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THE SYNDICATION OF CRIME AND THE MAFIA

The structure of organized crime today is far different from what it was many years ago. Its power for evil is infinitely greater. The unit of organized crime used to be an individual gang consisting of a number of hoodlums, whose activities were obviously predatory in character. Individual gangs tended to specialize in specific types of criminal activity such as payroll, or bank robbery, loft, or safe burglary, pocket picking, etc. These gangs normally confined their activities to particular areas of the country or particular communities. Occasionally their activities were aided and abetted by law-enforcement officials. The crooked sheriff who aids the outlaws is as much of a stock character as the fearless "law man" who makes justice triumph

New types of criminal gangs have emerged during prohibition. The huge profits earned in that era together with the development of twentieth century transportation and communication, made possible larger and much more powerful gangs, covering much greater territory. Organized crime in the last 30 years has taken on new characteristics. The most dangerous criminal gangs today are not specialists in one type of predatory crime, but engage in many and varied forms of criminality. Criminal groups today are multipurpose in character engaging in any racket wherever there is money to be made. The modern gang, moreover, does not rely for its primary source of income on frankly predatory forms of crime such as robbery, burglary, or larceny. Instead the more dangerous criminal elements draw most of their revenues from various forms of gambling, the sale and distribution of narcotics, prostitution, various forms of business and labor racketeering, black-market practices, bootlegging into dry areas, etc.

The key to successful gang operation is monopoly of illicit enterprises or illegal operations, for monopoly guarantees huge profits. In cities that gangland has organized very well, the syndicate or the combination in control of the rackets decides which mobsters are to have what rackets. In cities which have not been well organized, the attempt by one mobster to take over the territory or racket from another mobster inevitably breeds trouble, for modern gangs and criminal syndicates rely on "muscle" and murder to a far greater degree than formerly to eliminate competitors, compel cooperation from reluctant victims, silence informers, and to enforce gangland edicts.

CRIMINAL ORGANIZATION LIKE BUSINESS ORGANIZATION Modern crime syndicates and criminal gangs have copied some of the organizational methods found in modern business. They seek to expand their activities in many different fields and in many different geographic areas, wherever profits may he made. We have seen evidence of the operation of Costello-Adonis-Lansky crime syndicate, whose headquarters is in New York, in such places as Bergen County, N.J., Saratoga, N.Y., Miami, Fla., New Orleans, Nevada, the west coast and Havana, Cuba. We have seen evidences of operations of the other major crime syndicate, that of Accardo-Guzik-Fischetti, whose headquarters is in Chicago, in such places as Kansas City, East St. Louis, Miami, Nevada, and the west coast.

Some indication of how modern crime syndicates operate and how they open new territory is apparent from the facts described under the city story of Chicago elsewhere in this report in relation to the extraordinary testimony of Lt. George Butler of the police department of Dallas, Tex. Lieutenant Butler was approached by a member of the Chicago mob by the name of Paul Jones. According to Butler, Jones stated that he was an advance agent of the Chicago crime syndicate and was prepared to offer the district attorney and the sheriff $1,000 a week each or a 12 1/2-percent cut on the profits if the syndicate were permitted to operate in Dallas under "complete protection." Jones also stated that syndicate operations were conducted by local people who "front" for the Chicago mob. The syndicate, according to Jones, controlled such cities as St. Louis, Kansas City, New Orleans, and Little Rock. In addition the syndicate had connections in every large city, and if Jones ran into trouble anywhere, money and help would be forthcoming.

Lieutenant Butler advised his superiors, and on instructions, played along with Jones and indicated that the Dallas police were interested in his propositions. Jones, therefore, brought Pat Manno, a notorious Chicago syndicate mobster and a partner of Guzik and Accardo, who was labeled as the fifth man in the syndicate, to Dallas to talk matters over with Butler and Sheriff Guthrie, who had been apprised of the situation. Recordings of the conversation between Lieutenant Butler, Sheriff Guthrie, Manno, and Jones were made. Manno stated that he had been in the policy business in Chicago for 17 years and was interested in opening up operations in Dallas. He stated that the Chicago syndicate was definitely interested in coming into Dallas and that he, as representative of the syndicate, was looking the town over to see if they could operate it in collaboration with the police. The work of the Dallas Police in this connection was most commendable.

There are many other criminal gangs and criminal groups throughout the country that have more than a local importance. For instance, the Kleinman-Rothkopf-Polizzi group has operated in many different Ohio counties as well as in the Newport and the Covington area of Kentucky, in Nevada, and in Miami, Fla. Members of the Detroit gang have operated in Miami, Saratoga, and Kentucky. Individual gangsters and gangs in different parts of the country have also frequently worked in close and profitable relationship with each other, particularly in gambling casinos where often members of several gangs participate on a systematic basis. Outside gangs coming into an area will often use local hoodlums and local gangs.

