What types of crimes do organized crime groups commit? Why do you feel that these types of criminal actions are chosen? How do some of these crimes harm legitimate businesses? Use evidenc

CHAPTER THIRTEEN

Organized Crime in Labor, Business, and Money Laundering

Abadinsky, Organized Crime 10th ed.

In 1957, Albert Anastasia, boss of the Gambino Family and unofficial ruler of the Brooklyn waterfront, was murdered in a barber's chair at a New York hotel. His brother, ("Tough") Tony Anastasio, a member of the Gambino Family and official ruler of the Brooklyn waterfront, remained head of International Longshoremen's Local 1814 in Red Hook, Brooklyn, until his natural death in 1963. This chapter discusses the four international unions connected to OC.

2

LABOR RACKETEERING

 Infiltration, domination, and use of a union for personal benefit by illegal, violent, and fraudulent means.

Labor rackets assume 3 basic forms:

 Sale of “strike insurance.”

 “Sweetheart deal.”

 Siphoning of union funds.

3

ORGANIZED LABOR IN AMERICA

 Civil War led to dramatic industrialization of U.S.

 Industrialization led to unionization.

 Labor wars.

 Wagner Act of 1935: Right of workers to organize and engage in collective bargaining.

4

LABOR RACKETEERING: IN THE BEGINNING…

 In the early days, labor unions provided “muscle” from the ranks of their membership to deal with management Pinkerton agents and strikebreakers.

Abuse of power, needless strikes, extortionate practices.

Benjamin “Dopey” Fein: Jewish gang leader, part of Jewish labor movement.

 Protected pickets and union delegates against management goons.

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LEPKE BUCHALTER

Worked as strong-arm for labor-industrial racketeers.

Revolutionized labor racketeering.

 Infiltrated unions and management to gain control.

 Extorted wealth from NY garment, leather, baking, trucking industries.

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LABOR RACKETEERING AND THE BIG FOUR

Unions also fought with each other.

 During struggles over jurisdiction and representation between the AFL and the CIO, both sides resorted to muscle from organized crime.

 Many locals and some internationals were delivered into the hands of organized crime.

1982 congressional committee: International unions (LIUNA, HEREIU, ILA, IBT) are dominated by OC.

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LABORERS’ INTERNATIONAL UNION OF NORTH AMERICA (LIUNA)

Close ties to the Outfit.

Surveillance tapes of New Jersey Family boss Sam DeCavalcante, discussing how control of Laborers’ Union locals enabled him to “shake down” building contractors who wanted to avoid using expensive union labor.

2000: 127 LIUNA officials found to be OC members or associates.

8

HOTEL EMPLOYEES AND RESTAURANT EMPLOYEES INTERNATIONAL UNION (HEREIU)

HEREIU charters often provided the basis for extortion.

 “If an owner knew what was good for him, he agreed to have his place unionized upon the first visit of the organizer.”

 The Philadelphia local was controlled by the Family headed by Angelo Bruno.

Bruno Family members forced hotels in Atlantic City to buy supplies and provisions from companies they own.

9

INTERNATIONAL LONGSHOREMEN’S ASSOCIATION (ILA)

The NY waterfront harbor plays a critical role in the movement of goods throughout the Eastern seaboard.

Without government regulation, OC controlled it.  In control of the ILA, OC targeted the shipping

industry.  Ship turnaround time is crucial to shippers.  Shakedown shippers by threatening walkouts.

The “shape up” provided corrupt ILA officials with kickbacks from workers eager for a day’s wage.

10

WATERFRONT COMMISSION

 In 1952, it was revealed that OC, using its control of the ILA, “had for years been levying the equivalent of a 5 percent tax on all general cargo moving in and out of the harbor.”

 Outrage led to the 1953 establishment of the New York–New Jersey Waterfront Commission.

 Commission has banned persons with serious criminal records from the docks.

 Eliminated the “shape-up.”

 Convicted criminals prohibited from holding office in waterfront unions.

 Commission audits books and records of licensed stevedore firms to guard against illegal payoffs and other violations.

11

INTERNATIONAL BROTHERHOOD OF TEAMSTERS (IBT)

 IBT is the most important union to come under the domination of organized crime because virtually every consumer product needs to be trucked.

Largest labor union in U.S.  1.4+ million truckers, delivery drivers, warehouse

workers, flight attendants, and other workers.  Lost membership since 1970s.  Once represented 80 percent of long-haul truck

drivers, but now represents only about 8 percent. 12

JIMMY HOFFA, TONY PROVENZANO (“TONY PRO”), JOHN DIOGUARDI AND ANTHONY CORALLO,

ALLEN DORFMAN, JACKIE PRESSER

Some of these went from union reformer to labor racketeer. Others began as racketeers.

