Playboy's History of Organized Crime

The Mood of the Nation in the first years of the Thirties was desperate. A fourth of the potential labor force, nearly 13,000,000 people, were looking for jobs by 1932, and that army of the unemployed was being swelled every day as businesses large and small gave up and closed their doors. Bread lines and soup kitchens were becoming fixtures in every American city. Hoovervilles, warrens of cardboard shanties, were springing up along river beds and railroad tracks and in vacant lots to shelter the homeless. A Bonus Army of thousands of jobless and hopeless World War One veterans descended on Washington to seek the aid of the Federal Government, only to be met and routed by the bayonets, truncheons and tear gas of Regular Army troops commanded by General Douglas MacArthur. Banks were collapsing at an ever-increasing rate and carrying with them the hopes and the savings of millions. There was no money, not in the private purses of ordinary Americans nor in the state or Federal treasuries, and the sources of revenue were fast disappearing. The melancholy anthem of the age was sung all over the country: Brother, Can You Spare a Dime?

With Government seemingly unable or unwilling to meet the worsening crisis, many saw a developing potential for revolution. On one level, there was a crescendo of demands for action and change--radical and violent or moderate and peaceful; it didn't matter much which, as long as there were signs that someone was doing something. On another level, there was a demand, a necessity, for escape from the increasing wretchedness of life, if only for just a few hours.

The bankrupt Administration of Herbert Hoover was swept out of office in the 1932 election by Franklin Delano Roosevelt, and he brought to Washington and the nation an infectious optimism, a frantic 100 days and more of action, a parade of needed reforms that, if not ending the Depression, at least offered the hope that it would be ended.

Those who provided the country with its escapes and diversions had no less a stake in the survival of the system, though their contributions were of a different kind. By coincidence, they were made possible in some measure by the Roosevelt Administration's rural-electrification programs, which brought the wonders of electricity to those who had never known it before. With the electric light came another wondrous invention: the radio. Like television two decades later, in the Thirties the radio became a necessity in even the poorest household. Every evening the family would gather around the little box with its lighted dial to forget reality and enter the world of Jack Benny, Fred Allen, Amos and Andy, Major Bowes, Fanny Brice as Baby Snooks, Cecil B. De Mille introducing the Lux Radio Theater, the whole distant world of drama and laughter and adventure. In the mornings and afternoons, a housewife could go about her drudgery without thinking, her mind on the endless entanglements of Young Doctor Malone, Our Gal Sunday, The Romance of Helen Trent, Ma Perkins, Pepper Young's Family and all the rest of the soap operas. The world outside might be black, but inside the box all things were possible.

Amusement, change, total escape were even more satisfying in the darkness of the new talking-movie palaces, where, for a dime or a quarter, one could enter a convincing dreamland. On Wednesday nights there was bingo and on Saturdays a visiting celebrity, or maybe only the theater manager, might draw a number from a fish bowl and the lucky ticket holder would have a new set of dishes. Then the lights would dim and everything would be forgotten except those flickering black-and-white images on the huge silvery screen. It was a safe but exciting world: where Little Caesar was only Edward G. Robinson firing blanks, where the Public Enemy was Jimmy Cagney and Scarface was Paul Muni in make-up, where Boris Karloff and Bela Lugosi could create delicious shudders as Frankenstein's Monster and Dracula, where Busby Berkeley could work glamorous miracles along 42nd Street or with the Gold Diggers of 1933 and where the bulbous nose of W. C. Fields gleamed almost red in black and white.

But the escape provided by radio and movies, though vital, was an escape into a realm that even the most gullible knew (despite the publicized talent hunts and the exodus of pretty girls and handsome young men from the small towns to Hollywood's dream factory) was only a short flight for an hour or two before the return to reality. There were, however, other avenues of escape--some not so unreal, for they held out the possibility of power and riches. These were the dreams purveyed by the American underworld.

The survival of the American system was just as important to the criminals as to any other group. The underworld's roots were as deep in American society and tradition as the most honest patriot's, and many of its leaders, sensing this, became the most conservative of citizens. In later years, no single group was more patriotic or more virulently anti-Communist, more dedicated to the continuance of the American Way of Life without alteration. Major racketeers were easy marks for those who appealed to their love of country; their bank rolls were always open. (A dream of Meyer Lansky, a longtime conservative Republican, and Tommy Lucchese, a conservative Democrat, and a dream both realized, was to see their sons graduated from West Point and become commissioned officers.)

For organized crime, the climate of the Depression was in some ways superior even to that of the Twenties. The racketeers were the dispensers of dreams and escape--in the form of alcohol, gambling, money, drugs and sex--and, by the early Thirties, they had enormous wealth and influence. Under the leadership of Lucky Luciano, Lansky, Frank Costello and their peers, the organized criminals were openly courted by politicians seeking their support, their allegiance and their dollars. They were too powerful even to display concern over the growing reform movement that was demanding an end to politically protected crime.

The time had come, it seemed to many, to do something about the corruption that had flourished in New York, and in most of the nation's cities, since the start of Prohibition. It had been one thing for city officials, judges and police to flout the laws openly, take payoffs and live high during an era of boom and prosperity. But it was another thing entirely for these same public servants to conduct business as usual during the Depression, when joy had given way to desperation. The most blatant forms of venality could no longer be endured, and even the most blasé and jaded began to demand at least some semblance of honesty in civic government. As the new decade began, the scandals of the administration of New York's wastrel mayor, James J. Walker, and his Tammany allies and sponsors, such as Jimmy Hines, had reached the point where even the blind were forced to see.

