OC M3A1
Nataliej753
ORGANIZEDCRIMEM3.pdf
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.
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ORANIZED CRIME AND THE PROVIDERS OF ILLEGAL GOODS AD SERVICES
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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.
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“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.
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“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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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 around the world.
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