They used corrupt methods to gain high position in the union, and used union funds for personal use.

Most were convicted of crimes. Some were acquitted when witnesses were murdered.

Several corrupt local unions were placed in trusteeships by the government.

13

HOFFA VERSUS KENNEDY

Hoffa was subpoenaed to appear before the Senate Select Committee on Improper Activities in the Labor or Management Field.

 He referred to committee counsel Robert Kennedy as “Bob” or “Bobby” and as “nothing but a rich man’s kid.”

 1960: John F. Kennedy was elected president of the United States and appointed his brother Robert attorney general. Robert Kennedy made the Labor Racketeering Unit of the Criminal Division his personal “Get Hoffa Squad.”

Hoffa was subsequently accused of trying to bribe jurors and in 1964 was convicted of jury tampering and sentenced to eight years’ imprisonment.

14

BUSINESS RACKETEERING

There is no hard-and-fast line separating labor racketeering from business racketeering—one is often an integral part of the other.

 In many schemes involving corrupt union officials, “legitimate” businessmen have willingly cooperated in order to derive benefits such as decreased labor costs, inflated prices, or increased business in the market.

15

THE GARMENT CENTER

 Business racketeering in NY’s garment industry dates back to Lepke Buchalter.

 Today it centers on racketeer control of local trucking: whoever controls trucking controls the industry.  The fast-paced nature of the fashion industry cannot

countenance delays in shipping garments. Until 1992, garment center trucking was controlled by

Carlo Gambino’s sons.  1992 plea deal: Gambino brothers pled guilty to restraint

of trade violations and agreed to quit NYC’s garment center and pay a fine of $12 million.

16

RESTRAINT OF TRADE

Bid rigging and customer allocation are restraint of trade violations of the Sherman Act.

 Maximum fine for corporations: $100 million.

 OC provides a restraint-of-trade policing service.

Sometimes, OC "muscles in" to extort a part, when otherwise legitimate businesses have illegal restraint of trade agreements among themselves.

17

CONSTRUCTION INDUSTRY

OC can limitt competition by enforcing a system of collusive bidding.

Construction contractors, assisted or led by union officials and LCN family members, allocate jobs among themselves and exclude non-cartel.

Participant companies are beneficiaries, not victims, since the benefits of the cartel offset the increased costs it imposes.

18

PRIVATE SOLID WASTE CARTING

Companies “faced with the constant threat of cutthroat competition are tempted to pay gangsters for protection against competitors.”

Competition drives down profits until, with or without help from OC, an association is formed.

Members divide up the industry, allocating territories or specific customers.

Members (illegally) agree not to compete for another member’s business.

19

CRIMINALS IN A LEGITIMATE BUSINESS

6 reasons for OC involvement in legitimate business:

 Profit

 Diversification

 Transfer

 Services

 Front

 Taxes

20

THE SCAM / BUST OUT

Bankruptcy fraud that victimizes wholesale providers of various goods and sometimes insurance companies

The business used as the basis for a scam may be set up with that scheme as its purpose, or it may be an established business that has fallen into OC control as a result of gambling or loan shark debt.

21

STOCK FRAUD

Through the OC network, stolen securities can be transferred to a country with strict bank secrecy laws.

The securities are deposited in a bank, which issues a letter of credit, which is used to secure loans that are then defaulted.

 Used as collateral for bank loans from “cooperative” loan officials or “rented” to legitimate businessmen in need of collateral for instant credit.

22

MONEY LAUNDERING

Cash-rich criminals have a problem: laundering their illegal gains.

Modern financial systems permit instant transfer of millions of dollars through personal computers and satellite dishes.

Money is laundered through currency exchange houses, stock brokerage houses, gold dealers, casinos, automobile dealerships, insurance companies, and trading companies.

23

CHAPTER ELEVEN

Organized Crime: “Goods And Services” Gambling, Loansharking, Theft, Fencing,

Sex, Trafficking In Persons, Arms, And Counterfeit Products

Abadinsky, Organized Crime 10th ed.

On a corner in New York's Chinatown, a woman approaches the salesman. He takes a pamphlet from his pocket and shows her pictures of Coach, Gucci, and Louis Vuitton handbags. The woman asks a few questions, points to her selection, and gives him cash. He makes a cell phone call and soon another man appears carrying a plastic bag. Inside is the handbag she paid for—a counterfeit Gucci. The woman walks away with her purchase, smiling.

In this chapter we examine the global market in a wide range of illegal goods and services.

2

ORANIZED CRIME AND THE PROVIDERS OF ILLEGAL GOODS AD SERVICES

3

The business of organized crime is the provision of goods and services that happen to be illegal.

