In an excerpt from Miami Babylon, Gerald Posner recalls 1980s South Beach, when it was a Wild West of drug cartels and sex parties that made Scarface look tame. Plus, view our gallery of Miami vices.

The preservation battle for Miami Beach’s Art Deco District was knocked off the news on a blistering summer day: July 11, 1979. A white Ford Econoline van rolled through the parking lot of Miami’s largest mall, Dadeland, in Kendall, a bedroom community 10 minutes south of downtown. If anyone had bothered to look carefully, they would have noticed that the crudely stenciled red signs on each side did not match. The right read: “Happy Time Complete Supply Party,” the left: “Happy Time Complete Party Supply.” There was a telephone number, but the line was disconnected.

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The driver drove slowly around the outskirts of the 50-acre mall and pulled up in front of Crown’s Liquors, squeezed between a beauty salon and a deli. A few minutes later, a white Mercedes sedan with black-tinted bulletproof windows parked near the liquor store. The passenger was one of Miami’s top cocaine dealers, 37-year-old Jimenez Panesso, and the driver was Panesso’s 22-year-old bodyguard, Juan Carlos Hernandez. An unwritten code for a drug kingpin is never to have a set schedule, but this was Panesso’s weekly visit to Crown’s Liquors. His success and power had made him overconfident. When the two men went in to place their usual order for several thousand dollars’ worth of Chivas Regal and rare cognacs, Hernandez felt so comfortable that he’d left his 9mm Browning in the car.

They’d been in the store for less than a minute when two men from the Ford van walked in. Without a word, the taller one walked up to Panesso, whipped out a .380 Beretta handgun with a silencer, and shot the Colombian drug lord four times in the face. Hernandez and the store clerk began running. The other gunman sprayed the store with a .45 caliber MAC-10 machine pistol, emptying the 30-round clip in a few seconds. The two gunmen calmly walked back to the idling van and jumped in back. An accomplice slammed the accelerator. As the Ford careened out of the mall, the two men fired indiscriminately out the van’s rear doors, smashing store windows, tearing up cars, and sending shoppers fleeing in terror.

Dadeland did not just represent the year’s 37th and 38th drug homicides. The brazen assassination, at midday, in a mall packed with families and ordinary Miamians, was a worrisome escalation. Miami’s police chief told a friend that he feared the Colombians were turning Miami into Medellín. The shootings also introduced “cocaine cowboys” to millions of Americans and almost overnight gave South Florida a Wild West reputation. A prominent Miami executive, Arthur Patten, told Time: “I’ve been through two wars and no combat zone is as dangerous as Dade County.”

A recent flood of cocaine into South Florida was at the root of a spike in violence and murders. Colombian drug dealers had been dying in interesting ways: One was delivered DOA in a white convertible Cadillac, its engine left running and the car abandoned in front of a hospital emergency room; another was machine-gunned to death while sitting at a traffic light at noontime in upscale Coral Gables; three bodies that had been subjected to horrific torture were discovered in a car’s trunk after children playing nearby noticed a terrible stench; a drug distributor was shot to death in front of his family while on a tour boat on Biscayne Bay; and a killer wearing a motorcycle helmet shot a man waiting for his luggage at Miami International Airport, at point-blank range, then jumped on his motorcycle and sped away. “Shootout at the Cocaine Corral,” was a Miami Herald headline about a restaurant shooting just weeks before the Dadeland chaos.

In New York, the Colombians executed a nonviolent takeover of the cocaine trade. Instead of waging war, Italian mobsters worked out an agreement with them on distribution and protection in return for a small cut of the profits. But in Miami, the Colombian invasion ignited the cocaine wars. The few pre-Marielito Cuban traffickers did not want to give up their turf, but the Colombians swiftly and brutally carried the day. They did not subscribe to the unwritten Mafia rule that families were off-limits. Anyone remotely related to a target was fair game. When their wives and parents were killed, the Cubans lost their nerve and the battle over territory was over. The ascent of Colombian rivals, mainly the Cali cartel, soon broke the Medellín monopoly and Colombians began to fight among themselves for control of the dope business. Bolivian drug lords controlled whatever cocaine production was left.

Every year starting in 1979, murders in Miami set a record (349 in 1979; 569 in 1980; 621 in 1981). Fifty percent were drug-related; 25 percent died from machine-gun fire; 15 percent were public executions. The Dade County Medical Examiner’s Office rented a refrigerated trailer from Burger King to handle the overflow of corpses. In 1980, in the middle of the Mariel and Haitian influx, Time named Miami the nation’s “crime capital” and the home of the “largest narcotics network in America.”

