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Arson, Urban Economy, and Organized Crime: The Case of Boston Author(s): James Brady Source: Social Problems, Vol. 31, No. 1 (Oct., 1983), pp. 1-27 Published by: Oxford University Press on behalf of the Society for the Study of Social Problems Stable URL: http://www.jstor.org/stable/800406 Accessed: 29-08-2016 22:14 UTC

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SOCIAL PROBLEMS, Vol. 31, No. 1, October 1983

ARSON, URBAN ECONOMY, AND ORGANIZED CRIME: THE CASE OF BOSTON*

JAMES BRADY

Director, City of Boston Arson Strike Force; University of Massachusetts, Boston

The deadly crime of arson is spreading at an alarming rate in the United States, leav- ing whole city neighborhoods devastated in its wake. Traditional methods of dealing with the problem are based on a view of arsonists as pyromaniacs or vandals. This paper shows a clear link between the policies of banks and insurance companies, on the one hand, and the arson-for-profit schemes of organized crime, professional arsonists, shady landlords, and corrupt public officials. I develop a sociology of arson, in the process analyzing several kinds of arson and describing specific bank investment practices and insurance industry underwriting policies which directly contribute to the problem. I conclude by assessing proposed new remedies for arson in the light of the conflicting interests of corporate institutions, on the one hand, and tenants and homeowners on the other.

We are accustomed to think of fires, like automobile crashes, as tragic accidents caused by carelessness or bad luck. While it is recognized that some blazes are deliberately set, the public has long been assured by fire officials, psychiatrists, and criminologists that such fires are the

isolated acts of pathological "pyromaniacs" or juvenile "vandals" and pose no serious threat to cities guarded by modern fire-fighting companies. Unfortunately, the dramatic upsurge of arson fires in the United States since 1960 has made a shambles of these assurances. Arson now out-

strips all other "index" crimes in terms of injuries, deaths, and property losses, forcing us to re- think both our current control measures and our notions about the causes of this menace.

INTRODUCTION: THEMES AND METHODS

This study breaks new ground in developing a sociology of arson, using demography and urban economics. It demonstrates that arson is essentially a consequence of economic decisions undertaken by the banking, real estate, and insurance industries, as well as the racketeering op- erations of organized crime syndicates. This is not to say that "pyromaniacs" and especially "van-

dals" do not set a substantial number of fires in addition to those set by more sophisticated pro-

fessional "torches"- the preferred employees in arson-for-profit schemes. Nor do I mean to imply that bankers, realtors, and insurance agents are necessarily joined in conscious conspiracy

with gangster syndicates, though this is clearly the case in some instances.1 I argue that routine profit-making practices of banks, realtors, and insurance companies lead

to the processes of abandonment, gentrification, and neighborhood decline which destabilize urban communities and provide the context and motivation for several varieties of arson. Or- ganized crime syndicates, professional firesetters, and corrupt officials all figure prominently in arson-for-profit schemes, but the urban economic context also lies behind the fires of vandals and small property owners desperate to escape losing investments by means of convenient fires.

* An earlier version of this paper was presented at the national meetings of the American Society of Crimi- nology, Toronto, November, 1982. The author thanks his police and civilian colleagues of the Boston Arson Strike Force, particularly Michael N. Moore. Correspondence to: Department of Sociology, University of Massachusetts, Boston, MA 02125. 1. The symbiotic and sometimes consciously conspiratorial ties between legitimate corporations and gangster syndicates is hardly peculiar to arson. Scholars probing such criminal activities as narcotics traffick- ing, gambling, labor union corruption, loan sharking, and selling stolen goods have discovered the same kinds of links between racketeering, official corruption, and corporate profiteering. See Block and Cham- bliss (1981), Chambliss (1978), and Grutzner (1973).

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2 BRADY

In advancing this social economy of arson I rely mainly on original materials drawn from my study of arson, neighborhood development, and organized crime in the city of Boston.2 The Boston data is drawn from several years of personal experience as a researcher and activist with anti-arson community organizations in the fire-ravaged Dorchester ghetto where I live and

work. I am also director of the City of Boston Arson Strike Force, a special team of civilian experts and police detectives appointed by the mayor and charged with the investigation of local arson-for-profit syndicates. Our collected evidence was presented to the Suffolk County Grand Jury in April, 1983, preliminary to indictments and prosecution by the District Attorney. For

obvious reasons, neither the targets of the Strike Force nor any of the confidential evidence col- lected in our work will be disclosed in this article.

The materials presented in this paper are derived entirely from publicly available sources, in- cluding the local press, television documentaries, and especially the scattered records of property transactions. These transactions include sales and resales of buildings and land, insurance pol- icies and brokerage arrangements, mortgage lending, papers of incorporation for trusts and holding companies, taxes, housing and land court decisions, housing inspections, fire code in- spections, and fire histories of individual buildings and landlords. These records are drawn espe- cially from the Suffolk County Registry of Deeds, the Boston Rent Control Administration, the Boston Buildings Department, the Boston Housing Authority, the Boston Office of Community Development, the Metropolitan Area Planning Commission, the Boston and Lowell, Mass., Fire Departments, the Massachusetts State Commissions for Banking and Insurance, and the Massa- chusetts Secretary of State. I share with my police and civilian Strike Force colleagues the hope that we shall soon obtain criminal convictions of at least one major organized crime arson ring operating in Boston. Afterwards, it will perhaps be appropriate to divulge some of the investiga- tive methods and findings of this effort, which combines police work and sociological research.

It might be helpful to define several terms here. Arson refers to the intentional destruction

of property by fire. Redlining refers to the mortgage-lending practices of banks, and particularly

to the illegal practice of denying mortgage loans for properties located in districts inhabited by poor and minority populations. Gentrification refers to the migration of more affluent profes- sionals and middle-class families from the suburbs back to selected districts in the central city.

Both of these phenomena are characteristic of Boston's contemporary social dynamic and central to an understanding of arson.

Jurisdiction over arson investigation has been traditionally the almost exclusive domain of local fire departments and their semi-specialized arson squads (though the latter often include a few local police detectives, since firefighters do not usually have the power to arrest). However,

since 1972 the Federal Bureau of Alcohol, Tobacco, and Firearms (ATF) has been authorized to investigate fires in commercial buildings if an "explosive device" is suspected as the cause of the fire; since 1982 the ATF's jurisdiction has been broadened to include any commercial build- ing destroyed "by explosion or by fire" (Murphy, 1983). The ATF has established teams of arson investigators in major cities across the United States who are supported by sophisticated, mobile,

arson-detection laboratories; nevertheless, the organization still responds only to a small percent- age of the total arson incidents in commercial buildings.

The United States Fire Administration (USFA) supports some limited research on fire scene investigation, insurance fraud techniques, and related arson topics, and provides standards for the modernization of local fire departments. The National Fire Protection Association (NFPA), largely supported by the insurance industry, also engages in periodic evaluations of the local fire departments, publishes some of the more important arson statistics and research findings, and

2. A parallel view of arson-for-profit racketeering in Tampa, Minneapolis, and Rochester, New York, is provided in U.S. Congress: Senate (1979).

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Arson in Boston 3

is largely responsible for the drafting of fire codes used in building construction throughout the United States.

The discussion which follows is divided into four main sections. First, I survey the growth and impact of arson in the United States, the failure of law enforcement, and the contribution of deviance theory to our misunderstanding of the problem. Second, I develop a case study of arson

patterns in Boston and link this to a discussion of urban speculation, bank mortgage lending pol- icies, insurance industry underwriting practices, and demographic shifts as predictors and moti-

vators for arson. Third, I discuss major varieties of arson for profit in Boston and present the property transactions of several arson-prone speculators and one local bank whose "problem properties" have a tendency to burn. Fourth, I describe contemporary arson control reforms and

assess their prospects for success against the competing interests of the banking, real estate, and insurance industries. I also describe emerging movements of tenants and homeowners in threat- ened neighborhoods.

OVERVIEW: ARSON IN U.S. CITIES

From 1951 to 1977 the number of arson incidents reported by local fire departments across the United States to the National Fire Protection Association (NFPA) increased by over 3,100 percent, from 5,600 cases to over 177,000 cases (Carter, 1980:41). In 1964 arson was reported to have caused less than 3 percent of all fire losses (Carter, 1980:40); by 1981 it had risen to 30 percent (Karter, 1982:68). The federal Law Enforcement Assistance Administration (LEAA) esti- mated arson losses at closer to 40 percent of total fire damages in 1977 (Boudreau et al., 1977:5; Economist, 1977:11); this higher estimate is corroborated by the Aerospace Corporation report to the Senate (U.S. Congress: Senate, 1979). In 1981 local fire departments estimated that "large loss" arson fires (those causing over a million dollars in damages each) resulted in over $1.5 billion in structural damage (LeBlanc and Redding, 1982:32). The National Insurance Service estimated that the industry paid approximately $5 billion in claims submitted in 1979-80 for arson-related fire losses (Karter, 1982; Lima, 1977b).