Translating morality into a statute backed by legal sanctions does not provide for greater morality.

 Widens law

 Creates temptation

 Creates opportunity

3 FORMS OF CONNECTION BETWEEN ORGANIZED CRIME AND LEGAL BUSINESS

 Parasitic: Members of a criminal organization extort money from illegal entrepreneurs under a threat of violence.

 Reciprocal: Members of a criminal organization require legitimate or illegal entrepreneurs to pay a fixed or percentage amount but in return provide services, such as restricting market entry, debt collection, and arbitration.

 Entrepreneurship: A member of a criminal organization provides an illegal good such as drugs or a service, such as enforcement of restraint of trade agreements.

4

“GOODS AND SERVICES” OR EXTORTION?

The business of organized crime is extortion.

 Providers of illegal goods and services

are victims of OC extortion.

Pay for the privilege of doing business.

Pay “street tax” to avoid being killed.

Pay to “license” their business operations.

5

“Those who

somehow

missed

Butch’s

silent

message

became

corpses.”

GAMBLING

Gambling enforcement has a low priority with police and with the public.

Cell phones and the internet make the crime easier.

1983-1995: Illegal betting increased tenfold (est.)

 Arrests declined.

 1960: 123,000 persons arrested for illegal gambling.

 1995: approx. 15,000 arrested.

6

BOOKMAKING

 2 types: 1. Horse races and dog races. 2. Sporting events.

 In the past, “horse parlors” or “wire rooms” were set up in the back of a legitimate business.

Now, bets are placed by telephone directly or through a roving “handbook,” “runner,” or “sheetwriter” who transmits the bet to the bookmaker.  To maintain security, some bookmakers change locations

frequently, often monthly, or they may use cell phones.  “Call back” system: The bettor calls an answering service or

machine and leaves his or her number. The bookmaker returns the call from a variety of locations, and the bet is placed.

7

SPORTS WAGERING

King of bookmaking. Large dollar proceeds.

Bookmaker seeks balance between team bets.

 Uses a line or points—the expected difference between the favored team and the underdog.

 vigorish: The requirement, built into the odds, that $11 is bet in order to win $10. Also called “juice.”

This guarantees the bookmaker a 10% profit.

8

ORGANIZED CRIME AND BOOKMAKING

 In the past, bookmaking was an important source of income for OC.

 OC ran the operation or “licensed” syndicate bookmakers.

 OC controlled the wire service that provided race results.

 Phones used now.

 1995: police raided a major bookmaking operation—estimated gross $65 million, net 20 %.

 Computers used custom sports betting program. The computers were linked to an online service from Las Vegas that provided the latest line on sporting events.

 The operation connected to Colombo and Gambino Families.

9

LOTTERIES

American colonies authorized lotteries.

 Lottery used (unsuccessfully) to help finance the Revolutionary War.

 Supported by lotteries years ago: Rhode Island College (now Brown), Columbia, Harvard, University of North Carolina, William and Mary, and Yale.

 19th century: Many lotteries.

 1890: U.S. prohibited lotteries from using the mail.

 This prohibition created opportunity for an illegal lottery, the numbers business.

10

CASINO GAMBLING AND RELATED ACTIVITIES

Some cities have a tradition of holding “Las Vegas Nights.”  Approval and protection of organized crime unit,

using front of a religious or charitable organization.  OC provides gambling devices, personnel, and

financing, and shares profits with the sponsor. OC organized or sponsored high stakes card or dice

games, taking a cut of every pot.  Games may be operated in the home of a person in

debt to a loan shark to pay the loan.

11

LAS VEGAS

 1931: Nevada legalized gambling during the Depression.

 1946: Bugsy Siegel, OC figure, saw the potential.

 Financed by OC leaders throughout the country, Siegel built the Flamingo Hotel, the first elaborate LV gambling establishment.

 LV hotels were controlled by OC units around the country.  Funds “skimmed” before being counted for tax purposes.

 Distributed to OC bosses in proportion to their ownership.

 1973 to 1983, at least $14 million was skimmed from just one hotel, the Stardust.

OC now only on fringes of LV scene. 12

CYBER-GAMBLING

 Online bingo, poker, blackjack, roulette, and other, 24 hours a day.

 If legal where licensed, bookmakers are beyond U.S. jurisdiction.

 “Cyber-bookie” Calvin Ayre: headquartered in Costa Rica; operates online casino with 145,000 customers, most in the U.S.  Not a U.S. citizen; no physical presence in U.S.; pays no U.S. taxes;

net worth about $1 billion.

 2009: Members of the Lucchese Family arrested for running an offshore sports betting business.  Access codes enabled customers to place bets over the Internet.