Early in 1931, Roosevelt, then New York's governor but already beginning to sound like a Presidential candidate, and the New York appellate court appointed a commission to take a searching look at what was happening in the nation's largest city. The commission was headed by Judge Samuel Seabury, who not only sought to open some windows in the back rooms and let in light but no doubt relished the opportunity to expose the corruption of Tammany Hall, which had cost him a governor's race more than a decade earlier. All through 1931 and 1932, hardly a day went by without some major disclosures from the commission. The Seabury hearings were an unending serial of payoffs, bribery, venality, corruption and crime, developing the almost unbreakable link between Dutch Schultz, Luciano, Costello, Louis Lepke Buchalter and other underworld figures and the political world of Hines, Tammany Hall, Mayor Walker and various police commissioners.

Though the publicity was certainly undesired, the gangsters assumed the heat would soon die down and it would again be business as usual--especially considering the political events of the time. The Democratic National Convention would open in Chicago at the end of June 1932. Its nominee for President would almost certainly be swept into the White House over the forlorn and discredited incumbent, Herbert Hoover. The convention's choice seemed to be between Governor Roosevelt and the standard-bearer from 1928, Al Smith. (In the big cities, no one gave a moment's thought to the third contender, John Nance Garner, Speaker of the House of Representatives; after all, he was from that land of cowboys and Indians, Texas, which the cities didn't even think of as part of America.) Both were New Yorkers and, to appear as viable candidates to the convention, both had to control their home state's delegation. Smith, with his easy, garrulous manner, his Lower East Side accent, his loyal party record, was the traditional Tammany favorite. The patrician Roosevelt, with his Harvard education, upper-class accent, Hyde Park manner and personal wealth, was, to those in the city, only a charming and somewhat suspicious unknown.

Tammany's control of a large bloc of city delegates to the convention made it, then, the object of fervent dealing on the part of both Smith and Roosevelt backers; and since control of Tammany rested not just in Hines and his rival leader, Albert Marinelli, but also in their underworld allies, the political trading necessarily had to include them. Early in 1932, the problem for Roosevelt seemed to be the pressure generated by the Seabury investigation. As long as Tammany and its underworld allies were under fire, Roosevelt could not count on their support.

Roosevelt denounced civic crime, graft and corruption in ringing terms, lauded Seabury and his fellow commissioners for their work and then, mildly, said that he did not think a strong enough case had been made against Walker or anyone else to warrant legal or executive action.

The statement, and Roosevelt's refusal to authorize any action, did just what it was intended to do. Hines promptly announced that he was backing Roosevelt for the Presidency and would lead a large delegation to Chicago in the governor's behalf. But Tammany's underworld associates were not yet ready to make a total commitment. They hedged their bets. Marinelli proclaimed his allegiance to Al Smith and his intention to lead a Smith bloc to Chicago.

Hines and Marinelli were taking orders, and those who were giving them also attended the convention. At the Drake Hotel, Luciano took a large suite for himself and Marinelli. Down the hall, Costello took an equally lavish suite for himself and Hines. And in between, Lansky had his own suite, where the underworld's beneficence was dispensed to all willing delegates and where Lansky was prepared to mediate, to entertain and to explore new worlds out in the hinterlands.

In that late-June week there was no pretense of observing the doomed 18th Amendment, of drinking secretly. Liquor was for sale openly to any delegate who wanted it. There were well-stocked bars doling out free booze to all comers in Lansky's, Costello's and Luciano's suites, night and day. It was during an extended drinking bout in Lansky's suite that a florid politician from Louisiana named Huey Long, "the Kingfish," proposed that Lansky and his friends take gambling and slot machines to New Orleans and the other parishes, and so provide amusement for the natives and riches for (continued on page 152)Happy days and Hard Times(continued from page 142) the Kingfish. It would take time to make all the arrangements, but then millions would be extracted from Louisiana.

And in Luciano's suite, it was decided that Smith had no chance and that Tammany and the underworld would throw their support to Roosevelt. After all, they were confident the governor was, as Walter Lippmann had written, "an amiable man with many philanthropic impulses, but he is not the dangerous enemy of anything. He is too eager to please. ... Franklin D. Roosevelt is no crusader." With Roosevelt as the candidate and with Roosevelt in the White House, it seemed certain, they would have nothing to worry about.

But with the nomination in his pocket, the New York governor proved less compliant than expected. Ever since he had denounced corruption, he had been under steady public pressure from Seabury and from New York City congressman Fiorello H. La Guardia to take action. Now he did just that. Tammany's record and reputation were liabilities in the campaign and Roosevelt proceeded to dump the machine. Echoing La Guardia's constant refrain, he thundered that public office was indeed a public trust, the highest of public trusts. Those holding office, like Caesar's wife, must be above suspicion. If suspicions were aroused, the officeholders must allay them. They must answer all questions put to them by responsible investigators or get out of office. If there were questions about the sources of Walker's money, then let Walker answer those questions. Seabury could ask away and the answers had better be satisfactory.