It is apparent, as Narcotics Commissioner Anslinger testified before the committee, that the leading figures in organized crime do business with each other, get together in places like Miami and Hot Springs and on occasion do each other's dirty work, when a competitor must be eliminated and an informer silenced, or a victim persuaded. Commissioner Anslinger did not think that the activities in one part of the country occur as a result of instructions given in other parts of the country as a general rule. In some cases "it is pretty well organized in that particular way but I wouldn't say that one section of the country controls another section." What happens, Mr. Anslinger testified, is that leading mobsters throughout the country "confer together or talk to each other, deal with each other." He agreed with Mr. Halley's characterization that "they confine their dealings pretty well to the family."

As we have seen one of the major areas in which leading gangs cooperate is in enforcing each other's edict, silencing informers, persuading potential victims through intimidation, violence, and murder. It is obviously far more difficult for local law enforcement officials to detect the work of outside gangsters than the products of their local talent.

Modern gangland operations on any sizable scale cannot be carried on without protection. The gangs have unbelievable cash assets available for this purpose, moreover. Much of the moneys of criminal gangs and syndicates are invested in legitimate enterprises which presents special dangers to our economy and our people.

The Mafia, the committee is convinced, has an important part in binding together into a loose association the two major criminal syndicates as well as many minor gangs and individual hoodlums throughout the country. Wherever the committee has gone it has run into the trail of this elusive, shadowy, and sinister organization. Because of its importance to organized crime in this country, data on the Mafia will be presented in some detail.

MAFIA ORIGINALLY HAD HIGH PURPOSE The Mafia was originally one of many secret societies organized in Sicily to free the island of foreign domination. The methods used for securing secrecy of operations, unity of command, intimidation and murder, and the silencing of informers, were adopted by a criminal group that became the Mafia after the Bourbons were driven from Sicily.

According to historians and the most authentic research material available, the following is the history of the Mafia:

The various secret organizations in Sicily were fused into a single group known as the Fratellanza or the "Brotherhood" which sometime later became known as the Mafia. Initiates and new members of this organization took solemn oaths never to reveal the secrets of the group under any circumstances and never to divulge the names of fellow members, even under torture. This secret association was organized in groups of 10 members. Each group had a leader. The group leaders were known to each other but not to the members of the various groups. The group leaders reported to the provincial chief who in turn reported to the supreme chief in Palermo, a very wealthy and influential man.

This organization grew enormously in Sicily after 1860. Smuggling, cattle stealing, extortion, and shake-downs were its major criminal activities. The administration of justice was so openly defied by this organization that many attempts were made by law-enforcement agencies in Sicily to deal with it. Although many arrests were made, law-enforcement agencies found it extremely difficult to break the power of the Mafia. The arrested members of this organization would not talk. Witnesses of various crimes committed by members of the Mafia were intimidated and were afraid to testify. Political influence was used to protect Mafia members charged with crime. Good legal talent was always available for their defense. The various drives against the Mafia in Sicily which were made by Italian Governments from the 1870's down to Mussolini's time, were therefore largely ineffective in destroying the Mafia. However these drives had the effect of causing large numbers of Mafia members to migrate to the New World and many of them came to this country.

As early as the 1880's, New Orleans was the focal point of Mafia activity. According to Pasquale Corte, the Italian consul in New Orleans, large numbers of escaped Italian criminals settled there. These and other desperados grew rich and powerful upon the profits of robbery, extortion, assassination. Most of the victims were fellow countrymen who failed to pay the sums demanded by Mafia leaders.

The Mafia in New Orleans overreached itself when it ordered the murder of a popular police officer, David Hennessy. After he was murdered, a dozen Mafia leaders were arrested. None were convicted after a trial marred by the intimidation of witnesses and jury fixing. The defendants, however, who had been held in jail on other charges, were lynched by a mob of aroused New Orleans citizens. After these lynchings the power of the Mafia in New Orleans was temporarily broken.

The Mafia became established in other cities besides New Orleans. Moreover, like many other underworld organizations, it grew rich and powerful during prohibition in the sale and distribution of alcoholic beverages. In addition both during prohibition and since that time this organization has entered every racket promising easy money. Narcotics, pinball machines, slot machines, gambling in every form and description are some of its major activities at the present time.

MAFIA OPERATES BEHIND LEGITIMATE FRONTS Many of the individuals suspected of connection with the Mafia operate behind legitimate fronts. The olive oil, cheese, and the export and import businesses are some of the favorite fronts for Mafia operations. They offer a cover, particularly, for narcotics operations. They also help explain interstate and international contacts between persons suspected of Mafia connections.

Mafia operations in this country have been described by the Narcotics Bureau as follows:

It is almost inevitable that the Mafia should take an important part in American criminal rackets. Here is a Nation-wide organization of outlaws in a sort of oath-bound, blood-cemented brotherhood dedicated to complete defiance of the law. Where personal advantage or interests are concerned, here is a more or less permanently established network, an organized maze of underground conduits, always ready and available when racket enterprise is to be furthered. The organization is such that a member in one part of the country can, with perfect confidence, engage in any sort of illicit business with members in any other section of the country. Most helpful to the Mafia has been the attitude on the part of many law-enforcement officers in connection with its murders. These are sometimes passed over lightly on the theory these cases are just hoodlums killing off one another and that it is not a matter on which to waste police time and energy.