 U.S. gamblers are required to declare their winnings on tax returns, but cyber-bookies do not file reports with the IRS.

13

CYBER-CRIME

Transnational OC is increasingly involved. Costs consumers billions, threatens corporate and

government computer networks, and undermines confidence in the international financial system.

Computer crime is not necessarily cyber-crime. 2008: A Russian criminal organization took almost $10

million from the U.S. banking system.  Artificially inflated balances on prepaid credit or cash cards.

 Distributed cards to dozens of "money mules.”

 Withdrew millions from ATMs in cities across the country in a coordinated operation that took less than 24 hours.

14

CYBER-CRIME

Criminal activity is facilitated by the use of encryption.

 Accessible through retail software and hardware.

 OC can launder dollars, rubles, yuan, any currency.

 Employ hackers.

Extort payments from hacked companies.

 Infiltrate business—physically and/or electronically.

Gambino Family piggybacked bogus charges onto credit cards and phone bills; $650 million taken.

15

BOTNETS AND PROXY SERVERS

Botnets are networks of compromised computers controlled remotely.

Originally a useful tool for legitimate business users.

Can infiltrate and modify web pages.

Criminals rent or sell their botnets or operate them as a part of their criminal organization portfolio.

Proxy-servers conceal online activity, inhibiting law enforcement pursuit of cyber-criminals.

16

LOANSHARKING (USURY)

1880-1915: “salary lending” thrived in the U.S.

 Provided loans to salaried workers at usurious rates.

 After 1911: Laws licensed small lenders and set ceilings on interest.

 Created opportunity for OC illicit credit business.

2 features:

 Exorbitant interest rates

 Threat of violence

17

Usury: loaning

money at an exorbitant

interest rate.

OC USURY DURING THE GREAT DEPRESSION

After Prohibition, OC had lots of cash, no place to invest it, except the cash-poor economy.

 Lend to legitimate and illegitimate business.

2 types of usurious loans:

 knockdown: Specified schedule of repayment, including principle and interest.

 vig: A 6-for-5 loan; for every $5 borrowed on Monday, $6 is due the following Monday.

The $1 interest is the vigorish or juice.

18

FENCING

A fence provides a market for stolen goods.

For OC, it is a part of the illegal business portfolio.

OC may require thieves to deal with a certain fence.

19

COMMERCIAL SEX: PROSTITUTION

Late 19th, early 20th century: Prostitution houses were an important social phenomenon.

1910: Mann Act (White Slave Act) prohibited interstate transportation of women for immoral purpose.

After Prohibition, OC organized the independent brothels, requiring madams to pay protection.

Today, in some Chicago suburbs, brothels and sex entertainment bars pay “street taxes” to the Outfit.

20

COMMERCIAL SEX: PORNOGRAPHY

Formerly, almost exclusively controlled by OC.

Now, liberal court decisions legalized the genre and legitimate entrepreneurs entered the market.

 In Los Angeles, the Dragna crime family was convicted of extorting money from porn shop owners.

 Because they were no longer illegitimate, porn operators were able to go to the authorities about the extortion attempt.

21

TRAFFICKING IN PERSONS, ARMS, AND COUNTERFEIT PRODUCTS

The globalization of organized crime has greatly expanded the portfolios of criminal organizations, particularly trafficking in persons, arms, and counterfeit products.

22

TRAFFICKING IN PERSONS (TIP)

Modern slavery

Victims lured with false promises of good jobs; forced to work in brutal, inhumane conditions.

Debt, violence, threats, and deception create a pliant and exploitable work force.

2 broad categories:

 Undocumented workers in bonded servitude.

 Trade in persons for the commercial sex industry.

23

HUMAN TRAFFICKING EXAMPLES

Abducted or recruited in the country of origin.

Transferred through transit regions.

Exploited in the destination country.

 Agricultural workers brought into the U.S.

 Child camel jockeys in Dubai.

 Indonesian women doing domestic work.

 Child victims of sexual exploitation in Thailand.

 Child soldiers in Uganda.

24

TRAFFICKING IN ARMS

OC facilitates trade in conflict and post-conflict areas and urban gangs, especially Africa and Latin America.

Drug trafficking generates a demand for illegal arms.

Linked to global crimes in multiple ways: shared trafficking routes, same distribution networks and money-laundering infrastructure, and exchange of guns for drugs or other commodities.

25

TRAFFICKING IN COUNTERFEIT PRODUCTS

Products: intellectual property (books, music, videos, software); brand-name and designer clothing, handbags, and jewelry; and pharmaceuticals.

The factory owner does not make the big money. That’s for the networks running importation and distribution.

Camorra clans traffic in counterfeit goods, controlling thousands of Chinese factories making fashion goods, legally and illegally, for distribution arou

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