Judge Seabury promptly haled a parade of Democratic city politicians and officeholders before the commission and grilled them relentlessly about their underworld connections, about caches of money that were suddenly turning up. Walker, for one, was less than cooperative; his manner suddenly became subdued and evasive, and Roosevelt announced his intention to throw him out of office. Before he could, Walker sent him a telegram: "I hereby resign as mayor of the city of New York. ... James J. Walker." And before anyone quite knew what had happened, he was on a boat for Europe with his showgirl mistress. (When he returned years later, the scandals were just old memories and he was greeted with nostalgia by New Yorkers who fondly remembered "the good old days.")

But the flight of Walker and the revelations about his aides had little immediate effect on the masters of the underworld. While the rest of the nation was suffering, the underworld was in the midst of one of its great booms. It was expanding wildly in every direction, seemingly without check, though some of the directions had long been charted.

By the late Twenties, sagacious men like Arnold Rothstein and Johnny Torrio had been predicting the eventual demise of Prohibition, especially if the national economy were to suffer a sharp downward turn. At the Atlantic City meeting in 1929 and especially at the 1931 Italian-dominated session in Chicago, the leaders had begun to consider the increasing likelihood of legal liquor and its effect on their empires. As the Depression worsened, the public's demand for a legal glass of beer or shot of booze became a deafening roar that could not be ignored. In the euphoria of the Roosevelt ascendancy, the new Democratic Congress in March 1933 legalized the manufacture and sale of light beer and wines. Less than nine months later, Prohibition was dead at the age of 14. On December 5, Utah became the 36th state to ratify the 21st Amendment to the Constitution, repealing the discredited 18th.

When that day came, those who had made their fortunes in bootlegging or in Canadian booze--great amounts of which had made its way to the U. S. during Prohibition--were ready to move in on the newly legitimized U. S. industry. Going legit was, of course, an obvious move. Samuel Bronfman became one of Canada's richest and most respected men as owner of Seagram, and Lewis Rosen-stiel, who numbered among his close friends both Lansky and John Edgar Hoover--he would eventually create and endow the J. Edgar Hoover Foundation-- became one of the United States' most renowned philanthropists and industrialists as head of Schenley. (Rosenstiel and Schenley, from which he retired in 1968, have consistently denied his underworld background.) But if there were some who with Repeal tried to escape their unsavory Prohibition backgrounds, there were others who played both roles. Costello and his longtime partner in gambling, Phil Kastel, set up Alliance Distributors, which became the exclusive United States agent for Scotland's Whiteley Company, producer of King's Ransom and House of Lords Scotch; and by the mid-Thirties, Costello and Kastel bought a controlling interest in J. G. Turney and Son, Ltd., the British holding company for White-ley. Torrio took control of Prendergast and Davies Company, Ltd., another major Scotch importer and wholesaler, and among those fronting for him in that company was Herbert Heller, Rosen-stiel's brother-in-law. Lansky, Luciano, Bugsy Siegel, Joe Adonis, Costello and their friends all had shares in Capitol Wine and Spirits, a major importer and distributor of French wines, Scotch, Canadian and domestic whiskies. Schultz and just about everyone else got into the legal beer-brewing business. After 1933, there was hardly a major bootlegger who didn't have a piece of one legal distillery or another, and through the years liquor has remained a mainstay of the Mob.

But bootleg booze, despite Repeal, stayed a lucrative business. During the campaign to legalize drinking, some bright young men in the new Roosevelt Administration had what they considered a brilliant idea. Prohibition had clearly demonstrated that there was no way of stopping drinkers from drinking. The underworld had cashed in on that for billions of dollars. Now that liquor was going to be legal again, why shouldn't the financially hard-pressed Federal and state governments cash in on this with high excise taxes?

Those who conceived this plan thought they had discovered a new Golconda that would pour billions into public treasuries (as, indeed, would eventually be the case). But excise taxes that would raise the price of booze as much as 50 percent meant large profits in the illegal manufacture of untaxed liquor. All over the country, the Prohibition bootleggers became Repeal bootleggers, setting up huge clandestine stills and bottling plants. Perhaps the biggest and most famous was Molaska.

Just ten days before Utah ratified the 21st Amendment, the little company called Molaska Corporation was registered in Ohio. Molaska's president was one John Drew. His real name was Jacob Stein and he was a disbarred New York attorney who had been a close friend a decade before of Gaston B. Means, one of the prime movers in the Ohio gang brought to Washington by President Warren G. Harding. Working with Means back in 1922, Stein had gotten the FBI director, William J. Burns, to release Government bonded whiskey into his bootleg pipeline, through payoffs to Burns, Attorney General Harry M. Daugherty and the Republican Campaign Committee. Now Stein, or Drew, as he was calling himself, had re-emerged as president-in-name of Molaska. But he was only a front, as were the other publicly identified officers, including one Moses Citron of New Jersey, the assistant treasurer. The real owners of Molaska were the underworld powers: Lansky, who was Citron's son-in-law; Moe Dalitz, Sam Tucker, Chuck and Al Polizzi of Cleveland; Pete Licavoli of Detroit; Adonis; Longy Zwillman and others.