In 1981, 6,700 civilians died in burning buildings in the United States (Karter, 1982:68), three times more than the number killed by handguns (LeBlanc and Redding, 1982:50). Arson ac- counts for an increasing proportion of these fire deaths. During each year between 1977 and 1980, about one thousand civilians and another 120 firefighters were killed in deliberately set fires; an additional 30,000 civilians and 4,000 firefighters were injured (Carter, 1982; Fire and Arson Investigator, 1981:14).

These statistics understate the seriousness of the situation. Local fire departments count as "arson9" only those fires whose origins are initially regarded as suspicious by firefighters on the scene and which are subsequently `--vestigated by the local arson squad and judged to be "in- cendiary" or "suspicious." The standards of evidence required for these classifications are high, and a number of questionable fires are simply classified as "undetermined."3 Still others are wrongly described as accidents. There is wide agreement among independent investigators that most of these fires are also arson.4 Studies prepared by the LEAA count half of all "undeter- mined" fires as arson (Boudreau et al., 1977:1). Such prominent pyrotechnic experts as former chief James Scollins of the Lynn Fire Department, Harvey Schmidt of First Security Investiga-

tors, Inc., Robert Carter of the National Fire Protection Association, and William Murphy of

3. Based on an interview (Nov. 17, 1982) with Robert Carter, former Chief Arson Investigator, Common- wealth of Virginia and presently Research Analyst at the National Fire Protection Association, Quincy, Massachusetts. His assessment is corroborated by my own professional experience in the field, and by that of every other investigator I have encountered. 4. My views on this are shared by John White, Fire Marshall and commander of the Boston Fire Depart- ment's arson squad. White is the liaison between the Strike Force and the fire department.

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4 BRADY

the ATF arson team all concur that an enormous number of deliberately set fires are wrongly classified as "electrical," "children playing with matches," or "careless disposal" (as in trash set afire). They also concur that damages are greatly under-reported even when arson is acknowl- edged as the cause, since fire departments only consider fire damage to structures and do not consider either smoke and water damages, or the destruction of building contents. Actual insur- ance payments (usually based on replacement costs for all damaged items) typically amount to between three and five times the loss estimates reported by fire departments, as attested to by the above experts and substantiated in my own investigative experience.' The under-reporting of arson and fire damages is partly due to the shortages of staff and equipment which plague many arson squads and make it impossible to seriously investigate more than a fraction of the fires which are initially called to their attention (U.S. General Accounting Office, 1978). Fire chiefs are under pressure from mayors to show that fire protection has not declined despite cut-backs in city fire department budgets, as exemplified by department claims

during the recent "proposition 2V2" fiscal crisis in Boston (Harvey, 1981:6; Radin, 1981:3). The reputation of a city's fire protection services and the local department's evaluation by the NFPA affects both insurance premium rates and the bond ratings from municipal securities, which must

be sold to balance mounting budget deficits (National Fire Prevention Administration, 1976). Like other social problems, the cost of arson is not shared evenly. While national statistics are not available, the common impression of investigators and journalists alike is that most of those killed are poor people and minorities living in slum districts of urban centers (Lima, 1977b; Schall, 1977). The victims are often children or elderly people who are not quick enough to escape the flames. Typically, they die choking in their beds or trapped on staircases, the latter a favorite spot for arsonists to do their work because they provide an easy escape route and good updrafts for spreading the flames (ABC, 1978; Fraker, 1977). Declining urban neighborhoods, particularly in the older cities of the Northeast and Midwest, are the most common arson sites (Karter, 1982). New York City recorded more than 40,000 arson fires resulting in over 180 civilian deaths from 1975 to 1978 (Catalina, 1979). The city's fires have been concentrated in the heavily black and Hispanic South Bronx district, which was gutted by more than 30,000 arson fires from 1970 to 1979 (Hanson, 1980). In New Jersey, arson caused 168 deaths and over $96 million in damages in 1978, mainly in the ghettoes of Hoboken and Patterson (U.S. Congress: Senate, 1979). Denver's central district was scarred by more than 3,000 arson fires in 1971-76, which destroyed 544 buildings and caused over a million dollars in structural damages (MacDonald, 1977). The response of law enforcement agencies to the arson problem does not inspire confidence. Throughout the mounting arson wave of the 1970s, the Federal Bureau of Investigation (FBI) continued to list arson as a low priority offense, along with drunk driving and gambling; it final-

ly added arson to the list of "index crimes" in 1981 on a provisional basis (Campbell, 1981). Local

police departments reported in 1977 that less than 9 percent of all reported arson incidents re- sulted in an arrest, while less than 2 percent ended with a conviction (Boudreau, 1977:30). Fed- eral budget allocations show that in 1977, only $1.7 million of the Law Enforcement Assistance Administration's budget of $2 billion was set aside for anti-arson programs, or less than 0.1 per- cent (ABC, 1978; U.S. Congress: Senate, 1979). This was increased to $17 million by 1980, but was cut back to $5 million by President Ronald Reagan's administration in 1982 (Gest, 1983).

5. Based on presentations made by Scollins, Murphy, and Schmidt at the Massachusetts Attorney General's Conference on Arson held at Worcester, Massachusetts, February 23, 1983. In addition I interviewed three of these experts during January and February, 1983, in the course of liaison responsibilities for the Boston Arson Strike Force. I interviewed Carter extensively at the National Fire Protection Association at Quincy, Massachusetts, on November 17, 1982.

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Arson in Boston 5

MISUNDERSTANDING ARSON: THE LEGACY OF DEVIANCE THEORY

Solving arson, like any other crime, requires both sufficient resources and a logical theory which can link the available evidence and point to a particular suspect or a correct enforcement

policy. It is not enough for investigators to uncover the right clues; they must also set aside the wrong ones. A "cold trail" can be particularly deceptive when it is well worn by long investigative tradition and well marked by orthodox criminological theory. Unfortunately, the trail followed

in most analysis and investigation of arson is both "cold" and circular. In the United States, arson has long been the almost exclusive concern of local fire depart-

ments; and arson squads in those departments have typically served as a sort of bureaucratic "pasture" for older firefighters and those no longer fit for active fire duty. Training for these squads has been limited and largely confined to forensics and pyrotechnics. In essence, arson squad investigators are taught to approach each fire as an individual technical problem whose solution lies in identifying the means and method of "ignition" found in the rubble the morning

after. Once this evidence has been collected and any available eyewitnesses have been questioned,

the arson squads consider their job done. If they suspect a particular person set the fire, squad members may later spend long hours in clandestine surveillance of that individual (Associated Press, 1981).

But there is a great deal of difference between locating the origin or even the "torch" for a particular fire and understanding the source of the arson problem. Fire department officials have

little grasp of organized crime and even less appreciation of the complex socio-economic pro- cesses which lead to abandoned property, dramatic demographic changes, and ultimately arson. None of these larger issues seem relevant so long as arson is viewed as a crime without rational motive. Criminal investigation aims simply at linking physical evidence to particular arsonists whose impulsive, disturbed behavior makes them all the more elusive and unpredictable.

The dominant popular image of the arsonist is the classic "pyromaniac" who masturbates while watching the soaring flames from the shadows. While this portrayal has been slightly ex- panded to include the "juvenile vandal," arson is still widely regarded as a crime of rage, jeal- ousy, mental disorder, and especially sexual perversity (Battle and Weston, 1975:91; Witkin, 1979). This image owes a great deal to the rather dubious contributions of Sigmund Freud. Though Freud actually examined few pyromaniacs, he wrote extensively on the subject, describ-

ing them as sexually immature or homosexually inclined psychotics or adolescents. His conclu- sions, based largely on speculation and a reading of mythology (Freud, 1932:405), formed the basis of most later psychiatric and criminological work on pyromania (Macht and Mack, 1968; Yarnell, 1940).

Contemporary clinical research, invariably based on examinations of only a few maladjusted adolescents or adult psychotics, continues to reinforce the Freudian image. Hurley (1969:4) claims "arson is often a manifestation of mental abnormality ... the result of unconscious sexual conflict or as obsessive-compulsive or passive-aggressive behavior." Scott (1974) discusses arson as a crime of revenge or perversion committed by psychotics, alcoholics, homosexuals, and mal-

adjusted children, though he concedes that "arson for profit" might be the motive for a few of- fenders. Inciardi (1970) concludes that most of the 138 imprisoned arsonists he studied were pri- marily motivated by sexual excitement or the desire for revenge, while only 7 percent burned buildings for profit. The latter he regards as an anachronism harking back to the 1930s "when arson was associated with organized crime" (1970:145). MacDonald (1977) also depicts arsonists

as compulsive pyromaniacs, sexually excited by fire, but otherwise impotent, prone to bedwet- ting, transvestite behavior, and collecting obscene magazines.

The violent subculture theory is essentially an extension of the traditional explanations of arson as the product of individual deviance. However, the subculture theories regard whole com- munities - particularly urban ghetto dwellers - as prone to a variety of deviant behavior, includ-

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6 BRADY

ing arson (Banfield, 1970; Miller, 1968; Moynihan, 1970). Both sorts of deviance theory regard arson as an irrational act, undertaken by pathological actors, for a variety of perverse individual or collective impulses. Both explanations find wide acceptance among officials responsible for combatting arson and are clearly reflected in unsuccessful anti-arson programs (Battle and Weston, 1975; Witkin, 1979). There is a disturbing circularity in the deviance theories and the anti-arson programs which are based upon them. Researchers draw an image of the arsonist from the composite characteris- tics of those few wh6 were captured and imprisoned. Enforcement agencies aim their investiga-

tions at the "sort of people" identified by researchers as arson prone (Fire and Arson Investiga- tor, 1981). Orthodox assumptions about the motives and actors involved with arson remain largely unquestioned.