The ruthless elimination of competitors from enterprises which Mafia leaders decide to take over, the ruthless elimination of persons who have weakened in their Mafia loyalties, failed to carry out Mafia orders, or who have informed against the Mafia, has left a trail of murder from Tampa to San Francisco. This is well illustrated by the following comments of the Narcotics Bureau:

Joseph Sica and Alfred Sica of California are satellites of Anthony Rizzoti, alias Jack Dragna, and closely allied to members in New York and New Jersey from where they went to California several years ago. In 1949, a narcotics case was developed against the Sicas, principally upon the testimony of one Abraham Davidian who made purchases of narcotics from them, sometimes in lots costing more than $15,000. Early this year, while the case was pending for trial, Davidian was shot to death while asleep in his mother's home in Fresno.

Another west coast case of great importance was developed in 1944. This concerned a New York-California-Mexico smuggling ring in which Salvatore Maugeri and others were convicted. During the course of the investigation, a narcotics agent working undercover learned that one of the ring with whom he was negotiating, Charles "Big Nose" LaGaipa, of Santa Cruz, Calif., was in bad odor with some of his criminal Mafia associates. LaGaipa disappeared. He never has been found. His car was recovered with blood on the seat and brain tissue on the dashboard.

One Nick Dejohn, active in the narcotics traffic in Chicago, and Thomas Buffa, active in the narcotics traffic in St. Louis, transferred their activities to California. A short time later, evidently for trying to muscle in, both were killed. Buffa died from shotgun fire. DeJohn's body was found in an automobile with wire twisted around the neck.

A member of this combine named Ignazio Antinori went to Havana, frequently to obtain narcotics for middle western members of this organization. The leader was Joseph DeLuca * * *. On one occasion, Antinori, in return for $25,000, delivered a poor grade of narcotic. The middle western group gave him 2 weeks in which to return the money. At the end of that period, having failed to make good, he was killed in Tampa by shotgun fire in 1940. Evidently the middle western group ordered the Tampa leader to do this job. Thereafter his two sons continued in the traffic. After considerable investigation, we arrested DeLuca, Antinori's two sons, Paul and Joseph, and many others involved in 1942. The testimony of one of the defendants, Carl Carramusa, served to assure conviction of all defendants. The sentences meted out to these vicious murderers were shockingly low. In the case of Joseph DeLuca, who got 3 years, the court ordered that he not be deported on recommendation of the district attorney. After the leader, DeLuca, had served 1 year, he was paroled. Carramusa had moved to Chicago to escape vengeance by the combine. One morning, in 1945, as he was repairing a tire in front of his home, he was killed by a shotgun blast before the eyes of his 15-year-old daughter. His murder remains unsolved, but it unquestionably was the work of the Chicago members of the combine on orders from the Kansas City group. The neighbors of Carramusa who could have furnished information remained silent because of fear. This is the same pattern which follows all of their activities. Witnesses in narcotic cases against members of this combine refuse to testify knowing that they will be marked for death.

DIFFICULT TO OBTAIN RELIABLE MAFIA EVIDENCE The committee found it difficult to obtain reliable data concerning the extent of Mafia operation, the nature of the Mafia organization, and the way it presently operates. One notable concrete piece of evidence is a photograph of 23 alleged Mafia leaders from all over the United States, arrested in a hotel in Cleveland in 1928. When arrested, the group possessed numerous firearms. Among those arrested were Joseph Profaci of New York, Vincent Mangano of New York, and "Red" Italiano of Tampa. Profaci, who is considered by the experts to be one of the top leaders of the Mafia was questioned about this meeting at a closed committee hearing. At first, he asserted that he was in Cleveland in connection with his olive-oil business. Then after admitting that he had no olive-oil business in Cleveland before 1935 or 1936, he was unable to give a satisfactory explanation of his presence at the Cleveland convention.

Almost all the witnesses who appeared before the committee and who were suspected of Mafia membership, either denied that they had ever heard of the Mafia, which is patently absurd, or denied membership in the Mafia. However, many of these witnesses readily admitted knowledge of and associations and friendships with suspected Mafia characters in other parts of the country. A notable exception is Tony Gizzo, who testified in a closed hearing that he had heard that James Balestrere was the leader of the Mafia in Kansas City. Gizzo changed his testimony at the open hearing. Another notable exception is Philip D'Andrea who said that the Mafia was freely discussed in his home when he was a child, and that he understood it to be a widely feared extortion gang. On the basis of all the evidence before it, plus the off-the-record but convincing statements of certain informants who must remain anonymous, the committee is inclined to agree with the opinion of experienced police officers and narcotics agents who believe:

1. There is a Nation-wide crime syndicate known as the Mafia, whose tentacles are found in many large cities. It has international ramifications which appear most clearly in connection with narcotics traffic.

2. Its leaders are usually found in control of the most lucrative rackets in their cities.

3. There are indications of a centralized direction and control of these rackets, but leadership appears to be in a group rather than in a single individual.

4. The Mafia is the cement that helps to bind the Costello-Adonis-Lansky syndicate of New York and the Accardo-Guzik-Fisehetti syndicate of Chicago as well as smaller criminal gangs and individual criminals throughout the country. These groups have kept in touch with Luciano since his deportation from this country.

