The Most Successful Freon Salesman Ever 

The feds claim Mark Kesel's Hayward business kept the state's speed factories awash in their favorite solvent. Kesel says they're just out to get him 'cause he's Russian.

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That's a large quantity. How large? Michael La Barge, an employee at Trane Company, a national refrigerant wholesaler, told DEA investigators that the entire San Francisco Bay Area requires about fifteen thousand pounds to satisfy its annual needs. In a single year, Kesel's company had sold more than four times that amount.

According to DEA and state narcotics reports, here's who was buying so much freon, and why Kesel and his employees should have known better: In January 1999, a customer named Arnulfo Navarro started a bunk West Oakland company called Refrescos Air Conditioning and Refrigeration. Arnulfo's accomplice, Margarita Escobar, obtained an EPA certificate to buy freon using Navarro's company as her backer. EPA certificates are easy enough to get, requiring only a short test and an $85 processing fee.

Equipped with the proper documents, Navarro and Escobar became ADLS' most valued customers. The duo returned several times a week, buying up tens of thousands of pounds of freon, and always paying in cash. When they couldn't make it to ADLS themselves, Margarita sent an underling with a note approving the purchase on her EPA certificate number. For some purchases, she or one of her associates counted out as much as $26,000 in cash onto the counter.

Before long, DEA agents began tailing Navarro and Escobar out of the ADLS parking lot. Most likely, the two auditors who read through the company's books every week had noted the pair's unusual thirst for freon and forwarded the information to undercover surveillance crews. Several times, the car driven by Navarro and Escobar met up with eager clients within a few miles. Other times, the carriers headed toward Fresno, employing what the agents deemed countersurveillance techniques -- pulling off the freeway and parking in turnouts along the way. Agents documented the path of the gray freon drums to a variety of destinations: a bridal shop in Menlo Park; an Applebee's parking lot in Hayward; a ranch in Dixon; a suburban home in San Jose.

Within a year of Navarro and Escobar's first visit, the Bureau of Narcotic Enforcement wrote Kesel, alerting him that his containers had now turned up in a dozen meth labs across the state. California had rapidly become the nation's most prolific methamphetamine supplier, with thousands of clandestine labs tucked into the rural landscape, particularly down south. Kesel responded to the BNE's findings with a brief letter, thanking the agency and offering to assist with any future investigative efforts.

Still, Navarro and Escobar (who have also since been indicted) were snapping up supplies at such an incredible rate that it allegedly even concerned ADLS management. In November 2000, the company's day-to-day general manager Vladimir Kotlyarenko wrote the narcotics agency vouching for Navarro's patronage and assuring them that his frequent customer had the proper documents. But if it turned out Navarro was under investigation, Kotlyarenko added, he'd gladly put his customer on the "Do Not Sell To" list. The manager concluded with an offer: "Any information that DEA provides will be taken into serious consideration and NO sales will be made to the named individual."

But according to a state narcotics agent who worked closely on the case, Kotlyarenko's letter was considered suspicious. It smelled like a strategy to determine whether the DEA was investigating Navarro and, more importantly, ADLS. The DEA didn't respond, so ADLS continued its business relationship with its most prized customer.

From Kesel's perspective, however, the letter stands as a prime example of how the government has chosen to view his company's good-faith efforts only with mistrust. He claims many of his attempts to assist agents have been flipped around, somehow made to appear as sinister. In another instance, according to court documents, ADLS employees dutifully made dozens of calls to the DEA's "suspicious sales" hotline, just as required by law. But, to Kesel's purported amazement, agents dismissed the call-ins because they came only after the sales had been completed and the customers were long gone. In the government's view, the half-hearted effort by ADLS employees was yet another way the company attempted to appear on the side of the law even as it pandered to illegitimate customers.

The company, meanwhile, also attracted the attention of the IRS when its bank began reporting daily cash deposits ranging from ten thousand to fifty thousand dollars. The cash, bank employees said, was sometimes "damp and musty," suggesting that it had been buried underground or stored in coffee cans. Again, Kesel says the government has attached dramatic details to bald-faced facts: ADLS refuses checks, as many businesses do, and most customers simply prefer to pay in cash. And, since his out-of-state freon suppliers required COD payments, he needed plenty of currency in the till. As further evidence of his innocence, Kesel notes that he faithfully reported transactions of more than $10,000, just as the federal government requires.

In fact, the businessman and his attorneys argue, ADLS employees were repeatedly assured by the two visiting auditors that the company's reporting habits were on the up-and-up. In court documents, Kesel's attorneys cite a fall 2000 visit in which a company accounting employee asked narcotic bureau auditor T.J. Hirstein (who was wearing a wire as part of the investigation) if the books looked clean. Hirstein responded: "Well, you guys are careful about your cash." During the same visit, federal agent Deborah Bell told another inquisitive employee, "Well, just keep doin' what you're doin'," which was taken by the employee as a positive acknowledgment to keep up the good work. These sorts of comments, which ADLS attorneys say occurred on a weekly basis for three years, led Kesel and his co-workers to believe the government was pleased with their efforts.

Clearly, it wasn't.

By the time ADLS was temporarily shut down in December 2000, the company under Kesel's watch had grossed nearly $13 million selling 600,000-plus pounds of freon. It was enough to cool all of the Bay Area's department stores, automobiles, and refrigerators for the next forty years, according to La Barge's estimates -- and the Navarro-Escobar partnership had purchased about 45 percent of it.

To Kesel, he'd sold a lot of freon because his closest competitors had been shut down, and he'd reaped in the extra business.

To the authorities, the Russian had knowingly sold enough freon to help produce more than 88 tons of crank.


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