THE DEMOGRAPHY OF ARSON IN BOSTON

Boston burns almost nightly in deliberately set fires. From 1978 until the end of 1982 the city

was scarred by more than 3,000 "incendiary" and "suspicious" fires. In 1981 and 1982 alone they

caused more than $4.5 million in property losses and killed about 60 people (Gest, 1983; Schar- fenberg, 1980; Slade, 1978; Vennochi, 1982). Local fire officials view these incidents as the work

of "bored juveniles" and "firebugs" (Jahnke, 1982). They rely on expanded forensic laboratories,

neighborhood arson watch programs, and rewards to control the mounting fire problem (Ma- honey, 1982; Osgood, 1982). Not surprisingly, this approach has utterly failed. George Paul, the Boston Fire Commissioner, said, "There's no rhyme or reason to this, no pattern. We've plotted space, time patterns, nothing shows up" (McMillan, 1982:23).

There is, nevertheless, a pattern in Boston's fire history. Maps 1 and 2 show that arson is tightly concentrated within certain poor Boston neighborhoods, particularly Roxbury, North Dorchester, East Boston, and Jamaica Plain. These districts are largely populated by blacks, Hispanics, and poor Irish and Italians. If pyromaniacs or juvenile vandals set these blazes in random irrational acts, as local officials insist, why do the arsonists so carefully respect neigh-

borhood boundaries? If "bored youths idled by school vacation" (Dillon, 1982:4) were respon- sible for the wave of 300 arson fires in the summer of 1982, then must we assume that juveniles are bored only in certain districts?

Arson is more common in buildings owned by absentee landlords than in owner-occupied tene- ments in the same neighborhoods (National Urban League, 1971). Arson is rare in public hous- ing projects, which are located in the heart of Boston's fire-ravaged districts and which house the poorest, most disproportionately non-white, single-parent families. These are, presumably, the angriest, most potentially "socio-pathic" people in the city. Rates of street crime in the hous-

ing projects are the highest in the city, so serious indeed that the buildings were placed in re- ceivership by the federal courts during 1982-83 while security arrangements for tenants were im-

proved.6 Yet the Boston Housing Authority does not have a significant arson problem, with only four arson fires reported for 1981 in buildings which housed over 13,000 people (Fox, 1983).

Finally, incendiary techniques employed by arsonists have become increasingly sophisticated (Horn, 1976). Pyrotechnic experts draw particular attention to the 1982-83 blazes set in Rox- bury's Highland Park, along the South Boston waterfront, and those straddling the new South-

west Corridor mass transit construction zone.7 Robert Carter8 of the NFPA described these fires as follows:

6. Based on an interview with Jonathan Fox, Fire Safety Coordinator, Department of Public Safety, Boston Housing Authority, October 26, 1982. Fox also provided extensive notes on these matters. 7. Based on an interview with William Murphy, Federal Bureau of Alcohol, Tobacco and Firearms, November 11, 1982, and an interview with Robert Carter, November 17, 1982. 8. Based on an interview with Robert Carter, November 17, 1982.

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Arson in Boston 7

MAP 1

Arson and Abandonment in Boston

Legend

Each dot represents the location of one suspicious fire in 1979.

Shadings represent the total number of buildings razed or boarded up by city authority from 1975 to 1982.

0-49 buildings abandoned

50-99 buildings abandoned

100-199 buildings abandoned

200-550 buildings abandoned

Eac do rereens heoato of:;-:?. one suspiciousfren199 Shadngs eprsentthe ota number of bildnsrzdo

borddupb ct atort fo 975 to192

0-49 bulig bnoe 50-9 bulinsaanoe

100?:-?-.:-199 bu\::: i ldng ba do e

200-550ii: bu::~ ild i ngs abandoned:

Sources

City divided according to ward boundaries used by the city's buildings department. Arson fire locations plotted by Michael Moore, Boston Arson Strike Force.

Abandonment data from monthly and annual reports of the city's buildings and community development depart- ments, available from Boston City Hall.

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8 BRADY

MAP 2

Arson and Redlining in Boston

East Boston

Charlestown .......

Boston Proper

Aliston/BrightonASort Back BaySouth Boston Jamaica Plain

R n eNorth Dorchester

l ee.f.i i v s t et.n.o v n

West Roxbury --tional mortgages per dollar

.. M . L eg en

Hyde Park deposited, of the 10 largest banks reporting to the state's Commis- sioner of Banks from 1975 to

1978.

$0.20-0.35

$0.15-0.19

$0.10-0.14

$0.05-0.09

....... J. ......... ...... ....; ??::: ~?:??:. ???:x.:::??::::

Roxbury: ~~~~ ~ ...... ............... W ,1 ~?

............... .. .....?~i?: Jamaica Plain~,~ ~.i~ :j ~ :~,?.?. .............;;

sinro aksfo 95t

:r-::: : : : :::::: II--1978.-

$0.0-.3

-$0.15-0.19

- r\ ~-~ S$0.10-0.14te $00-00

Sources

City neighborhood divisions from the Boston Redevelopment Authority.

Arson fire locations plotted by Michael Moore, Boston Arson Strike Force.

Bank reinvestment patterns from Greenwald (1978).

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Arson in Boston 9

These have been some of the most professional jobs we've seen in the city. Extensive quantities of hard-to- detect accelerants, such as paint thinner, have been used, typically placed in several waxed-paper con- tainers positioned at key structural members of the buildings and linked together with trailers (streams) of accelerant, leading to a single ignition point, sometimes using photographic paper as a fuse device which leaves little residue.

Are we to believe that psychotic "pyromaniacs" or malicious juvenile vandals would employ such systematic and complex means of setting fires?

The answer, of course, is that arson is not primarily a result of deviant perversion, juvenile rage, or boredom. More complex economic motives are involved, which have to do with where buildings are situated and who owns them. I have discovered several discernable varieties of

arson in Boston, all of these directly or indirectly linked to patterns of real estate speculation and to decisions aimed at profit-making in what are essentially business transactions.

THE ROLE OF BANKS: ARSON AND ABANDONMENT

Arson is both a barometer of changing values and a mechanism for accelerating changes in property values and in the social economy of the city. More than half of Boston's 3,000 arson fires from 1978 to 1982 occurred in abandoned buildings.9 The relative frequency of abandon- ment in the city's neighborhoods can be ascertained by analyzing the monthly reports of city de-

partments charged with boarding up or razing derelict buildings. The abandonment pattern cor-

responds closely to the arson distribution pattern as represented in Map 1. Across the city's 22 wards, an average of 41 buildings per ward were razed or boarded up from 1975 to 1982; in the

depressed North Dorchester and Roxbury districts, there were between 220 and 540 buildings razed per ward.10

Abandoned buildings have long been recognized as a problem in urban neighborhoods, where the phenomenon is closely associated with declining local opportunities and mounting crime. An earlier generation of urban planners at the Federal Housing Administration (FHA) described abandonment as part of the "natural" process of "neighborhood evolution" wherein "high-rent neighborhoods move slowly but predictably across the urban landscape, creating a gravitational

pull on the middle class, leaving behind the structure by which slums are made" (Hoyt, 1939:26). More recently, U.S. Housing and Urban Development analysts have attributed abandonment to the problem of "urban blight" brought on by the "influx of minority populations" (Real Estate Research Corp., 1975:22). Such prominent urban planners as Sternleib et al. (1974:33) also em- phasize that "abandonment is a contagion problem" which is "most frequent in structures inhab- ited by blacks and Puerto Ricans."

These attempts to explain abandonment clearly echo the deviant subculture theory and, in their persistent use of language borrowed from physics or biology, give the impression that neighborhood decline is somehow natural or inevitable, or that poor and ethnic people are in- fected with the problem and are therefore responsible for it. The simple correlation of abandon-

ment rates and minority census figures in fact proves nothing about why housing deteriorates; but such "explanations" again draw strength from implicit racist sentiments. Any further analysis of the problem is precluded by this orthodoxy, which is little more than a tautology.

There is a great deal more to be said about abandonment. National studies show that it is not

minority landlords who most frequently abandon their buildings, but rather white landlords - in

9. Joseph O'Keefe, Massachusetts State Fire Marshall, on "People are Talking," WNEV-TV, Boston, November 11, 1982. 10. Statistics on razed and boarded-up properties drawn from tabulated monthly reports filed by Boston Buildings Department and Boston Office of Community Development at Boston City Hall. Note that these statistics are compiled by ward divisions, while the bank reinvestment statistics computed by Greenwald (1978) and presented in Map 2 are compiled with "neighborhood" districts drawn by the Boston Redevelop- ment Authority.