According to its incorporation papers, Molaska had been set up for the ostensible purpose of manufacturing dehydrated molasses (hence its name) as a sugar substitute. Its source of molasses was almost limitless. During Prohibition, as he scoured the Caribbean in search of bootleg booze, Lansky had made friends with just about every corrupt politician in the area. He had become particularly close to Fulgencio Batista, and when Batista emerged as Cuba's strong man, (continued on page 244)Happy Days and Hard Times(continued from page 152) Lansky rode alongside him. Batista guaranteed Lansky as much molasses as he would ever need. (And this was just one of the many deals that, in the decades ahead, that partnership would parlay into millions.)

But Molaska had no intention of using any but a small part of the Cuban molasses as a sugar substitute. Its real aim was to turn out bootleg booze. Huge stills, elaborately concealed underground and complete with escape tunnels, were built in Cleveland and Zanesville, Ohio, in Elizabeth, New Jersey, and at least 13 (no one is really certain how many) other locations in the East and Midwest. Molaska's product, which cost two dollars a gallon wholesale and retailed for $2.50 a quart, found a ready market all over the Eastern part of the country and as far West as Kansas City. The customers were not just ordinary drinkers who were looking for good cheap liquor but also a host of legal distilleries in which the underworld had some interest. These merely bottled and labeled the Molaska liquor and then sold it, at a price higher than strictly bootleg booze but, even with excise taxes, considerably lower than competitive legal liquor made and sold by non-Mob distilleries.

More is known about Molaska than about other illegal operations, because Molaska eventually became gargantuan and attracted official attention. Early in 1935, agents of the Internal Revenue Service's Alcohol and Tobacco Tax Unit closed down the stills in Zanesville and Elizabeth. The one in Zanesville, they estimated, was the largest illegal still ever discovered in the United States; it contained at least $250,000 worth of equipment and had the capacity to turn out 5000 gallons of 190-proof alcohol every 24 hours. And the Elizabeth still, agents said, was turning out enough booze "to flood New York and New Jersey with illicit alcohol."

Though the raids ended these two operations, it is unlikely that they discouraged the underworld from its continuing bootleg activities. But as a major activity, bootlegging soon lagged far behind gambling, fast emerging as the biggest money-maker in the underworld portfolio. With the Wall Street collapse and the Depression that followed, the chances almost vanished for a quick killing anywhere. But there was still the chance, the long one, to buck the odds and come out rich through gambling, and the underworld provided any and every game of chance that any sucker wanted: a bet on the horses (or any sporting event) at plush horse parlors or with neighborhood bookies, backed and banked by the organization; a bet on the numbers; a coin in a slot machine; a chance from a candy-store punchboard; and, for those with a little more cash, roulette wheels, crap tables, blackjack games and other pastimes at the casinos the Mob was beginning to open around the country.

There was hardly a resort area anywhere in which Mob money wasn't building clandestine casinos, usually with the support of paid-off local officials. During Upstate New York's social event of the summer, the Saratoga horse meet, the casinos boomed, the wheels spun and the chips and money of the nation's elite poured into the pockets of Luciano and Lansky and Costello, who ran the games. In the mid-Thirties, with the backing of Huey Long (whose share of the take may have reached $20,000,000 or more before his assassination), Costello and Kastel not only took the slot machines to New Orleans but they opened the Beverly Club, which was soon awash in the money of rich Southerners and vacationers; Lansky built and opened the Colonial Inn, the Club Greenacres and other places north of Miami. Owney Madden was running a string of casinos for the Mob in Hot Springs, Arkansas, which was becoming not merely a resort for the rich but a sanctuary and a playground for the rulers of organized crime. Zwillman, Luciano, Costello, Willie Moretti and others held controlling interests in an uncounted number of casinos that flourished along the New Jersey strip down the Hudson across from Manhattan. The Cleveland mobsters such as Dalitz, in association with Lansky and Luciano and others, were taking over wide-open Covington, Kentucky. Wherever the rich traveled in search of pleasure, there the Mob either was waiting or soon followed with the games to amuse them and take their money.

But the Mob's gambling was not just for the rich. There was something for the very poor, too. Since the Twenties, the numbers--the policy racket--had been ubiquitous in Harlem; it was the chance for the poor blacks, at the risk of only a penny, a nickel, a dime, a quarter or even half a buck, to suddenly have their pockets filled with cash. Almost everyone played every day, and with the economic collapse extending poverty to millions of whites, the racket spread rapidly to every poor neighborhood in almost every city in the country.

For the bettor, it was painless. Who would miss a penny or a nickel a day? For that penny, he could select any combination of three numbers up to 999, and if he won--the winning number was based ordinarily on the betting totals from a combination of races at some horse track, and so theoretically unfixable--he would get a payoff of 600 to 1.

For the operators, policy was almost unimaginably profitable and without major risk. After all, the real odds on a numbers bet were 999 to 1 and not the 600-to-1 payoff. In 1931, for instance, the Harlem policy banks were grossing $35,000 a day and paying out to winners only $7700 a day. Even with their overhead--commissions, salaries, police- and political-protection payoffs and the like--they were reaping a profit of more than 50 percent. And by 1933, in the depths of the Depression, there were estimates that policy in New York City alone was grossing more than $300,000 a day, or over $100,000,000 a year. Including the rest of the country, that figure could be multiplied at least ten times.