5. The domination of the Mafia is based fundamentally on "muscle" and "murder." The Mafia is a secret conspiracy against law and order which will ruthlessly eliminate anyone who stands in the way of its success in any criminal enterprise in which it is interested. It will destroy anyone who betrays its secrets. It will use any means available-political influence, bribery, intimidation, etc., to defeat any attempt on the part of law-enforcement to touch its top figures or to interfere with its operations.

The Mafia today acts closely with many persons who are not of Sicilian descent. Moreover, it must be pointed out most strongly that the Mafia group comprises only a very small fraction of a percentage even of Sicilians. It would be most unfortunate if any inferences were erroneously drawn in any way derogatory to the vast majority of fine law-abiding citizens of Sicilian and Italian extraction.

THE ROLE OF THE WIRE SERVICE IN ORGANIZED CRIME In our second interim report we stressed the great importance of the race wire service as a lever which makes it possible for organized criminal syndicates to gain a foothold in every community in the country. Bookmaking provides the richest source of revenue from gambling operations and the wire service, which transmits up-to-minute information about racing news, is essential to big-time book-makers. A bookmaker who does not have the wire service cannot compete with one who has. The wire service is as essential to a book-maker as the stock ticker to a stockbroker. It is because of this importance of the wire service to the bookmakers that the organization which controls the wire service can, in effect, control bookmaking operations. It has bookmakers at its mercy and it can charge what the traffic will bear. Thus, the characteristic of wire service distribution is the great disparities in the prices charged for similar types of service. Bookmakers are charged vastly different rates than the few legitimate users of the wire service, such as the newspapers. Bookmakers are frequently compelled to pay a fixed percentage of their profits to distributors of the wire service, whereas the few legitimate users pay only nominal sums.

In view of the great importance of the wire service to bookmaking operations, throughout the country, and in view of the fact that the wire service is one of the means whereby organized crime siphons off the lush returns from bookmaking, the committee feels that it is necessary to retell the story of the Capone mob's influence on the wire service which appears in its second interim report.

CONTINENTAL PRESS SERVICE A MONOPOLY As stated in that report, the committee is of the opinion that the Continental Press, which has a monopoly of the transmission of gambling news throughout the country, is not fully controlled by Edward McBride, its nominal owner, or by Thomas Kelly, its general manager, but is substantially influenced by the gangsters who constitute the Capone crime syndicate. As a corollary, the Capone syndicate has the power to dominate bookmaking operations of any size throughout the country.

The racing wire news service first assumed importance under the ownership of M. L. Annenberg, some 30 years ago. Annenberg had been circulation manager for several large metropolitan newspapers and had likewise interested himself in the distribution of racing news publications known as scratch sheets. These scratch sheets contained information with respect to various aspects of horse racing which was intended to guide prospective bettors.

He conceived the idea of establishing a telegraphic news service which would carry over the wires fast and accurate information on racing for bookmakers and, with the big daily news distribution loops as his model, set up his own method of racing news coverage.

In the days when Annenberg, now deceased, was building newspaper circulations, competition between daily papers in metropolitan areas was intense. It was the era when newspapers were numerous. Since then many have become defunct and many others have been merged. The fight for circulation was a rough-and-tumble affair. Often violence was resorted to in order to cut down the circulation of a rival journal. Obviously many of those who participated in the circulation wars were strong-arm individuals to whom street brawls for control of newsstands and distribution outlets were everyday affairs.

To obtain the news from race tracks was the first problem of the new wire service. Some track owners were willing to sell the exclusive privilege of reporting from their enclosures to the news service which Annenberg named Nationwide News Service. However, some tracks were unwilling to cooperate and here it was necessary for the news to be purloined. For this purpose it was only natural for Annenberg to employ some of the individuals who had been associated with him in the newspaper-circulation wars. Crews were formed to telegraph racing information from some point near the track, if not inside it, to a central location in Chicago, whence it was relayed to other distribution points in the various States. From these latter subcenters of distribution local distributors furnished it to bookmakers.

Annenberg and his principal associates, including James A. Ragen, Sr., not only controlled Nationwide in Chicago, they also apparently owned controlling interests in the suboutlets which in turn purveyed the racing information to the bookmakers. The profits accruing to the owners of this system were enormous.

ONE SUBDISTRIBUTOR TYPICAL OF ALL In view of its limited time and facilities, this committee was unable to study exhaustively the various subcenters that constituted the provincial capitals of the old Annenberg empire but to complete its study it was considered necessary to make a detailed investigation of one typical point and for this purpose the committee selected the Pioneer News Co. of St. Louis, a relict of the old Annenberg distributorship.

The testimony shows that Annenberg, Ragen, and one Al Kruse of Chicago owned 50 percent of the stock of Pioneer News Co. when the latter was an affiliate of Nationwide. Their participation in the business was not active but another Nationwide associate, William Molasky, who then lived and still lives in St. Louis, was their representative on the spot. There came a time in 1939 when Annenberg divested himself of all his interest in the racing wire news service, at about the time when the Internal Revenue Bureau opened an investigation into his income tax returns, and the Department of Justice began investigating his monopolistic control of the wire service. Molasky purchased the entire Annenberg interest in Pioneer News Co. for $1; its actual value had no relation to the nominal purchase price.