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10 BRADY

particular absentee landlords with high incomes who own a number of buildings and who hold property titles indirectly through holding companies and real estate trusts (Sternleib et al., 1974). Studies of abandonment in New York City, Cleveland, Chicago, Detroit, and Los Angeles con- sistently demonstrate that abandonment patterns follow closely the discriminatory mortgage- lending policies of banks which deny credit to certain districts of the inner city in order to invest

in more profitable suburban real estate (Linton et al., 1971; Loyola Law Journal, 1975; National Urban League, 1971). This disinvestment process is known as redlining. Devine (1973) docu- mented the scale of this destructive redlining pattern in New York's South Bronx district, where

the largest local banks systematically drained the district of capital by exporting local deposits and assets to investments in the suburbs. Berwyn (1974) showed that for every dollar deposited

in major banks located in Chicago's predominantly black districts, less than eight cents was rein-

vested by those same banks in conventional mortgages loaned in those areas-though 31 cents was used by those banks to provide mortgage supports for the suburbs. In Boston, the same pattern is evident. The State Commissioner of Banking, Carol Greenwald (1978:7), using statistics provided by the banks, found that for every dollar deposited in the city branches of the 10 largest banks from 1975 to 1978, the banks reinvested only 10 to 17 cents in conventional mortgages within the city. Some urban districts fared far worse than others: East Boston received between three and 11 cents, North Dorchester between five and 11 cents, Rox-

bury between four and 11 cents. Redlining is a clear violation of both a bank's obligations, contained in state and federal chart- ers, and the provisions of the Community Reinvestment Act adopted by the U.S. Congress in 1978 (Taggert, 1977). Yet no bank officers to my knowledge have ever been prosecuted for viola-

tion of the law or their local charters (Greenwald, 1980). Not all banks are equally involved with

redlining. Greenwald (1978) found that the largest banks were the ones most systematically en- gaged in redlining. It should be noted that banks use redlining not so much to avoid losses as to maximize profits. In Boston the banks have consistently made profits from their investments in every section of the city, but suburban investments are more profitable (Metropolitan Area Planning Council, 1980). Redlining is devastating to a neighborhood. Many small businesses are forced to close when they are unable to get bank loans (Bradford and Rubinowitz, 1975). As property values decline, landlords stop repairing their buildings and eventually abandon them when they become unin- habitable (Newfield and DuBrul, 1977; Stone, 1978). A severe housing shortage develops. In Boston, where housing for low- and moderate-income tenants is extremely scarce, the city authorities estimate that there were approximately 3,000 abandoned buildings in 1974 and nearly 5,000 in 1982 (Boston Redevelopment Authority, 1974; Flynn, 1982). Arson has been concentrated in those Boston neighborhoods which have been most drained of capital and mortgage loans. The Boston Fire Department reports that there were an average of 12 arsons per ward across the city in 1980; but wards 14 and 15 in North Dorchester and Rox-

bury had a combined total of 82 arson fires, while ward 1 in East Boston had 21 arson fires. Two sorts of arson fires can be seen as a direct result of redlining, and these might be described

as escape fires and vandal fires. Escape fires are arranged by landlords and small business owners to collect insurance premiums on unprofitable properties and real estate investments. Vandal fires occur after owners abandon their properties and take a tax write-off on their losses. Their buildings become a hangout for juvenile gangs and, ultimately, a target for vandalism. Of course, redlining is not the only reason for neighborhood decline, which leads to vandal and escape fires; but redlining accelerates the downward spiral and makes recovery almost impossible (Duncan, 1975; Greenwald, 1980; Public Interest Research Group-District of Columbia, 1975). While redlining has been found to be a common practice among the larger banks and an indi- rect contributor to arson, some individual banks and bank officers play a direct role in arson

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Arson in Boston 11

through their involvement with organized crime's arson-for-profit syndicates. Before discussing

specific examples of collaboration between bankers and gangsters, I consider the general model that links criminal syndicates to redlining and abandonment.

BANKERS, GANGSTERS, AND PROBLEM PROPERTIES

Foreclosures on unpaid mortgages are one of the side effects of redlining. Many property own-

ers in redlined areas cease making mortgage payments on losing investments. By the time foreclo-

sure procedures have been completed and the bank seizes the buildings, the property has fre- quently been neglected and even abandoned for months or years. Such derelict buildings, hardly

an attractive item on the real estate market, represent a potential loss for the banks. Enter the organized crime racketeers. They offer to buy the "problem buildings," often at a

price far greater than true market value, on condition that the bank write out a new mortgage for close to the full purchase price, and sometimes more, to cover the cost of "renovation." Thus,

the racketeers acquire large numbers of properties with little investment of their own capital. In some cases they can further increase their "leverage" by arranging second, third, or fourth mort-

gages whose total value far exceeds the original inflated purchase price. Backed by mortgages from a major bank, it is fairly simple to arrange insurance coverage for the buildings at a level well above the total value of the mortgages.

The racketeers then hire professional "torches" to set fire to the over-mortgaged and over- insured buildings. Often a series of fires of escalating scale are set to net the owner several partial

insurance payments before the building is totally destroyed in one final blaze. Racketeers' profits are further increased by hiring phony contractors to "repair" the fire damage. Corrupt building inspectors file false reports, concealing the fact that repairs were never made, then another fire

is set to burn the "repaired" portion of the building. The banks often profit more than the racketeers from this ruse, even without consciously

joining in the conspiracy and without violating the law. Since state laws stipulate that the insur- ance company must pay the holder of the mortgage first in the event of a fire which destroys the building, arson represents the "final solution" to problem properties. Fire-prone speculators are the best possible risks for banks, since their mortgages are paid off in full and in short order.

The potential losses represented by foreclosed properties are converted into a substantial profit for the bank because the new mortgage paid by the insurance company greatly exceeds the old bad debt assumed under foreclosure.

The relationship between bankers and racketeers can become quite cozy as the racketeers return again and again to the same bank and often the same loan officer. Unless bank officers

engage in conscious conspiracy to burn for profit (and there is reason for them to do so), these transactions are perfectly legal-even if the buyer has recently been convicted for arson or has a long history of incendiary fires. Indeed, one might argue convincingly that a bank officer who failed to unload problem properties in such a profitable arrangement would be derelict in his obligation to protect the interests of the bank's shareholders.

The case of the South Boston Savings Bank, one of the largest financial institutions in Massa-

chusetts, illustrates this point. From 1970 to 1977 the bank foreclosed on 76 properties, many of them in depressed neighborhoods. These parcels were covered by conventional mortgages written by the bank. In the same period 39 of these properties suffered a total of 79 fires, averag- ing about two fires per parcel. This may be compared with 69 parcels foreclosed by the same bank in the same period for mortgages written by the bank but guaranteed by the Veterans' Administration (VA) and the U.S. Department of Housing and Urban Development (HUD). These latter properties were in the same neighborhoods as the first group, and their original owners were actually poorer risks, since the VA and HUD required of them smaller initial down- payments than the bank demanded from holders of conventional mortgages. Still, the 69 govern-

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12 BRADY

ment-guaranteed foreclosed properties suffered only 36 fires at 26 addresses, or approximately half the rate of loss at the foreclosed properties in which the bank's own money was at risk in a conventional mortgage (Zanger, 1978a,b). The timing of these fires in the South Boston Savings Bank properties is also curious. One would expect more fires to occur in the year before foreclosure, when owners might turn to desperate means (such as an escape fire) to recoup their losses. This is precisely the pattern in the buildings foreclosed by the bank in which the mortgages were guaranteed by the U.S. govern-

ment. However, the reverse is the case for properties foreclosed under conventional mortgages written by the bank. It was the new owners with properties acquired from the bank after fore- closure who had the "bad luck" with fires - most of which occurred in the first year after resale.

Insurance payments for fires have brought millions of dollars in income to the South Boston

Savings Bank, for properties which might otherwise have represented a serious loss (Zanger, 1978b).

In 1978 the South Boston Savings Bank's mortgage clients included many of Boston's most arson-prone property owners, of whom a mere dozen experienced more than a hundred sus- picious fires from 1970 to 1977 (Zanger, 1978). The bank's clients during this period included: Caroll St. Germaine, convicted arsonist and murderer (over $500,000 to 1978); Russell Tar- danico, convicted arsonist (over $730,000 in 16 mortgages to 1982); George Lincoln, confessed "torch" and arsonist who turned "state's witness" in exchange for immunity in a 1978-79 Boston arson conspiracy trial (over $150,000 in five mortgages to 1978); Nicholas Shaheen, convicted arsonist (over $100,000 in five mortgages to 1978). The bank's president, Alfred Archibald, has denied any knowledge that these and other fire-prone clients were "that sort of person" (WBZ, 1981), or that they had any "sort of fire problem" (Zanger, 1978a:1).

INSURANCE INDUSTRY POLICIES AND ARSON

Insurance companies in the United States paid an estimated $5 billion in arson-related losses in 1979-80 (Karter, 1982). Yet they have not been aggressive in pressing local, state, or federal governments to undertake vigorous anti-arson measures, such as the restriction of bank redlining; and their internal studies of arson are generally circulated quietly within the industry.

With some important exceptions, which I discuss below, the insurance industry has not re- sponded publicly to the arson problem.