Costello, who had grown up in East Harlem, always maintained some control over the rackets there, though his real interests were elsewhere. Policy was raining money also onto Luciano and Lepke and others in New York and onto the Cleveland Syndicate and every other major mob in the nation. But in the early Thirties, the biggest numbers operator in New York, and in the whole country, was Schultz. It was said that by 1933, he was cleaning up $20,000,000 a year from the numbers alone.

Schultz had moved in only a couple of years earlier. Backed by the counsel of his lawyer, J. Richard "Dixie" Davis, and the political muscle of Tammany boss Hines, who became his partner, Schultz muscled in on the Harlem operators around 1931. Self-employed numbers bankers Wilfred Brunder, Big Joe Ison, Henry Miro, Alexander Pompez and others were suddenly forced into either retirement or the employment of Schultz. Once he had taken over, Schultz put the mathematical genius of Otto "Abbadabba" Berman to work to figure out ways to increase the take. In a series of devious maneuvers (including the involved one of using his aides to suddenly increase the bets on the vital races to manipulate the payoff number), Berman managed to further reduce the pay-out and increase the profits by ten percent or more. His genius was copied by others, though nobody else seemed to have his ability.

For people who didn't want to bet the numbers or who thought they were not enough, there were options. Bookies inhabited every neighborhood, often as the owners of candy stores or small groceries looking for a way to make ends meet; most of them used the central bookmaking banks controlled by Luciano and his allies in New York, by the heirs to Capone in Chicago and by the leading Mobsters elsewhere. Costello and Kastel had a lock on the slot machines and punchboards, and when the new mayor, La Guardia, went on a rampage against them, personally wielding an ax to break some of the slots seized in raids, they merely took up the offer made by Long and moved them down to Louisiana.

The money generated by gambling and other rackets was mounting almost faster than anyone knew what to do with it, and when combined with the millions that had been salted away during Prohibition, the underworld during the Depression probably had the biggest stash of liquid assets in the nation. It was money waiting to be put to work to earn even more money in an upward-spiraling cycle. It was available, at a price, to any businessman who wanted and needed it, who was willing to seek out the underworld's loan sharks, who was willing to pay the usurious interest rates--50 percent, 100 percent or more--or, failing that, to take on a partner. Shylocking developed into one of the surest, simplest and most important of the underworld's enterprises. "Loan-sharking, sometimes called 'juice,' is believed to be the second most important source of income for criminal syndicates," said former Attorney General Ramsey Clark. And, as the then--acting chief of the Justice Department's Organized Crime Section, Martin Loewy, noted in 1971, "Organized crime is not ordinarily short of cash. When business is slow, it leaves room for organized crime to take over. What starts out as a creditor ends up as a partner."

That was exactly what occurred in the early years of the Depression and continues to this day. The technique is simple. The Shylock lends whatever is needed at the usual usurious interest rate. Every week, the collectors go around for payment of both principal and interest. A classic example is a man who borrows $1000 for ten weeks; each of those ten weeks, he pays the Shylock $150; thus, in just over two months, the loan shark has not only recouped his original $1000 but has added $500 to it, all of which goes back onto the street in the form of new loans.

If, however, the borrower is short and cannot come across, the trouble begins. In the old days, the optional payment would be a pound of flesh, and this occasionally is still exacted as a warning to other defaulters. But after the Wall Street debacle, the Shylocks' clientele expanded to include many respectable men in business and industry who had nowhere else to turn and loan-sharking took a new twist. Luciano, Lansky, Lepke, Costello, Schultz and the other racketeers with imagination and hoards of cash moved into the banking business in a major way. They understood that beating or killing a recalcitrant borrower was simply wasteful: It didn't ensure that the money would ever be repaid and it left behind a bitter customer who might go to the authorities and thereby endanger an almost completely riskless business (police and court records indicate that Shylocks are rarely arrested and even more rarely convicted). They also understood that most of their new customers had collateral-- their businesses. And so developed the pattern in which a defaulting debtor was no longer beaten; he merely wound up with a new partner.

Having a gangster as a partner was not always as bad as some have described it, depending on the mood and the immediate objectives of the new partner. In some cases, the racketeer's sole desire was to get back his capital and more. So, through a variety of maneuvers, the business would be milked dry and driven into bankruptcy. But if the business provided a nice cover for the racketeer, it was usually in his interest not merely to keep it going but to make it succeed, to make it pay off with high profits--which a gangster could sometimes do when no one else could. The underworld had its contacts and its payoffs, ensuring that city inspectors would overlook various code violations that otherwise would necessitate costly repairs. And not infrequently, the new partner would invest money in new machinery and equipment that would increase both efficiency and profits.

Then, of course, there were reciprocal deals and interlocking arrangements. Gangster control of a variety of companies in numerous industries opened many opportunities to buy supplies and services cheaper than legitimate competitors could. Also, a company's shipments could be guaranteed safe and speedy handling, for the gangsters often controlled trucking companies, a natural outgrowth of their heavy involvement in trucking during the old bootleg days. And if they controlled local unions (the price paid for their organizing help), they could negotiate sweetheart contracts.