Annenberg's dissociation with the racing wire news service was complete. He did not attempt to sell it to anyone or to realize any salvage from it; he simply walked out.

At that same time Ragen was also under indictment for violation of income-tax regulations. Ragen turned to an old friend, an associate of the newspaper war days, Arthur B. McBride of Cleveland. McBride was, like Ragen, a veteran of the vicious street battles for newspaper circulation. Moreover, Ragen's man Friday, Thomas Kelly, had been married to McBride's deceased sister.

It is one of the amazing aspects of this whole story that without any break in the service, without any dislocation of the facilities in the entire process of obtaining racing information, legitimately or illegitimately, from the race tracks and without any disruption in its distribution, one man stepped out of this complicated business and another man took it over without any formal transfer or without the passing of a single dollar.

It is hardly believable that no one else made any attempt to acquire the race news wire service either by purchase or by force. It happened just that way. The old management closed the door and a new management walked in and sat down and started operating.

ARTHUR B. M'BRIDE TAKES OVER McBride, in his testimony before the committee, said he believed that without him the organization would have fallen apart. But his testimony is also on record to the effect. that when he went into the wire service he knew nothing about it, had no time to devote to it and that if, at Kelly's asserted plea, he did go into the business, it would have to be run by Kelly and Ragen.

From McBride's testimony, the committee finds it hard to discern just how he was indispensable to the conduct of the racing wire service. McBride said that it was necessary for him to provide the original working capital of $20,000 but this does not appear to be convincing because $20,000 in the operation of the new racing wire service which was given the appellation Continental Press Service appears to have been small money. As a matter of fact, McBride got his $20,000 back out of net profits before 2 weeks had elapsed. It was also apparent that Ragen could have put that amount up out of his own pocket or could have borrowed it without any difficulty whatsoever.

McBride testified that the only reason he went into the business was .to help his brother-in-law, Kelly, and another old friend, Ragen. It was suggested by counsel for the committee that he could have loaned Kelly $20,000 and allowed Kelly to become the owner of the business but McBride said that he did not feel Kelly was sufficiently seasoned in business to be trusted with a loan of that size - this despite the fact that McBride had loaned similar amounts to known gangsters on at least two occasions and also despite the fact that when he did take the business over he had to trust Kelly to run it.

McBride stayed in Continental until 1941. Then he sold out to Ragen.

The story continues with Ragen and Kelly operating Continental until 1943 when McBride says Ragen came to him and said that he simply had to have McBride or a member of McBride's family in the organization. Nobody has given a clear reason for this because McBride, in his testimony before the committee, said that he had not learned anything further about the business up to that time and he had neither the energy nor available time to give to it. McBride had a son, Edward, who at that time was overseas with the Armed Forces. Obviously Edward could not give any attention to the business. But for him McBride purchased a one-third interest for $50,000 which was paid out of McBride's share of the profits. Why McBride had to be brought into a business which was operating successfully and did not need capital is obscure unless it was to make McBride's powerful connections with John Angersola (King) and other important leaders of the underworld in Cleveland.

Continental Press Service continued to operate without serious trouble until about 1946. During this period Ragen and McBride operated it as. partners and there is no indication on the record that during this period it was dominated by any out-and-out gangster element although, beyond any doubt, Continental Press enjoyed amicable relations with the gangsters who were building up large-scale bookmaking operations in the bigger cities of the country.

CAPONE GANG STARTS MUSCLING IN It was in 1946 that trouble began.

The first eruption came in California where Mickey Cohen and Joe Sica, undoubtedly acting on behalf of Jack I. Dragna, a leader of the Mafia in California, entered the premises of Russell Brophy, who was in charge of the local distribution agency for Continental. Brophy, incidentally, is Ragen's son-in-law. Sica is a reputed member of the Mafia under indictment on a narcotics charge; his trial has been delayed because the chief witness against him was recently mysteriously murdered. Brophy took a beating from the two hoodlums. At about the same time, back in Chicago, Ragen himself was having serious trouble with the R. & H. Publishing Co., a subdistributor of the acing news service controlled by the local Capone syndicate which was stealing news from Midwest News Service, a controlled distributor of Continental. R. & H. serviced several hundred bookmakers from Chicago. R. & H., which was operated by Hymie Levin, Phil Katz, and Ray Jones, was actually controlled by Tony Accardo, Jacob Guzik, and the Chicago syndicate.

Ragen threatened to tell what he knew about the Chicago mob to the Federal Bureau of Investigation and. also threatened to report R. & H. to the Federal Communications Commission so that the subdistributor would be forced out of business. He made a number of attempts to get R. & H. out of the business, saying that the wire service could not tolerate the gangster element or it would itself be put out of business.

Ragen offered to buy out R. & H. but he would not pay the enormous price that the gang set as the consideration for their elimination. The syndicate in turn appears to have been anxious to ease Ragen out and to take over the entire wire service, and thereby gain control over every handbook in the country.