There are three reasons for this attitude. First, the insurance companies themselves practice redlining (McDonough, 1980). In 1968, following ghetto riots in a number of U.S. cities, the insurance industry persuaded Congress to establish a network of FAIR Plan insurance consor- tiums to cover high-risk districts in urban centers (Massachusetts Property Insurance Under- writers Association, 1970; U.S. Housing and Urban Development, 1968). Under the FAIR Plans sponsored by 26 states with large urban centers, insurance losses in the high-risk areas are shared

among all companies doing business in each state. A company's contribution to the state's FAIR Plan pool is based on that company's percentage of the total premium value of policies written in the state (U.S. Housing and Urban Development, 1968). The creation of the FAIR Plans accelerated the wholesale exodus of conventional insurance companies from the high-risk dis- tricts, and the FAIR Plans were obligated to provide insurance for virtually everyone and virtu- ally all categories of real property. FAIR Plan losses to arson grew rapidly, amounting to an estimated $275 million for New York FAIR Plan and over $30 million for New Jersey FAIR Plan from 1968 to 1977 (Economist, 1977:11; Higgins, 1979:18). These are substantial losses for the FAIR Plans and their member insurance companies, but they can be simply passed along, in the form of higher premiums charged to all of those living in FAIR Plan districts where inhabitants cannot shop elsewhere for conventional coverage (U.S. Congress: Senate, 1979).

Second, insurance claims adjustors seldom recommend civil litigation against property owners

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Arson in Boston 13

making fire claims, even when arson for profit is suspected. The companies are reluctant to chal-

lenge claims, because they don't want to acquire a reputation for "being tough" and risk losing potential clients in the increasingly competitive scramble for policy underwriting. If a company challenges a claim, refuses prompt payment, and then loses the case in civil litigation, the judge will usually require the company to pay the claimant damages equal to three times the original claim (U.S. Congress: Senate, 1979). The poor record of the criminal justice system in investigat-

ing and prosecuting arson, and the inadequacy of often vague and sketchy arson squad reports, also leaves the insurance companies vulnerable to counter-suit when they are unsuccessful in challenging a client's claims. All of these considerations discourage serious arson control within the industry. George Clark, vice president for Cravens, Dargen Insurance Co., told a Congres- sional hearing on arson for profit:

If we instruct our cause-of-loss investigators to send copies of their reports to District Attorneys, it looks as if the big insurance companies are trying to put the policy-holder in jail. If we voluntarily share the material and the District Attorney dismisses the case, we are wide open for a civil lawsuit. Punitive damages in some states will be the price we pay for sharing this valuable information with law enforcement authorities. There seems to be a lack of interest as far as law enforcement is concerned (U.S. Congress: Senate, 1979:22).

Third, the insurance industry is privileged: it is the only U.S. industry not restricted by federal

anti-trust laws. Restrictions enacted by the individual state insurance commissions leave the companies tremendous flexibility in investing their premiums. Insurance companies are reluctant to admit the extent of the arson problem because they don't want closer regulation of the industry

(Lima, 1980; Weese, 1971). The worst industry nightmare would be the repeal of the McCarran- Ferguson Act of 1945, which grants the industry exemption from federal regulation. This is precisely what has been demanded by some anti-arson activists and by some government- sponsored investigations of insurance fraud (U.S. Comptroller General, 1979; U.S. General Accounting Office, 1978; U.S. Congress: Senate, 1963). The main impetus for insurance reform has come from community groups in fire-ravaged

districts, such as Massachusetts Fair Share and the Symphony Tenants Organizing Project who made arson and insurance fraud a public issue in Massachusetts from 1977 to 1980 (Brady, 1981a, 1982a, b). They roundly criticized the local FAIR Plan for its inadequate attention to arson in the early 1970s, when Massachusetts FAIR Plan admitted that fully 60 percent of its total losses were due to arson-related claims (Golembeski, 1980, 1982). The state insurance commissioner, Michael Sabbagh, recognizing the mounting problem, granted enlightened FAIR Plan officials the authority to refuse certain coverage to clients with serious histories of sus- picious fires. The Massachusetts FAIR Plan since 1979 has required all prospective clients to submit an "arson application" detailing all fires in every building in which they have held any financial interest (Golembeski, 1980). In 1976 the FAIR Plan also began to devote far greater resources to the investigation of suspicious fire claims, and has refused to write policies for a number of arson-prone landlords. The FAIR Plan's arson losses have declined from an estimated 60 percent of all fire claims in 1975 to less than 30 percent in 1981 (Golembeski, 1982). Unfortunately, there is another form of insurance coverage still available to arson racketeers:

the so-called surplus line insurance companies, which are based outside the state and often in another country. Though their premiums are often substantially higher than those of the conven- tional companies or the FAIR Plans, the surplus line companies insure almost anyone at levels of coverage not possible elsewhere (U.S. Congress: Senate, 1963). These companies operate without local licenses or regulation, except that their local brokers must be registered with state insurance commissions and must swear that their clients have been turned down by several con- ventional companies, making them eligible for "surplus" coverage (Bawcutt, 1978; Kwitney, 1973:158). These local brokers are largely unsupervised by their company's "home office," which

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14 BRADY

is sometimes no more than a post office box in Bermuda, the Bahamas, or Delaware- a state notorious for its lack of corporate regulations. The brokers typically receive more than double the commissions allowed by conventional companies and often the same brokers are later responsible for claims adjustment (Lima, 1980; Weese, 1971). The surplus line companies usually sell their premiums, and 98 to 99 percent of their policy liabilities, to foreign investors who are eager to break into the U.S. insurance market and are unaware of the scale of arson fraud in the United States. Thus, the broker and the surplus line company are not vulnerable to the losses sustained under the policies which they write, and policies of arson racketeers are buried within large investment bundles containing many more policies with legitimate insurance clients (Brenner, 1980; Daenzer, 1980). The surplus line market grew dramatically during the 1970s. From 1971 to 1977, the volume of surplus lines increased 533 percent, from $298 million to $1.6 billion dollars (National Association of Insurance Com- missioners, 1980a). Since experts estimate that only about one-fourth of the actual premium volume is reported to the various states' insurance commissioners (Weese, 1971:81), the real premium volume was probably about $8 billion in 1980 (Chaput and Faxon, 1981; Daenzer, 1980; Lima, 1980:2). The situation, in short, is ideal for arson racketeers driven out of their once lucrative FAIR

Plan hunting grounds (U.S. Fire Administration, 1979). In 1978, the SASSE syndicate of surplus line brokers, operating in league with real estate speculators and gangsters in New York City, collected over $32 million in fraudulent insurance claims on grossly over-insured properties in the South Bronx (Brenner, 1980; Coppack, 1980). Some of these policies were backdated to cover previous fires, and "torches" were hired to set other buildings afire (Brenner, 1978; Lima,

1980). The SASSE syndicate consisted of New York City brokers representing a number of surplus line companies which were in turn investment conduits for Lloyds of London. The scale of this loss staggered even Lloyds and prompted New York State's insurance commissioner to implement the nation's most stringent underwriting procedures for surplus line companies (Chaput and Faxon, 1981). In Massachusetts the implementation of effective anti-arson measures adopted by the FAIR Plan from 1976 to 1979 coincided with the dramatic expansion of the surplus line market. The total value of surplus line premiums reported to the state insurance commission increased by nearly 600 percent in 1976-77 alone, when it grew from $5.6 million to $32.8 million (Chaput and Faxon, 1981:4). The number of reported fire insurance policies written with surplus line companies doubled in 1981-82. Of course, there are many reasons for using surplus line coverage

which are entirely legitimate, as are most brokers and surplus line clients. For example, an individual wishing to insure a vacant apartment building or an empty warehouse in a high-risk

district would probably not be eligible (after 1978) for FAIR Plan or conventional insurance coverage (Golembeski, 1980). Nevertheless, the Boston Arson Strike Force discovered that 31 individuals and holding companies with serious arson histories on their properties contracted for

new surplus line policies in 1980 and 1981. These policies totaled over $38 million in fire insurance coverage in these two years. Properties belonging to these 31 individuals and trust companies burned in 153 "incendiary," "suspicious," or "undetermined" fires from 1978 to 1982, with total structural damage estimated by the Boston Fire Department in excess of $2 million."

A handful of brokers represent nearly all of these suspicious property owners (Brady, 1982b; Moore, 1983).

11. Surplus line insurance affadavits are public records, on file at the Massachusetts Insurance Commission Office in Boston. Fire incidence and cause records are also public documents (though follow-up investigation reports of the Arson Squad are not). The public fire records may be obtained from the Central Headquarters, Boston Fire Department. Copies of insurance affadavits are available on request from the author.