With loan-sharking as either the key or the wedge, the underworld soon managed to infiltrate or take over many corporations in many industries. Adonis, for instance, was for a time the leading Buick dealer in Brooklyn as proprietor of the Kings County Buick Company; he owned Automotive Conveying Company of New Jersey, which Ford paid millions to ship cars from its Edgewater, New Jersey, assembly plant all over the East; he also owned, among other legitimate and semilegitimate enterprises, a major cigarette distributorship and a large vending-machine operation. Moretti, too, controlled cigarette distribution, laundries, trucks and other businesses; Lansky, in addition to his liquor, gambling and other illegal operations, controlled a company called Manhattan Simplex (later, Emby), which distributed Wurlitzer jukeboxes; Lucchese, Albert Anastasia and others were able to list their occupation with taxmen and other officials as dress manufacturer, with factories in New York, Pennsylvania and elsewhere. Joe Bonanno not only owned a garment factory in Brooklyn but, like Costello and many others, was putting his money in real estate. The underworld would eventually control office buildings, apartment houses and other choice properties in every major city. Some of the industries the underworld found easiest to penetrate were amusements of all kinds, including theaters, movie-equipment manufacturers and distributors; automobiles, particularly distributorships; baking; cigarette distribution; drugstores and drug companies; electrical-equipment manufacturing; construction; flowers; foods, especially meats, seafood, dairy products, fruit--all the perishable commodities that required quick and efficient handling to avoid spoilage and loss; garments; gas stations and garages; hotels; import-export businesses of all kinds; insurance; jukeboxes and other coin-operated machines; laundries and dry cleaners; liquor; loan companies and bonding agencies; news services, especially those specializing in racing information; newspapers; oil; paper products; race tracks; radio stations; restaurants; real estate; shipping; steel; stevedoring; transportation.

Corporate infiltration was only one side of the coin. Along with it went infiltration and take-over of unions, especially those in major urban centers or in industries in which the gangsters were deeply entrenched. The Teamsters, for one, were an early target. During the Twenties, the gangsters had become some of the biggest trucking operators in the nation, controlling huge fleets used to transport the illegal booze to market, and with Repeal they turned to hauling every conceivable kind of merchandise. But, for Teamster organizers, moving in on underworld-controlled companies to try to sign up drivers was no easy task. So deals were worked out. The price of unionization was control of Teamster locals and a voice in the Teamsters' international union. The underworld influence in the Teamsters became so strong that union pension funds and other hoards found their way into gangland hotels and other operations, and the relationship between top Teamster officials and the leading underworld rulers such as Dalitz and Lansky was deep, abiding and very friendly. So corrupt, in fact, did the leadership of the union become that eventually the A.F.L.-C.I.O. found that it had no choice but to expel the Teamsters from the house of organized labor.

The Teamsters was just one union that fell, to a greater or lesser extent, under gangland control. Another classic example occurred in New York's Garment District. For years, the International Ladies' Garment Workers Union and the Amalgamated Clothing Workers of America had been unsuccessfully attempting to organize the sprawling industry of small loft factories piled one upon the other in the teeming area of the West 20s and 30s in Manhattan. The attempts had been beaten back consistently. Manufacturers entered into alliances with underworld strong men such as Lepke and Luciano and Lucchese to ensure that organizers never crossed their thresholds. And when the underworld began taking control of countless factories, the danger to union organizers only increased.

But gradually there came the realization that more profit and power could be attained by playing both sides, and soon Lepke, Lucchese, Luciano and the rest were not just making dresses, coats and suits but pinning a union label on them. What seemed of greatest interest to the garment-center union leaders such as Sidney Hillman, David Dubinsky, Jacob Potofsky and others during the late Twenties and Thirties was not the wages or working conditions of the laborers but putting a union card in their pockets and extracting dues from them. If it didn't cost the manufacturers much, if it guaranteed labor peace, if it enriched the racketeers and increased their powers, then they were not averse to coming to the aid of the I.L.G.W.U. and the Amalgamated. Soon the ranks of garment-union organizers were swelled by the hirelings of Lepke, Luciano and the rest--tough thugs and killers such as Jacob "Gurrah" Shapiro, Charlie "The Bug" Workman and Abe "Kid Twist" Reles.

So the garment industry was organized, but the price was high. Numerous locals fell under the absolute control of the underworld and the corrupting influence marched all the way into union headquarters. Dues were siphoned off into the pockets of the gangsters and honest garment manufacturers found themselves forced to pay additional extortion money to Lepke, Lucchese, Luciano and their friends to avoid strikes and slowdowns, while their competitors down the street, owned or controlled by the very same men, had no such labor problems.

And then there is the incredible story of the Mob's move into the motion-picture industry. It began in 1932, when George E. Browne, the business agent of Local Two of the International Alliance of Theatrical Stage Employees (I.A.T.S.E.), linked up with one Willie Bioff, extortionist, hoodlum and business associate of Frank Nitti and other Capone mobsters, of Luciano, Lepke, Costello, Zwillman and many more. Browne's local had jurisdiction over motion-picture projectionists and, times being not the best, more than half the local's 400 members were out of work. Bioff and Browne came up with an idea of how to turn that unemployment into golden linings for their personal pockets. They set up a soup kitchen to feed the destitute projectionists and then proceeded to squeeze theater owners for contributions to support the kitchen. It was all pretty smalltime until the two decided to take on Barney Balaban, head of the Balaban & Katz theater chain.