Then, from nowhere, suddenly appeared a new racing information distribution service known as Trans-American Publishing & News Service, Inc.

One of Trans-American's first customers was R. & H. which withdrew from the Continental Press set-up. Heading Trans-American were three nonentities, not one of whom had any address or stature in gangdom. Two of them, Pat Burns and his son, Andrew, were former employees of Continental who had been lured away by Trans-American for the new set-up. One of the three was Ralph O'Hara, a minor gangster of Chicago. All were officers and stockholders of the new corporation but none had the capital necessary to embark on this costly venture. O'Hara was a witness before the committee in Chicago. The books and records of Trans-American were supposed to be in his custody, but many of them proved to be missing. But from those that were available it would appear that in its first year's operation Trans-American lost about $200,000, most of which was put up by R. & H. Publishing Co. Other gangster-dominated customers provided financial support by loans or advances for service.

In addition to the huge "loans" from R. & H., Trans-American received a "loan" of $12,000 from Benjamin (Bugsy) Siegel, who at that time had a monopoly of the bookmaking and wire-news service in Las Vegas. Hoodlums in various parts of the country furnished support to Trans-American's operation, and among those who provided money was William (Butsy) O'Brien, who had formerly controlled the racing-news service for Continental in the State of Florida and who continued throughout Trans-American's operations to give support to Continental, thus playing both ends against the middle. Many handbooks hedged by subscribing and paying for service from both the Continental and Trans-American systems.

TRANS-AMERICAN EXPANDS ITS ACTIVITIES Trans-American made no attempt to operate directly in St. Louis; it utilized one of the partners in Pioneer News Service to work from the Illinois side of the Mississippi in East St. Louis, thus competing directly with Pioneer. In Kansas City, Trans-American was directed and operated by four of Binaggio's henchmen, who included two notorious Mafia members with outstanding records for violence. They operated independently for a few days and then moved into the office of Continental which they took over lock, stock, barrel, and personnel. The Kansas City group spread its wire-service tentacles out into a number of neighboring States, including Iowa, Nebraska, and Colorado, taking with it Continental wire outlets and utilizing them for Trans-American set-up.

Police officials in the cities involved confidently anticipated that there would be considerable violence but the outburst did not reach the height which they expected. It is possible that the reason for this is that before local violence became too acute Ragen, the head of Continental Press Service, was assassinated in Chicago in a fashion typical of gangland.

A few weeks prior to his slaying, he had gone to the district attorney of Cook County, Ill., and had made a very lengthy statement saying that his life had been threatened and he fully expected the threats to be carried out. If he were killed, he said the probable killers would be Accardo, Guzik, and Murray ("The Camel") Humphreys, the top echelon of the Capone syndicate. Ragen said that the Capone syndicate wanted to be cut in on Continental and that he was resisting with all his might even though his life was thereby endangered. Ragen's statement to the district attorney of Cook County is a part of the record of this committee. It is corroborated, at least in part, by the testimony of Dan Serritella, Jake Guzik's partner in the Capone syndicate's scratch sheet.

After Ragen's death, active management of Continental was taken over by Tom Kelly; Kelly and McBride arranged to buy the two-thirds interest in Continental which belonged to the estate of Ragen and the latter's son. Title was taken in the name of Edward McBride, Arthur McBride's son but Edward had no part in the negotiations and was not present except when the papers were executed. Edward McBride thus became the sole owner of Continental. He remained in Florida where he was attending law school and had absolutely nothing to do with the management of the company. When questioned at a committee hearing he could not even recite elementary facts about the important personnel of his news transmission system but had to refer to his uncle or to his counsel for the replies. It is obvious that, although he now owns Continental Press of record, he knows nothing whatever about its operation or management.

The acquisition of Continental by McBride's son had a mysterious paralyzing effect on the hostilities between Continental and Trans-American. Like the Arabs in the poem, Trans-American quietly folded its tents and silently withdrew from the scene -- just at the point, according to the testimony of Kelly of Continental Press, where the latter seemed doomed to be forced out of business.

As an illustration of the effects of the wire service warfare, it is interesting to note that John J. Fogarty, Continental distributor in New Orleans, was forced into a partnership with two brothers of Carlos Marcello, reputed Mafia leader in Louisiana, who was an associate of Joe Poretto, Trans-American's representative.

TRANS-AMERICAN MOBSTERS DODGE SUBPENAS Although the most diligent efforts were made, the committee was unable to serve subpenas on any of the persons connected with R. & H. Publishing Co. It did obtain the presence of Ralph O'Hara, the head of Trans-American, but he refused to answer any questions whatsoever about the business on the ground that his answers would tend to incriminate him. He did not change his attitude when it was pointed out to him that the McBrides and their counsel insisted that the Continental operation, parallel in all respects to that of Trans-American, was wholly legitimate and in no way in violation of any law. Kelly and McBride insisted in their testimony that Trans-American discontinued doing business on its own initiative and not as a result of any deal.

