Bearing seal on the exhaust side of the turbo bearing or oil coming from the engine through the exhaust portion of the turbo and into the exhaust. Tailpipes dripping oil have been reporterd before. Keep an eye on yout oil level.

Thank you for everyone's helpful suggestions.

I took it to my local indy and he removed the turbo, sent it to a shop in Salt Lake City where it was remanufactured for $850. It looks like a new turbo.

I got the car back yesterday, total bill, $1350.

It runs correctly now, and after a 5-mile Italian tuneup, it burned out the oil in the exhaust system and it doesn't smoke any more.

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1st MBz: 1982 300SD
2nd MBz: 1987 300SDL
3rd MBz: 1995 S420
4th MBz: 1987 190DT
5th MBz: 1984 300SD w/1983 300DT engine
6th MBz: 1999 C230k I'm 3rd owner, got it w/57,235 miles.
and manages Mom's 2007 R320 CDI