Bioff and Browne showed up at Balaban's office one morning and demanded that he restore a pay cut he had imposed on his theatrical employees a couple of years earlier when the Depression hit. When Balaban resisted, the two gave him an alternative. They would forget the demand if Balaban would kick in $7500 a year to operate the soup kitchen. "Barney," Bioff later testified in court when the law finally caught up with him, "turned out to be a lamb. When he agreed to our suggestion, I knew we had him. I told him his contribution would have to be $50,000 unless he wanted real trouble. By that I meant we would pull his projectionists out of the theaters. He was appalled, but we turned on the heat. He finally agreed to pay us $20,000."

It had all been so simple that Bioff and Browne decided that a single local was not enough, that they could make millions if they could capture the international. To support that bid, there was the underworld. In Chicago, Nitti, Paul DeLucia and other rulers of the Capone empire put the pressure on voting unionists to cast their ballots for Browne as the new president of I.A.T.S.E. In New York, the Browne slate had behind it the muscle of Lepke, Luciano and Zwillman; Dalitz, Frankie Milano and the Polizzis put the same kind of heat on union members in Cleveland and elsewhere in the Midwest. The electioneering was direct and blunt, and successful. When the I.A.T.S.E. convention was held in Louisville, the underworld's enforcers were ominously present, strolling slowly among the delegates and passing out messages. When it came time to vote, Browne was elected president unanimously.

His first move was to appoint Bioff his "personal representative." And then the two decided to take over the whole movie industry, at least to the extent of extorting a fortune from it. They demanded a payoff from the theater chains in Chicago; if the theaters didn't pay up, Browne threatened to strike them with the demand that they hire two projectionists instead of the one they then had to employ. The gambit worked; the theaters came across with $100,000. The only problem for Browne and Bioff was that their Mob backers began demanding a bigger share of the take; instead of a 50-50 split, the Mobsters demanded 75 percent, leaving Browne and Bioff to share the remaining 25 percent. That fazed the union leaders for only a moment; they told the theater owners they were taking a cut of the profits and then, to keep their incomes as high as they had been before the new split, told them to cut the wages of their projectionists and fire some of their stagehands.

Success in Chicago propelled Bioff and Browne ever onward. They turned to New York and with no difficulty at all took the Loew's theater chain for $150,000, the price for calling off a strike. But the biggest stake was still ahead-- Hollywood itself. In 1936, I.A.T.S.E. had few members in the West Coast movie studios, but that didn't deter Bioff and Browne or their gangland backers. They demanded that I.A.T.S.E. be given jurisdiction over movie studio labor. The studios resisted. The Mob reacted by striking and closing every movie theater from Chicago to St. Louis. The theater owners, led by Balaban, howled in anguish and the studios capitulated.

Controlling Hollywood labor was the wedge. Bioff called on Nicholas M. Schenck, president of Loew's and spokesman for the industry, and informed him: "You have a prosperous business here. I elected Browne president of this union because he will do what I say. I am the boss and I want $2,000,000 out of the movie industry."

Schenck was stunned. "At first I couldn't talk," he said. "But Bioff said, 'You don't know what will happen. We gave you just a taste of it in Chicago. We will close down every theater in the country. You couldn't take that. It will cost you many millions of dollars over and over again. Think it over."

Think it over was what Schenck did, along with Sidney Kent of 20th Century-Fox and Leo Spitz of RKO, and they decided that wisdom dictated the payment, immediately and in perpetuity. The first money was paid in New York, at the Hotel Warwick. Schenck and Kent took $75,000 as the initial installment in a satchel and then were forced to stand around and watch while Bioff and Browne dumped their loot onto a bed and slowly, carefully counted it.

The movie industry got its high-priced peace and Bioff and Browne and their Mob friends got their fortunes. This went on for several years, until Joseph M. Schenck, brother of Nicholas and 20th Century-Fox chairman of the board, ran afoul of the law. After neglecting to report several large items on his income-tax return, he was indicted for and convicted of tax evasion, and in return for a reduced sentence, he decided to tell the Government of his underworld dealings. His tale led to the indictment of the extortionists. Browne and Bioff were both convicted and sent to prison, where they decided to do a little singing of their own about their Mob backers, some of whom were also indicted. Faced with another term in prison, Nitti decided that was too much. He committed suicide. DeLucia and several others wound up behind bars.

But that didn't happen until 1941. In the meantime, the Mob was thriving. Its legitimate businesses were booming, it was capturing union after union and its illegal enterprises were pouring money into the coffers faster than even a computer could count it. By the middle Thirties, such racketeering opportunities were clear, indeed, to the leaders of the underworld and gave increasing urgency to tightening the links that had been forged at Atlantic City in 1929 and at the Italian-dominated Chicago conference in 1931.

In a series of meetings during the next three years--in Chicago, Cleveland and at several places in New York, including the 39th-floor suite of the Waldorf Towers, where Luciano lived in luxury under the Anglo-Saxon alias of Charles Ross-- there was born what some have called the Combination, others the Outfit, still others the National Crime Syndicate or just the Syndicate. Almost every important underworld figure in the nation, either in person or by proxy, took part in these discussions and decisions.