“My dentist always took coke for his work. I got my hair cut for half a gram, rented speedboats for two eight balls, bought clothes with grams. If you had coke, almost everyone took it as payment.”

Federal authorities estimated that by 1980, 70 percent of all cocaine and marijuana entering the country passed through South Florida. The DEA said the annual Miami dope trade brought in about $12 billion, outpacing the area’s two largest legitimate businesses: $11 billion in real estate and $9 billion in tourism. Although Miami had a reputation for money laundering since the days of the Batista and Somoza dictatorships, an astonishing volume of narco-cash now passed through the city. Miami’s Continental Bank was typical of many small independent banks, 70 percent of them Latin American–owned, that had opened in recent years. It averaged $12 million in annual deposits during the mid-1970s. By 1980, it was flooded with more than $600 million. The Federal Reserve branch that covered Miami and Miami Beach had a $5 billion currency surplus, most in 50- and 100-dollar bills, larger than the 11 other Federal Reserve banks combined. Federal Reserve districts elsewhere were running deficits.

In the depths of a recession, the drug trade provided demand for an estimated 25,000 legitimate jobs in banking, real-estate construction, and the service industries. Dade County brought in $400 million extra a year in sales tax receipts. Ten thousand building permits were issued at a time when national construction was at a standstill. More than 20 skyscrapers were erected. “Cocaine was the currency that built that skyline,” Alex Daoud told me, while looking at the dense clusters of mainland high-rises across Biscayne Bay.

According to one veteran real-estate broker, “it was one of the busiest times ever.” A single drug dealer bought $20 million in prime Miami real estate. At a time when national interest rates were high and real estate was in a tailspin, South Florida was the only market where housing prices boomed. About one-third of all property transactions were all cash.

One real-estate agent, who requested anonymity, says: “I had clients who could barely speak English, but they would go house-hunting packed into two or three Mercedes. They always had bodyguards. These dark suits made them stand out like sore thumbs in the bright colors of Miami. And there was very little effort to hide the guns—usually one under their jackets, and when they’d cross their legs you’d see one strapped to the ankle. One house I showed had a fake wall that opened to a steel-encased room. It sold the first day. The biggest cash deal I did was for $1.7 million in Coconut Grove. I thought the seller’s lawyers were going to faint when the buyers showed up and started unloading boxes of cash from a van. The most aggravating sale I did was for just over $300,000, where the buyer paid in twenties. We were there half a day counting.”

That slow count was atypical. Banks had electronic counting machines that made deposits simple and coke dealers tried to make their big purchases as straightforward as possible. Most dealers stored some of their cash in stash houses—heavily armed homes in suburban Miami. Those 24/7 stash houses took a protection fee, and dealers withdrew the money in packages of exactly 100 bills of the same denomination, making counting it easy. In any case, many local businesses trusted dealers when they said how much cash was in a bag. So much was pouring in there was no reason to cheat anyone on the count.

By 1980, the federal government concluded that local police departments and governments were so riddled with corruption that outside intervention was the only way to put heat on the Colombians. The federal salvo was the first multiagency money-laundering task force ever assembled, the U.S. Customs–IRS Operation Greenback. Its goal was to electronically track large cash transactions. Its first seizure was a plane carrying $1.2 million, about to take off from Miami for Colombia. Two Colombian pilots were arrested. The Medellín cartel held the pilots personally responsible for losing the money; each had family members murdered in Colombia.

Cocaine use was so widespread in South Florida that it was often used as currency. Bobby Weinstein, a midlevel dealer, paid many of his bills with cocaine. “An eight ball was worth $350,” he says, “and everyone knew that. My dentist always took coke for his work. I got my hair cut for half a gram, rented speedboats for two eight balls, bought clothes with grams. If you had coke, almost everyone took it as payment.”

“ Scarface was a fully integrated image of Miami,” says real-estate developer Craig Robins. “A documentary,” says one drug dealer

From MIAMI BABYLON by Gerald Posner. Copyright © 2009 by Gerald L. Posner. Reprinted by permission of Simon & Schuster, Inc.

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Gerald Posner is The Daily Beast's chief investigative reporter. He's the award-winning author of 10 investigative nonfiction bestsellers, ranging from political assassinations, to Nazi war criminals, to 9/11, to terrorism. He lives in Miami Beach with his wife, the author Trisha Posner.