After Trans-American folded, Continental's distributor, Illinois Sports News, took back into its employ one Pat Burns and his son and daughter, both of whom had walked out on Continental to take jobs with Trans-American. Why Continental gave reemployment to these persons, with substantial salaries, and others who had left to go into the employ of its competitor has not been satisfactorily answered. Nor has any convincing explanation been given as to why Continental then gave racing wire service in Kansas City to the same group who in effect had stolen the local outlets of Continental for Trans-American. In fact, the Mafia operators who took over the Reliable News Service in Kansas City received much better terms than the old wire service in that city had received from Continental before the fight and certainly got better terms than other distributors in various cities who had not fought Continental but who are not connected with the Mafia or the Capone gang. R. & H. in Chicago encountered no difficulty in contracting for service with Illinois Sports News on terms far more profitable than those given to another racing service distributor in Chicago who had no connection with either Mafia or the Caponites. R. & H. paid $750 a week for its service, whereas its competitor, Midwest News Service, subscriber of Illinois Sports News, for precisely the same service, paid between $4,000 and $5,000 a week. The owners of Illinois Sports News failed to give convincing testimony to the committee in explanation of the reason why R. & H. was given such a preferential rate in the light of their statements that for years R. & H. had stolen news from the Continental system. The owners of Illinois implied that the theft of news was a costly expense to R. & H. and after the cessation of the Trans-American Co., Illinois would have a great competitive advantage over R. & H. if they had refused to sell R. & H. service. It is of further significance that the usual practice of Illinois Sports News to investigate into the volume of business of its customers for the purpose of fixing the service rate was not resorted to in establishing the rate for R. & H. No satisfactory explanation was advanced by the owners of Illinois Sports News as to why it failed to request information from R. & H. as to the number of hand-book customers R. & H. intended to service and the rate R. & H. was to receive from these customers. In New Orleans, Continental made Marcello its distributor; on the west coast, Dragna was rewarded for his part in the fight with Continental by being given a contract at $25,000 a year to steal news from the race tracks and send it into Continental's headquarters for interstate distribution.

In Florida, "Butsy" O'Brien held on to his distributorship for Continental. The testimony taken by the committee in Florida shows particularly that it was not until after Trans-American took itself out of the picture that the Capone henchmen infiltrated the racing news service in that State.

SERVICE TURNED OFF AND ON FOR S. & G. One of the most significant aspects of the racing-wire story in Florida was the manner in which service from Chicago was cut off from the S. & G. bookmaking syndicate and its operatives in order to force that syndicate to take into partnership the Capone gang whose front man was Harry Russell, a Chicago gambler and former partner of Tony Accardo. A representative of the Western Union Telegraph Co., over whose wires the racing news to Miami Beach was carried, testified that the cut-off was ordered by William (Butsy) O'Brien.

Continental Press claimed that if all these things occurred, they were done by independent news-distributing companies to whom Continental sells the news, but over whom it has no control. Continental, it is claimed, stands simon pure as a central news-distributing agency which does not steal news or deal with bookmakers or characters of the underworld.

The facade of legality which Continental Press has erected for itself on the advice of eminent and learned counsel is a sham. In a court of law, as a corporate structure, it might stand up. But this is all the more reason why the true facts must be called to the attention of the Senate.

Continental Press is said to be owned by Edward McBride, a young man in his early twenties studying law in Miami, Fla. He knows nothing of its operations. Continental Press is operated by young McBride's uncle, Tom Kelly, who says he simply sells a news service to Illinois Sports News, Inc., and he does not know, he says, what Illinois Sports News does with it thereafter. It is significant that Illinois Sports News hired Pat Burns and the other dissident Continental employees back after Trans-American went out of business. It was Illinois Sports News that resumed business with R. & H. after Ragen was shot. Strangely enough, Illinois Sports News is operated by two other Kellys, the brother and son of Tom Kelly of Continental. The brother, George, admitted he knew little about the wire service and depended on Tom for advice and guidance.

On the business side, Illinois Sports News does not keep the considerable profits that it earns but it remits to Continental all of its net profit beyond a certain amount which has been agreed upon as a fair payment to Kelly's relatives for their services for running the outfit.

CONTINENTAL PULLS THE STRINGS Illinois Sports News is a dummy. It is a typical dummy, but it is not the only one of its kind. Everywhere this committee looked among the subdistributors of Continental it found other dummies which are captained and manned by former long-time affiliates of the wire service chiefs and the Capone mob. They go through the fiction of stockholders' meetings, of meetings of board of directors, of voting themselves salaries which, in terms of the huge returns that roll in from the wire service, are picayune - they pay themselves $90 or $100 a week sometimes - and each year, by a solemn vote of the board of directors, arrange to pay into either Illinois Sports News or Continental Press everything that has come in over and above their actual operating expenses and these peanut salaries so that the subdistributors make no profit and pay no dividends. There is nothing left, after Continental Press gets its share, from which to pay any dividends. The wire rooms of both Continental and Illinois are in the same building. The news is stolen from some tracks by track crews of Illinois Sports with equipment supplied by Continental. On other tracks, the news is stolen by crews of Continental. The entire wire service system is centered in the headquarters of Illinois Sports News in Chicago.