Much of the impetus behind these sessions came from Johnny Torrio, the underworld's elder statesman though still in his 50s. But Torrio had plenty of backing and many allies--men with strong voices and firm ideas of their own who saw, as he did, the need for national cooperation and were determined to bring it about. There were Luciano from New York and his powerful friends, Adonis, Costello, Lansky, Vito Genovese, Bugsy Siegel, Lepke. There were Dalitz from Cleveland, who usually traveled under the name Moe Davis, and Dalitz' friends in both the Jewish and the Italian underworld. There were Costello's New Orleans partner, Kastel, who was discovering gold in Southern slot machines and gambling, and Kid Cann, born Isadore Blumenfield, from Minneapolis--St. Paul. The Philadelphia strong men, such as Harry Stromberg, better known as Nig Rosen, all favored the plan, and so did Zwillman and his partner, Moretti, from northern New Jersey. King Solomon and, after Solomon died, Hymie Abrams usually attended to voice the desires of the New England mobs, and Anthony "Little Augie" Carfano, who had moved to Miami, usually appeared to lobby for the idea that he should have suzerainty there. Kansas City's Boss Tom Pendergast was kept informed of all developments, though he was so deeply involved with Federal and state authorities during these years that he couldn't spare the time to attend any of the meetings; his organization was in chaos and his underworld aide, John Lazia, convicted of tax evasion in 1934, was threatening to sing until machine-gun bullets sealed his lips. Torrio had decreed that no formal invitation be extended to the Chicago mobs; his own experiences with these had convinced him that the Chicagoans were just too uncivilized to engage in polite discussions with perspicacious men. But he did permit Chicago to send observers to the meetings, usually Paul "The Waiter" Ricca, who was generally considered, along with Jake "Greasy Thumb" Guzik, the smartest racketeer in the old Capone organization.

The purpose of these meetings, of course, was to implement the decisions of the 1931 Chicago conference, to forge closer ties among all the mobs, whatever their ethnic make-up, in cities across the country, and to agree on the rules by which they could not only coexist, as in the recent past, but at least partially merge.

And the signs looked good that such hopes could be realized. Luciano frequently pointed out that the days of jealousy and clannishness in the Italian underworld were over. The assassinations of Giuseppe Masseria and Salvatore Maranzano, for which he took due credit, had already begun to bring the Mafia, or the Unione Siciliana, as he preferred to call it, out of the darkness of its provincialism to work cooperatively with everyone. When the underworld cartel was finally established, Luciano stressed, the Italians, too, would abide by the rules and disciplines of the national commission (on which, of course, he and other powerful Mafia figures would sit).

Luciano, Adonis, Lansky and others often referred to the success of the Seven Group (the organization established in 1927 to ensure cooperation among the seven major powers) as an example of what interethnic cooperation could accomplish, and after 1933, Lansky and Dalitz held up the Molaska operation and the joint gambling ventures as examples of how profitable interregional cooperation could be.

Zwillman's point, which he raised time and again, dealt with public relations-- the need for underworld leaders to present and comport themselves as good and responsible businessmen. It became something of an obsession with the New Jersey racketeer, who was forever denouncing the violence of the Dutch Schultz--Mad Dog Coll warfare and the rise of the free-lance criminals such as John Dillinger and his bank-robbing, chopper-waving, trigger-happy friends. Such adventurers had to be put down, he often said; they were bad for business, as was gangland feuding; and as good businessmen, he and the others must stress discipline, cooperation and organization. Nor should they neglect to enhance their images as public-spirited citizens. As examples, he cited his own offer of a reward for the capture and conviction of the kidnaper of the infant son of Colonel Charles A. Lindbergh, and Madden's offer of his own personal services at no cost.

Through these continuing discussions, the determination to establish a national Syndicate became fixed, and in the workings of the new Roosevelt Administration--the National Recovery Administration, with its national board and its regional district boards--the underworld found a model for its own organization. By 1934, the Syndicate was following this route, setting up its national commission, or board of directors, to decide over-all policy and arbitrate all disputes. Under it were regional boards; the country was divided into districts with a regional commission in charge of all organized crime in its territory, and with territorial lines inviolate. In those areas, such as the West Coast and Miami, where the organization was just getting started, joint ventures should be undertaken.

To enforce these agreements, the national commission adopted an idea that Lepke had long been advancing. During Prohibition, the Bugs and Meyer Mob had been the enforcers for their partners and for the Seven Group. Lepke proposed a similar enforcement arm, directed by him and Anastasia and composed of professional killers who would work under contract to the national commission and to regional and local organizations. It was a plan that met with approval, except for two minor objections, voiced by Dalitz and Lansky. They noted that when a politician or a reporter was killed, the inevitable result was bad publicity and a wave of civic reform. Thus, politicians and journalists should be declared off limits. With these necessary exceptions, Lepke's scheme led to the establishment of what would become known as Murder, Incorporated.

Such elaborate plans could not be implemented in a single day or week; that took years and many arduous meetings. But by 1934, the Combination was becoming a reality.

At the same time, however, the heat on the underworld was increasing through a series of scandals and disclosures and would soon result in staggering explosions.

This is the fifth in a series of articles on organized crime in the United States.