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Arson in Boston 15

"DOWNSCALE" ARSON AND THE TARDANICO SYNDICATE

The case of the Russell Tardanico/Robert Sherman syndicate in Dorchester illustrates one variety of arson racketeering in Boston. In 1970 Russell Tardanico was convicted of arson and "interfering with the duties of the Fire Department" while it was engaged in putting out another arson fire (Pappas, 1981). Tardanico and Sherman have, since the 1960s, owned whole blocks of commercial buildings and dozens of apartment units in Dorchester (Anner, 1982; Axelrod, 1982; Pappas, 1981). Following his arson conviction, Tardanico transferred title for most of his properties from his own name to those of his wife and children, and to Sherman, who are trustees of some dozen holding companies (Brady, 1982b). From 1973 to 1982, Tardanico/ Sherman properties have burned more than 35 times, with losses estimated at more than $600,000. The state FAIR Plan alone admits paying him more than $110,000 (Pappas, 1981).

Table 1 summarizes the Tardanico syndicate's transactions and a few of the more important fires to strike their properties, most of which were classified by the Boston Fire Department as "incendiary," "suspicious," "undetermined," or "burning trash." Most of these properties burned very shortly after they were purchased and insurance policies were arranged. Many of these properties were purchased from Arthur Pitnoff, a respected local entrepreneur with ex- tensive holdings in Dorchester. Tardanico was until 1979 president of the Fields Corner (Dorchester) Merchants' Association (Zanger, 1978a).

The South Boston Savings Bank has consistently provided mortgages to the Tardanico syndicate, including six written while Tardanico was under a suspended prison sentence for arson,

from 1971 to 1974. Between 1971 and 1979 the bank wrote 15 mortgages worth $730,000 for 13

different Tardanico properties."2 Eleven of these buildings burned a total of 27 times, usually in "suspicious" or "incendiary" fires and usually a few months after purchase in suspicious fires. Backed by this powerful bank, Tardanico easily arranged large insurance policies for his proper- ties. Along with the policies of several conventional companies, he arranged over $600,000 in coverage with the state's FAIR Plan from 1972 to 1979 (Brady, 1982b; Pappas, 1981).

Since 1979 the FAIR Plan has denied coverage to Tardanico (Pappas, 1981). He has become the object of considerable media attention (WBZ, 1981; WNEV, 1982) following four arson fires at Tardanico/syndicate-owned buildings at 318 Adams Street (August, 1981) and 1352 Dor- chester Avenue (November, 1982) (Anner, 1982; Pappas, 1981). Despite his claims to the con- trary (Pappas, 1981), Tardanico has not left the real estate business. Rather, Russell Tardanico has shifted property titles to a new set of trust companies now headed by his wife, Kathleen, and

has drawn up a new series of comprehensive insurance policies (worth a total of over $1 million) with several surplus line insurance companies. The largest of these carries a value of $705,000 coverage for unspecified "buildings." The unnamed insurer, as a surplus line company, is not subject to state regulations, except that the broker was obligated to swear that Tardanico had been previously turned down by at least three conventional companies, making him eligible for surplus coverage.

"UPSCALE" ARSON AND THE CASE OF FREDERICK RUST

Another sort of arson has developed in Boston neighborhoods where property values are rising rapidly and landlords are trying to attract more affluent renters or buyers for condominiums created from former rental apartments (Jahnke, 1981b). Boston arson expert Michael Moore (1981) refers to this pattern as "upscale" arson in his seminal writings on the economics of arson. The "vacancy de-control" clause of Boston's rent control law and the eviction restrictions of the

12. South Boston Savings Bank mortgage contracts are public records, available from the Suffolk County Register of Deeds, Old County Courthouse, Government Center, Boston. Copies are available on request from the author.

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TABLE 1

Real Estate Transactions and Fire History of the Tardanico Syndicate

Date Date Estimated Property of Sale Previous Owner Buyer Sale Price Mortgage of Fire Fire Origin Structural Damage 1350-8 Dor- 11/17/76 South Boston Russell Tardanico $ 65,000 South Boston 11/16/82 suspicious $ 10,000 chester Avenue Savings Bank Savings Bank 11/20/82 suspicious $ 1,000 1374-78 Dor- 5/13/75 City of Boston Russell Tardanico $ 4,500 Arthur Pitnoff 7/6/79 suspicious $ 2,000 chester Avenue 1/2/80 Russell Tardanico Mass. Tex $ 70,000

Corporation

1377-79 Dor- 2/24/74 Robert Pitnoff Russell Tardanico $ 45,000 Meeting House 2/25/76 trash $ 20,000 chester Avenue (Arthur's brother) Hill Bank

7/23/76 Russell Tardanico RKPSR Realty Trust $1 South Boston 5/1/77 suspicious $ 2,500 (Russell Tardanico) Savings Bank

1452-58 Dor- 8/11/76 Mary Remy RAB Realty Trust $ 32,000 South Boston 10/9/76 trash $ 2,000 chester Avenue (Russell Tardanico) Savings Bank 1/20/79 incendiary $ 1,500 1460-70 Dor- 3/18/77 New England 1460 Trust $ 38,500 Mass. Cooperative 4/27/77 suspicious $151,000 chester Avenue Mutual Life (Russell Tardanico) Bank 2/16/78 incendiary $ 1,000

Insurance Co.

1502-08 Dor- 8/19/75 Simon Drasner RAB Realty Trust $ 45,000 South Boston 9/3/75 undetermined $ 83,000 chester Avenue (Russell Tardanico) Savings Bank 10/3/75 undetermined $ 25,000 1510-14 Dor- 7/22/76 Arthur Pitnoff RRR Realty Trust $ 75,000 South Boston 11/6/76 undetermined $ 6,500 chester Avenue (Russell Tardanico) Savings Bank 1/2/77 undetermined $ 20,000

158 Adams 10/11/72 Arthur Pitnoff Russell Tardanico $ 25,000 South Boston 11/30/72 undetermined $ 2,500 Street Savings Bank 4/11/73 suspicious $ 3,000

7/12/73 Russell Tardanico Arthur Pitnoff $ 12,000 3/15/77 undetermined $ 40,000 3/20/80 Arthur Pitnoff Ronald Tardanico $1 6/18/78 undetermined $ 4,500

(Russell's brother)

318-22 Adams 4/24/81 BayBank RKPSR Realty Trust $105,000 BayBank 4/26/81 suspicious $ 1,000 Street (Russell Tardanico) 3/25/81 suspicious $ 75,000 115 Hollings- 4/19/74 John Gornstein Russell Tardanico $ 48,000 South Boston 11/6/74 suspicious $ 8,000 worth Road Savings Bank 1/1/75 suspicious $ 37,400 Source:

Property sales and mortgages from documents at Suffolk County Registry of Deeds. Fire data and structural loss estimates from Boston Fire Department Arson Squad.

0)

CI

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Arson in Boston 17

city's 1979 "condominium conversion" statute were specifically designed to protect long-term and

elderly tenants from unwarranted rent increases or sudden displacement. Local tenants unions have won small but important victories in the courts and legislatures which restrict "free" specu-

lation. As a consequence, arson has become increasingly popular among landlord-speculators as the final solution to "problem tenants," just as it has become popular among banks faced with "problem properties." Boston's prime "condominium conversion" districts have been hard hit by arson. In 1980, arson

rates increased by 400 percent in the Back Bay area, where property values have been soaring (Malaspina, 1981). This closely followed the 1979 passage of a city ordinance restricting the right

of landlords to evict tenants for purposes of condominium conversion. Harvey Schmidt, an arson investigator for the Massachusetts FAIR Plan, noted:

There are three basic upfront advantages that even a relatively unsophisticated owner might recognize in having a friendly fire on the premises: rendering the property uninhabitable, facilitating renovation by gutting the interior, and generating insurance money to finance conversion (McNamara and Kilbanoff, 1981:7).

City Councilman Ray Flynn, looking at the 1980 arson pattern in Brighton, a district under- going extensive condominium conversion, stated:

I am convinced that there is a correlation between building conversion and arson. There is nothing so ef- fective as fire for circumventing eviction procedures. Just look at the money being made by conversions. It is second only to the lottery in the amount of money you can make in one shot (McNamara and Kil- banoff, 1981:7).

The upscale arson pattern is evident in the history of buildings owned by real estate magnate

Frederick Rust. Since 1977, Rust has been engaged in a massive condominium conversion effort in the Brighton district (Jahnke, 1981b). His properties are extraordinarily "leveraged," in other

words, with only small cash outlays he has obtained heavy second, third, and fourth mortgages whose total value often triples the original price within a few months of purchase. Rust is thus in a position to draw enormous fire insurance policies (Goodstine, 1982). For example, in 1977- 78 Rust purchased four large Brighton buildings and, within four months, arranged second and third mortgages worth $1.7 million, more than double the purchase price. More than $1.3 million

of the second mortgages for these four properties were provided by the Suffolk Franklin Savings

Bank, where Rust was a member of the board of directors until 1981 (Goodstine, 1982; Jahnke, 1981b).

