Ice trade brings
high profits and costs
A former resident of Ewa Beach
shows just how lucrative
the drug business can be
Michael Schulze was living the high life when the law caught up with him.
The 36-year-old former Ewa Beach resident, who was sentenced to a 30-year federal prison term last week after he was convicted on drug trafficking and other drug-related charges, stashed away $1.3 million in 15 bank accounts that he controlled.
Schulze also owned properties in Nevada, two cabin cruisers, two GMC Suburbans, a Yamaha WaveRunner, three pickup trucks and a bulldozer. The Las Vegas resident recently gave his fiancee a $10,000 diamond ring and a black 2001 BMW sedan, federal prosecutors said.
"He was a typical American drug dealer," said Assistant U.S. Attorney Ken Sorenson, who was part of the "Vegas Ice" investigation that resulted in the conviction of Schulze and seven of his associates. "He threw money around like crazy."
Federal prosecutors say Schulze, also known as Michael Dannon, was one of Hawaii's biggest ice wholesalers. Since 1997, his organization imported 1,000 pounds of crystal methamphetamine to Hawaii. The drugs have a street value of about $25 million.
The proceeds of Schulze's ice operation, which were seized by federal prosecutors, underscores the complex economics that governs Hawaii's ice trade.
While statistics on the scope of the local ice problem are hard to come by, its economic impact is evident in the high-flying lifestyles of drug entrepreneurs like Schulze, the massive amounts of money spent on the drug by addicts and the millions of dollars that taxpayers and local consumers pay for treatment, law enforcement and in property crimes committed by users to feed their habit.
That economic toll has prompted state lawmakers this summer to hold a series of hearings and town-hall style meetings to discuss Hawaii's ice epidemic.
Next week, Gov. Linda Lingle's administration will hold its first-ever ice summit at the Sheraton Waikiki Hotel to attempt to get a handle on the problem and develop a legislative agenda to address the epidemic.
"This is biggest drug problem we've seen in the history of our state," said U.S. Attorney Ed Kubo. "And we're just beginning to realize the potential economic damages it can create."
Drug business booming
If ice were a legitimate business, it would rank among Hawaii's largest corporations.
Conservative estimates place the number of hard-core ice addicts in Hawaii at about 8,100 and the typical addict smokes between $50 and $170 a day of ice.
That means that local crystal meth addicts use about $150 million a year, roughly equivalent to the annual sales of Maui Land & Pineapple Co. or St. Francis Healthcare System of Hawaii.
A broader view endorsed by local law enforcement officials like Kubo puts Hawaii's crystal meth problem at $1 billion a year.
The latter scenario -- which relies on estimates that there may be as many as 30,000 hard-core users in the islands -- would equate Hawaii's ice trade to the annual revenues of Alexander & Baldwin Inc., the state's fifth-largest company.
One look at the fat profit margins enjoyed by drug smugglers explains why it's such a big business here.
A pound of crystal methamphetamine has a street value of about $2,500 in El Paso, Texas, and $7,000 in Los Angeles, according to Kubo.
In Hawaii, that same pound retails for about $25,000.
While some of the proceeds are laundered in Hawaii, most of the drug profits don't stay here, federal prosecutors said.
Hawaii's ice supply is largely imported by wholesalers like Schulze who get their drugs from labs in Los Angeles allegedly linked to Mexican drug cartels.
Couriers within Schulze's organization told federal investigators they often transported suitcases containing $150,000 in cash through Honolulu Airport to pay for drugs in California.
"The trick in the Hawaii drug business is to get the money to California," Sorenson said. "It's a two-way street: It's dope in and money out."
Hawaii pays dearly
Hawaii's ice problem also has been costly for Hawaii's taxpayers, who are footing the bill for the rehab of thousands of ice addicts.
According to Elaine Wilson, chief of the Alcohol and Drug Abuse Division of the state Health Department, it costs between $3,000 and $10,000 to treat a hard-core ice addict.
Last year, the Alcohol and Drug Abuse Division made $7.7 million in contract payments to private providers like Hina Mauka in Kaneohe and the Sand Island Treatment Center to pay for drug and alcohol treatment.
The state Judiciary spent another $2.2 million last year to treat people for substance abuse while the state prisons and probation systems said their drug treatment costs were $3.5 million last year.
Those figures aren't broken down specifically for ice treatment, but state officials said ice addicts represent a major portion of their caseloads.
The personal costs to the addicts are also severe.
The typical ice addict hits rock bottom before he seeks treatment, said M.P. Andy Anderson, Hina Mauka's chief executive officer.
Most have lost their homes and their jobs or have gone through a divorce as a result of ice-related family stress, Anderson said.
A four-year study conducted by the federal Center for Substance Abuse Treatment found that Hawaii's meth users had an average monthly income of about $220.
The center's study, which looked at treatments of more than 1,050 addicts in California, Montana and Hawaii, found that the overall average monthly pay of its study participants was $625, said Alice Dickow, the CSAT's principal investigator for its Honolulu site.
About 49 percent of the Honolulu participants in the study were unemployed, Dickow said. That compares with an unemployment rate about 22 percent for addicts in San Diego and 31 percent for users in Hayward, Calif.
"We are talking about a huge problem in terms of financial loss and human suffering," added Hina Mauka's Anderson.