Bulger seen in S. Boston months after indictment, records show

Eight months after the FBI launched a worldwide manhunt for South Boston crime boss James "Whitey" Bulger, the fugitive was back in his old neighborhood, taking an afternoon stroll through the L Street Bathhouse, court records show.

Stephen Rakes, who was allegedly forced to sell his liquor store to Bulger, recently told investigators that he saw Bulger walking toward him in a well-lit hallway at the bathhouse on a summer afternoon in 1995, according to records filed in Norfolk Probate Court.

"He is certain that the person he saw was Bulger," wrote Internal Revenue Service Special Agent David J. Lazarus in an affidavit unsealed yesterday. "Before Bulger caught sight of Rakes, so far as Rakes knows, Rakes quickly left the premises."

The encounter came just weeks before Rakes was to testify in September 1995 before a federal grand jury investigating allegations that Bulger threatened to kill Rakes in 1984 if he didn't sell him the liquor store a week after it opened.

The sighting of Bulger, who has been on the run since his January 1995 indictment on federal racketeering charges, reinforced Rakes's decision to lie to the grand jury by claiming he willingly sold his store, Lazarus wrote.

Two weeks after Rakes lied to the grand jury, he again saw Bulger, according to the affidavit. A light blue car pulled up to the curb as Rakes was walking along a South Boston street and Bulger yelled from the passenger's seat, "Hey. I'm watching you."

The alleged sightings of Bulger, 70, who is one of the FBI's Ten Most Wanted and has a $250,000 reward on his head, were revealed by prosecutors during a protracted court battle with Bulger's sister over the gangster's $1.9 million in lottery winnings.

Federal prosecutors seized the money in July 1995, saying Bulger paid $700,000 to a friend who won a $14 million Mass Millions jackpot in 1991. He wanted the one-sixth share of the winnings as part of a money-laundering scheme, prosecutors allege.

In August 1995, Bulger's sister, Jean Holland of Quincy, filed a petition asking a Norfolk probate judge to appoint her as legal receiver of Bulger's property - including the lottery winnings - saying he had disappeared and his family didn't know where he was.

Norfolk Probate Judge Christina Harms dismissed Holland's claim last year, but in January the state Supreme Judicial Court asked her to reconsider the case after prosecutors raised doubts about their claims that Bulger had returned to South Boston after his sister filed the petition.

Now the government is presenting new evidence to try to prove that Bulger made frequent trips back to the Boston area and deliberately chose to use his sister to fight the forfeiture.

Rakes, 45, of South Boston, began cooperating with investigators after he was convicted of perjury and obstruction of justice in June 1998 for lying to the grand jury. He was sentenced in November to two years' probation.

Assistant US Attorney Richard L. Hoffman conceded in a brief filed with the court that investigators have been unable to gather independent evidence to confirm Rakes's claims that he saw Bulger twice in 1995.

Yet, the government isn't relying solely on Rakes. In a second affidavit unsealed yesterday, Massachusetts State Police Sergeant Stephen P. Johnson said a former Bulger associate has admitted meeting with Bulger at Malibu Beach in the Savin Hill section of Dorchester in March 1995.

The unidentified associate also told investigators that Bulger confirmed he was at a Boston church just a month after his indictment, in February 1995. The associate also admitted meeting Bulger three times in New York City and once in Chicago between 1995 and 1996.

While the associate isn't identified in the affidavit, sources said it is Kevin Weeks, Bulger's top lieutenant who began cooperating with authorities after his indictment on racketeering charges in November.