Rust's buildings are frequent targets for arson. Fires of "suspicious" or "undetermined" origin

caused over $300,000 in estimated damages to his properties between 1978 and 1980. His building

at 1673 Commonwealth Avenue burned in a "suspicious" fire in 1980; and one person burned to death in the August, 1980, "undetermined" fire at 1677 Commonwealth Avenue. Another "suspicious" fire occurred in 1980 at 232 Kelton Street, which Rust purchased for $96,000 in 1978 but which was mortgaged for a total of $950,000 in 1979. Rust purchased 248 Kelton Street (next door to 232) in 1980 from Joseph Mazzapica, who was convicted of arson and insurance fraud in the 1978 "Symphony Road" arson case (Zanger, 1980), and who, by virtue of his $100,000 second mortgage, remains an insurance beneficiary in the event of fire at 248 Kelton Street. Another of Rust's buildings, 362-6 Commonwealth Avenue, carried over $2 million in mortgages by 1980, three times its 1977 purchase price. Boston's largest financial institution, the First National Bank of Boston, provided third, fourth, and fifth mortgages worth $700,000 for that building (Goodstine, 1982) which burned in two arson fires during 1978 and 1980; total struc- tural damages were estimated at $175,000 by the Boston Fire Department. The 1980 fire effec- tively evicted the tenants at 362-6 Commonwealth Avenue (Moore, 1980). When newspaper

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18 BRADY

reports asked Rust about his plans to convert the building to condominiums after the fire, he replied:

The building has a substantial amount of fire damage, and I had to make an economic decision. Not that you aren't sympathetic to the tenants involved, but it is an economic decision. ... If you have a situation like that, it isn't absolutely strange for someone to decide to convert to condominiums under these cir- cumstances (McNamara and Kilbanoff, 1981:7).

Rust's tenants have formed unions; they claimed Rust violated fire and building codes, clashed with his lawyers in housing courts, and pressed the Massachusetts Attorney General for a serious arson investigation (Jahnke, 1981a, b).

There are more than a dozen identifiable syndicates in Boston which have a history of sus- picious fires and massive speculation. Elsewhere I have discussed the Sarah Cutler Trust opera- tion in which John Kerrigan, a leading local politician and former member of the Boston City Council, was the silent beneficiary of this trust, which experienced dozens of arson fires from 1972 to 1980 (Brady, 1982a). Few residents of Boston are surprised by these kinds of revelations. Yet, local fire department officials and the state's fire marshall hold fast to their image of arsonists as vandals or pyromaniacs (Vennochi, 1982). In 1982 Boston Fire Commissioner George Paul said that the city did not have a serious arson problem and that the media was exaggerating the issue (WNEV, 1982). Such official denials, like the misunderstandings that spring from racism and social bias, not only preclude effective arson control, but can lead to the arrest of the innocent and the tolerance of those most culpable. The following two instances are cases in point.

THE SYMPHONY ROAD CONSPIRACY

In 1973-74 the Symphony Road district of Boston suffered more than 20 fires which left hundreds of people homeless and five dead (Blank, 1978; Brostoff, 1977; Lima, 1977a). The dis- trict was then inhabited by a mixture of the elderly, the poor, students, and newly arrived ethnic

minorities. Local tenants groups repeatedly asked the state and local fire officials for an arson investigation, but Joseph Dolan, the Boston Fire Marshall, insisted, "I don't see any pattern of arson of any kind. Most of the fires in that area started in quarters where tenants were living. Most of them were caused by human error, human negligence" (Kenney and Richard, 1977:8).

Following the fifth arson death, a group of residents organized and began to systematically collect evidence of housing and fire code violations in local buildings and traced the pattern of sale, resale, and escalating insurance coverage on buildings which had burned (Schmidt, 1980). Presented with this information, State Police Lieutenant James De Furia, commanding the arson

squad at the state fire marshall's office, continued to discourage the residents, saying, "Maybe an owner does hire a torch to do a job. But you can't prove it. It's a waste of time to try" (Blank, 1978:133). One of the leading neighborhood activists, David Scondras, recalled:

Initially most people refused to believe that these were arson fires at all. They assumed that the kind of riff-raff that lives around here would naturally set fire to their buildings. There's some obscure notion in the minds of people that low-income people have a natural proclivity toward a variety of strange behavior, one of them being they burn down their homes (ABC, 1978).

The Symphony Road residents persisted in their research, and the publication of their findings

prompted the state attorney general to investigate (Canavan, 1978). This year-long probe which followed was financially supported by the Massachusetts FAIR Plan, which provided funds for a staff of talented sleuths employed by the First Security Corporation (Schmidt, 1980). The case led ultimately to the indictment and conviction of 32 members of the largest arson ring in the United States: its profits surpassed $6 million from 1972 to 1977 (Harvey and Connolly, 1977; Zanger, 1977). Those convicted of charges varying from conspiracy and insurance fraud to arson

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Arson in Boston 19

and murder included six lawyers, four real estate agents, four insurance adjustors, six landlords, two finance company officers, two bookkeepers, two housing contractors, three small business-

men, a city of Boston housing inspector, and two police officers (Cullen, 1977; Jones, 1978). The latter included the captain of the Boston arson squad and De Furia, the commander of the state fire marshall's arson squad, quoted above. None of the lawyers, insurance adjustors, finance executives, accountants, or the Boston arson squad captain served more than four months in jail; 10 of these 22 white-collar criminals received only probation or a suspended sen- tence, though all 22 were convicted of criminal conspiracy and many were also found guilty of insurance fraud (Zanger, 1980). The lenient sentences for fraud and conspiracy in this case are not unusual in the United States (Fire and Arson Investigator, 1980); in Massachusetts less than 4 percent of those convicted of arson from 1971 to 1979 were sent to prison (Roy et al., 1980).

THE 1982 LOWELL FIRE: LAW ENFORCEMENT RESPONSE

It was a typical arson incident. A sudden 3 a.m. blaze roared through the decrepit wooden tenement at 32-36 Decatur Street in the Lowell, Massachusetts, Hispanic ghetto outside Boston. The eight bodies pulled from the rubble that March 1982 morning were typical victims: most were

small children and none were white. The police response was also typical: they arrested a young man recently released from a mental hospital and two other young Hispanic men which the first named during interrogation. The motive ascribed to their crime was rage and drug-crazed irra- tionality (Thomases, 1982a).

When the three suspects were brought to trial, the ex-mental patient told the court that his confession had been obtained by torture and intimidation in the Lowell police station. The police

department's own record showed, moreover, that all three defendants had remained at the scene

of the fire throughout the night, trying with their neighbors to save those trapped in the flames (Lasalandra, 1982a). The judge dismissed the case against the two defendants implicated by the ex-patient, though, at the time of writing, the latter had spent nearly a year in jail still awaiting

trial without bail (Thomases, 1982b). Meanwhile, leading figures in the Lowell community have mobilized the public to protest against this defendant's continued confinement and to demand a further investigation of the fire (Jordon, 1982b; Lasalandra, 1982b).

The police have apparently never questioned the owners of the building-the Spanos family. Fire department records show that there have been six previous "incendiary" fires at the same address since 1979, and that several of these started inside locked, vacant apartments. The title to this and other Spanos properties, which have been cited for numerous fire code violations, has been juggled among family members. Since legally a new owner is allowed an additional six months grace on fire code violations, continuous "resale" within the family precludes enforce- ment. The Spanos family owns over 20 tenements in Lowell's Hispanic ghetto (Lasalandra, 1982b; Thomases, 1982b).

Between 1974 and 1982 there were 86 "suspicious" fires at Spanos properties in Lowell (Jordon, 1982b). The insurance settlements for these fires remain confidential, protected from public scrutiny by state law. Massachusetts Insurance Commission records do show, however,

that "William Spanos et ar' contracted with a local broker for special package coverage by an unnamed, unlicensed surplus line company in 1981. That broker was the same one who arranged

surplus line coverage for Russell Tardanico.

INNOVATIONS: LAW ENFORCEMENT

The public and policy makers alike have grown increasingly aware of the seriousness of the arson problem in Boston and the United States as a whole (Levey, 1982). Though some local fire officials continue to minimize this threat or cling to the traditional deviance explanations, there are signs of progress in the development of new arson control measures in Boston and elsewhere.

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20 BRADY

These fall into two main types: innovations in law enforcement aimed at strengthening prosecu- tion or deterring arson-for-profit conspiracy, and regulatory reforms. A number of these deserve

mention, but it is important to understand that powerful institutions with entrenched interests

oppose any structural changes which might erode their autonomy or restrict their profitmaking. The most promising criminal justice innovations established by local authorities include the police "strike force" approach and the computer-assisted arson prevention and prediction

program's. The Boston Arson Strike Force, for example, combines the expertise of civilian criminologists and research analysts who are skilled in the analysis of urban demography, political economy, real estate mortgage, and insurance transactions, with police detectives skilled in discreet surveillance and the collection of testimony and physical evidence. The Boston Strike Force reports directly to the mayor and the district attorney. The fire department and its arson squad are excluded from the Strike Force, though fire department records are available for its use.

The identities of the syndicates which the Strike Force is watching are a closely guarded secret, as are the locations of buildings which are under surveillance as likely arson targets. Police ex- perience with investigation of other types of racketeering is valuable, particularly in combination with civilian arson specialists; but the Strike Force is weak in the area of pyrotechnic expertise. The fire department's arson squad retains exclusive jurisdiction over investigations on the scene

of fires, and the Strike Force is hampered by the vagueness and generally poor quality of arson

squad reports. Other cities have also established similar strike forces (Fire and Arson Investiga- tor, 1980).

