In Sept. 9, 1975, William Osterhoudt, a local school principal, looked out at an implausible scene unfolding at the pink house belonging to his neighbor on United Street.

Key West Fire Chief Joseph "Bum" Farto, wearing his trademark rose-tinted glasses, began to drive away in his lime-green luxury automobile, complete with spread-eagle gold hood ornament and front license plate bearing the words El Jefe, Spanish for "The Chief."

Suddenly a car pulled in front of Farto. At the same time another blocked him from the rear. Men in business suits hustled him out of his car. The principal could tell they were out-of-towners. They were wearing ties on a hot September morning.

A tow truck arrived and the principal watched as the flashiest car on the island was towed away. What, he wondered, are they doing to the fire chief? He called the police. They too were baffled.

Six months later the whole town was wondering what had happened to El Jefe.

In fact, the chief wound up on a hot-selling T-shirt, worn on occasion by Jimmy Buffett at his concerts. The shirt posed a simple question: "Where is Bum Farto?"

Two decades later the shirt, now a collector's item, is hard to find. And so is Bum.

Bum Farto did not disappear from the Conch Republic because he was a good fire chief or because he was a devoted family man, a flashy dresser, the village eccentric, a baseball booster or a believer in witchcraft.

Bum vanished because he sold cocaine from Key West fire stations and got caught.

Did he flee to Latin America and live off his drug money? Or did Colombias cocaine cowboys, fearful he might talk, fit the flamboyant fashion statement with the dull gray of cement overshoes?

IN KEY WEST THE RULES ARE different. Sometimes rich, sometimes dead broke, the old town deals with the mood swings of its fragile economy with finely honed survival skills. Do what you have to do to put food on the table and look the other way if your friend, neighbor or cousin bends a few of society's rules.

"To live on an island this small, you need a different psyche, a different mind-set," says Ken Jenne, a former Broward County assistant prosecutor who headed the first state grand jury probe into Key West's curious view of justice. "Marijuana in their mindset was no different from shrimping. Theirs is simply a different moral and legal system."

While Key West basked in its island isolation, reports filtered back to Tallahassee that laws were not being enforced, and that in many cases, the people who broke the law were not being prosecuted.

In 1973, Gov. Reubin Askew asked the Broward State Attorneys Office to investigate a folder full of complaints, one of which concerned open drug dealing in Key West. State Attorney Phil Shailer picked Jenne, now a state senator Hollywood, to head a three-man task force to look into the matter.

Jenne's team received little cooperation. One night they found Limburger cheese smeared into the air conditioners in their motel, an odorous warning but hardly enough to stop their work. What they found would lead to a six-month investigation by the Florida Department of Criminal Law Enforce-ment, the U.S. Drug Enforcement Administration and the Dade County Organized Crime Bureau.

"Operation Conch" resulted in a fistful of grand jury indictments and a roundup on Sept. 9, 1975, of 19 alleged Key West drug dealers.

JOSEPH FARTO WAS BORN IN Key West on July 3, 1919, the son of Juan Farto, a Spanish immigrant who owned and operated the Victoria restaurant at the southeast corner of Greene and Duval streets. Juan specialized in "the best yellowtail in town" until 1937. That year he sold the building to Josie Russell, who converted it into a saloon that became the world-famous Sloppy Joe's.

Joe Farto grew up in a wood-frame house across the street from Key Wests fire station. He idolized the firemen, who gave him the affectionate nickname "Bum."

Farto's first job was with the Lopez Funeral Home, and by the time he was 22 he was also working as a nozzleman with the Key West Fire Department. In 1964 he was named chief.

Two years later, Farto ran into trouble for alleged "irregularities," including the use of department funds. Ruling against him on eight counts, the city commission recommended his firing.

But the Civil Service Board overturned the commissions action, finding Farto guilty only of threatening to dismiss a fireman for giving testimony before the investigating committee. Farto was suspended for 30 days. The chairman of the Civil Service Board was his nephew.

Farto was a colorful eccentric who was usually attired in fire-engine red with flashy gold chains around his neck. He was also a big fan of the Key West High baseball team and was permitted to drive his car into the stadium and park near the left-field fence. There he would light a candle and place it on the cars fender. Steeped in witchcraft, he believed this ritual would bring luck to the Fighting Conchs.

IN THE 1970s, THE FREE-AND-easy lifestyle of Key West became even more wide open. The Navy, a powerful presence for more than a century, pulled out many of its forces, a crippling blow to the island's already fragile economy. Times were hard, and people turned, as they always had in the past, to illegal ways to earn a living. "Square grouper" - bales of marijuana - became the catch of the day.

Sometime in the early '70s, Bum Farto succumbed to the lure of drug money. Selling marijuana from Colom-bia was so simple that he began peddling it while sitting on a bench outside the fire station. From marijuana he moved into cocaine.

Farto wasn't the only entrepreneur serving a growing market. Bolita sellers moved through the streets, shouting "last call for the numbers;" bumper stickers declared, "When marijuana is legalized, I will be on welfare," and T-shirts read "Smoke Florida Seafood." One detective was quoted as saying that cocaine was "as common as Key lime pie."

The timing couldn't have been better for Operation Conch.

In August 1975, Titus Walters, an ex-junkie-turned-informant, introduced undercover agent Larry Dollar to Bum as his cousin. Dollar offered Bum a gold diamond ring in exchange for an ounce of cocaine.

Farto told Dollar that he "would contact Manny James," Dollar later testified in court.

Manny James, 33, wore many legal hats. The adopted son of Police Chief Winston "Jimmy" James, he served as city attorney. He was also the primary defense lawyer for Key West's well-heeled community of drug smugglers and dealers.

"I sometimes wondered what they talked about at Christmas dinner," Ken Jenne says.