Computers have been brought into action in programs designed to predict and prevent arson. Boston's Urban Educational Systems (UES) pioneered this approach (Rezendes, 1982). Unfor- tunately, that civilian-led program is a casualty of bitter infighting with the state's fire fighting

establishment, particularly State Fire Marshall Joseph O'Keefe who, at the time of writing, was embroiled in a lawsuit with UES over the disbursement of funds appropriated for arson preven- tion by the legislature (Jordan, 1982a; Rezendes, 1982; Scharfenberg, 1980, 1981).

New Haven, Connecticut, has been more successful in institutionalizing its nationally renowned Arson Warning and Prevention System (AWAPS). Essentially, such computer- assisted programs try to predict buildings which are likely arson targets. The computers search through city records of fires, tax collections, and building inspections to locate properties whose individual histories fit a profile associated with arson (Miller, 1978). These characteristics in- clude: previous structural fires, unpaid property taxes, building code violations, and outstanding

liens for debt (Sauerteig and O'Connor, 1980). When the computer identifies a building with all of these characteristics, both the property owner and the insurance company are officially noti- fied that the building is under the attention of law enforcement authorities (New Haven Fire Department, 1981).'3

In 1980, a year after the AWAPS program was initiated, New Haven reported a 40 percent de-

cline in total fire losses and arson losses, and a 20 percent decline in civilian death injuries and the total incidence of arson fires (Security World, 1981). These statistics have only limited meaning, however, since so many factors influence arson rates. The AWAPS program itself could have had only a tiny direct impact, since only 11 buildings were targeted as "arson prone" in 1980 (Sauerteig and O'Connor, 1980).

Deterrence is the central strategy for both the computer prediction/prevention programs and the strike force approach. These law enforcement innovations can make the arson problem more

13. It should be noted that the insurance industry, particularly Aetna Insurance Company and Factory Mutual Insurance Company, have contributed most substantially to the funding for the AWAPS program, along with the U.S. Fire Administration (Security World, 1981; Sauerteig and O'Connor, 1980).

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Arson in Boston 21

visible and can raise the risks of what is still one of the safest and most lucrative crimes.

Obviously, the very existence of such programs helps undermine the "deviant" image of the arsonist by concentrating on the arson-for-profit motive. Of course, neither the New Haven computer nor the Boston Arson Strike Force can hope to control arson, as long as its institu- tional sources remain intact.

STRUCTURAL REFORMS AND POLICY RECOMMENDATIONS

Efforts to address the structural economic causes of arson must begin with closer restriction

of bank redlining. The federal Community Reinvestment Act of 1978 must be given greater in-

vestigatory powers and punitive sanctions. Federal anti-trust laws must be more energetically applied against bank mergers, because documented studies such as Greenwald (1978) show clearly that the larger banks are less sensitive to local community needs and are more systematic-

ally engaged in redlining than the smaller financial institutions. The banks deny that they have ever engaged in redlining and bristle at the accusation from

community groups, who have turned neighborhood disinvestment into a major urban political issue. In Massachusetts, the banks bitterly resented the regulatory activities of the former state bank commissioner, Carol Greenwald, who from 1974 to 1978 initiated the most aggressive anti- redlining enforcement in Massachusetts history. Indeed, the financial institutions were so angered that they refused, in 1976-77, to purchase state bonds unless the governor fired Green-

wald. Governor Michael Dukakis refused to bow to this pressure, and was obliged to sell Massa- chusetts bonds to buyers in New York and the Midwest (Greenwald, 1980). Banking industry opposition was regarded by political analysts as one of the reasons for Dukakis' defeat in 1978; and since his re-election in 1982 he has pointedly assured the banking community that he will not appoint "another Greenwald" (Ball, 1983:23).

The Community Reinvestment Act requires banks to disclose their mortgage lending practices and aims especially at preventing and punishing redlining. Massachusetts regulatory statutes and the credit lending obligations imposed on banks by their state and federal charters, grant con- siderable powers to the banking commissioner (Greenwald, 1980). It remains to be seen whether the next commissioner will possess the will and the political mandate to press regulation on behalf

of neighborhood preservation. Certainly the current pace of bank merger and agglomeration, together with the withdrawal of thrift institutions from the mortgage lending market, (Flad and Jones, 1982) will, if left unchecked, undermine hopes of recovery from arson and abandonment in urban neighborhoods (Stone, 1978).

Boston's city government, like that of most U.S. cities, has yet to formulate a coherent policy

for dealing with the problem of abandoned buildings and unpaid property taxes. Long delays between notice of foreclosure and actual seizure and sale of properties for delinquent taxes are typical, and both vandal and escape fires occur most frequently in the interval. If a building sur-

vives this period of vulnerability, the city usually elects to sell it at a public auction to the highest bidder. This policy gives the illusion of securing maximum income for a city at a time of lean budgets; but the immediate gains on the auction block may be more than offset by later losses to arson fires, or speculators may choose to sit on newly acquired properties or convert them to uses which further destabilize property values in the neighborhood (Axelrod, 1982). A more rational approach would be to give or sell cheaply a substantial number of seized buildings for local homesteading families who would be obliged to rehabilitate and inhabit them (Flynn, 1982).

The insurance industry has failed abysmally to control arson fraud and it is therefore impera- tive that it be more tightly regulated. Local urban FAIR Plans should be given a longer grace period before payment of suspicious claims and they should be charged to devote more energies to investigation of prospective clients and especially fire losses. The growing surplus line sector of the insurance industry must be brought under immediate control, if not abolished outright.

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22 BRADY

The National Association of Insurance Commissioners (NAIC, 1980a) study of the surplus line companies found extensive malpractice, swindling, and abuse. The NAIC formed a national in- formation office in 1977 to keep track of these agencies (NAIC, 1979) and drafted a model law (NAIC, 1980b) to monitor the surplus line companies (Chaput and Faxon, 1981; Lima, 1980). Criminal penalties for fraud and malpractice by surplus line brokers carry maximum penalties of one year in prison and $500 fines. The NAIC model regulatory law should be adopted without delay as a minimum step, and criminal penalties for broker fraud should be substantially in- creased. Beyond this, the U.S. Comptroller General's (1979) report to Congress raised funda- mental questions about the effectiveness of the present fragmented system in which 50 state insurance commissioners try to counter mounting fraud and corporate abuses of public trust. The privileged status of the insurance industry must be ended with the repeal of the McCarran- Ferguson Act and the imposition of stiff federal regulations on all aspects of the industry. The insurance industry has fought with single-minded determination against all of these regulatory initiatives. The insurance lobbies have successfully blocked enactment of even the mild NAIC model law for surplus line insurance. The conventional companies do not regard the

surplus line companies as mavericks, but rather as pathbreakers: if surplus line ventures are profitable in new sorts of risks, the conventional companies may later follow their lead (Chaput and Faxon, 1981; Lima, 1980). The conventional companies and their local FAIR Plans are not unduly disturbed about the surplus lines' vulnerability to arson racketeers. As John Golem- beski,14 general manager of the Massachusetts Property Insurance Underwriters Association, said:

We realize that organized crime is moving to surplus line insurance; but our member [conventional] com- panies would resist any effort to abolish the surplus lines. We don't want to eat the losses if the arson rings are forced to come back to us.

The role of community activists in combatting arson and cutbacks in fire protection is crucial

(Brady, 1981a; 1982a). Tenants' unions, taxpayers' and homeowners' associations, and fire- fighters' unions have played a leading role, particularly in Boston and New York where they have forced legislative reforms, prompted changes in insurance underwriting policies (Andrews, 1978; Stone and Zanger, 1979; Waterflow, 1977), and contributed decisively to the investigation of organized crime operations (Barry, 1979; Blank, 1978; Canavan, 1978; Johnson, 1981; Wyrough, 1981). At the same time, it is unfortunately true that the tensions of racial and social divisions

and profound ideological differences among community groups have seriously undermined efforts to form broad coalitions able to challenge the banking and insurance industry or vigorously press for more effective law enforcement (Brady, 1982a). The community-based efforts are powerfully motivated and hold great potential, but have been fragmented thus far (Brady, 1981a, b).

CONCLUSION

Those critical of the existing order in the United States have long argued that crime is the product

of socio-economic conditions engendered by capitalism; but they have been hard-pressed to show

the operating linkage between the gross statistics of misery and the behavior patterns of the miserable- who may or may not commit street crimes. Radical critics have also argued that the

corporations commit the most socially destructive crimes, but that their offenses are less visible and less personally threatening to the public. Arson, on the other hand, is the most visible and broadly threatening of crimes, and it cannot be explained without directly implicating the most central of capitalist institutions: the banking, insurance, and real estate industries. Moreover,

14. Based on interviews with Jack Golembeski, February 11, 1983.

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Arson in Boston 23

the involvement of these institutions in the arson process cannot be ascribed to a few corrupt or irresponsible executives. The sociology of arson takes us right into the heart of the city, where

corporate profiteering, gangster racketeering, and government corruption or ineptitude overlap

with devastating impact on working-class communities. One needs no conspiratorial model or bogeyman visions here, for the processes that lead to neighborhood collapse, deteriorating housing, and arson are all logical consequences of good business practices.

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