Continental's operators and counsel contended in the face of all this that these subdistributing companies are independent operators and that their actions are their own. On its face, this contention is almost insulting and can be rejected out of hand. In every case investigated by the committee the purpose of attempting to insulate Continental Press was clearly obvious. As an example, in the case of Howard Sports News which operates out of Baltimore and is one of the most flagrant of Continental's dummies, Continental wants to be isolated because Howard Sports News has for one of its functions the procurement of news from most of the race tracks. By the admission of its manager, Kelly, and the assertion of its lawyers, Continental has been very careful to divorce itself by every legal maneuver from any possible connection with activities as sordid as the stealing of news or selling the same to bookmakers who it cannot deny are engaged in an illegitimate business.

In fact, the testimony is uncontroverted that Continental deliberately set out to erect a business structure of such a kind that if its activities were ever questioned it would be able to defend itself with the half-truth that its news is sold only for a legitimate purpose. This fictional attempt at legality was attempted to be supported by distributors at the second level of the Continental set-up who had the temerity in their testimony before the committee to assert that they did not know they were selling their service to bookmakers.

SELL NEWS TO BOOKMAKERS - AND KNOW IT The efforts of the subdistributors to keep up the legal fiction sought to be established by Continental collapsed under persistent questioning before the committee. The various distributors finally admitted that they sell racing news service to bookmakers and that they are fully aware that they are doing so. James Ragen told the State's attorney that the sole purpose of the legal fiction was to give Continental the appearance of not having too close a touch with the "undesirable ones."

Typical of the legal sham is the method by which the General News Service at Chicago was created. Prior to 1949 the Midwest News Service, a customer of Illinois Sports News, was owned and operated by James Frestel and Sylvester Farrell former employees of Annenberg and minions of James Ragen. In 1947 Illinois and Midwest merged to combat R. & H., George Kelly becoming a partner in the new company. As Midwest had always done, the Midwest-Illinois continued to service handbooks in the State of Illinois. In addition it enjoyed a profitable interstate business, subdistributing to handbooks and smaller distributors in many States. In January of 1949 the merger was dissolved by the sale of George Kelly's partnership interest to John Scanlon who had influential connections with the syndicate. The other partners Farrell and Frestel became silent. All three avoided service of committee subpena. As part of the same transaction Midwest decided to dispose of its lucrative interstate business. Edward McGoldrick, a $70-a-week employee decided to buy. Being without funds he negotiated a loan for the purchase price of $3,000 from the house counsel of Continental without interest. To assist this young entrepreneur, Illinois Sports News granted him 2 weeks' free service, the rate being $1,000 weekly. Net profit from the interstate customers was $1,500 to $1,800 per week. In no time the loan was repaid. Continental and Illinois provided the technical assistance and advice needed for operation of the new distributor.

These second-level outfits also groped for a pretense at legality by offering highly favorable rates to any legitimate publication which would buy their services. For example, a New York newspaper with one of the largest circulations in the country pays no more than $30 a week for Continental's news service, although other customers are billed as much as $5,000 a week for the same identical service.

Here is another typical example testified to by William P. Brown, manager, operator, and owner of the controlling interest in the Pioneer News Service of St. Louis:

Brown stated in his testimony that some customers pay about $100 a week for service and other customers of Pioneer pay as much as $350 a week for service. He was then asked, "What is the difference between the service given a $100 a week customer and the service given a $350 a week customer?", to which Brown replied, "Really, none."

Question: "Really no difference whatsoever? Can you justify that difference?" Answer by Brown: "No; I can't."

FACADE OF LEGALITY A SHAM The committee believes that the facade of legality which was set up by Continental's counsel with such great particularity must be rejected. It must also reject the insulation erected between McBride and the ultimate customers of Continental's service, the bookmakers, and, having rejected both of these factors, the inference becomes inescapable that Arthur B. McBride created a machine in which Edward McBride, through his agents, operates a racing wire service which is an integral part of a Nation-wide system employing discrimination in service and price against various persons seeking to purchase a commodity.

The conclusion is also inescapable that through agents and subagents McBride's organization steals news from race tracks and supplies this news through direct and indirect channels to bookmakers operating in violation of the law throughout the country. Whether this constitutes violation of local laws on the part of McBride is a matter for the determination of the courts in the respective States. The sole function of this committee in respect to the circumstances is to ascertain the facts and to determine whether or not any Federal legislation or regulation is required.

It also becomes inescapable, once the fiction of the divorce of Continental Press and McBride from the various distributors of Continental's news service, particularly in Chicago, has been rubbed out, that Arthur McBride is deliberately making a gift to the Mafia-affiliated Capone mob in Chicago of about $4,000 a week, which represents the difference in price paid by the Capone-controlled R. & H. service and the price paid by their competitors in the same city. In Kansas City, the Mafia group operating the wire service receives largesse of several hundred dollars a week on the same comparative basis. It is also clear that in many other cities the Capone affiliates and the Mafia are now in control of the distribution of racing wire news with a resultant source of enormous profits and power over bookmaking.

One final incidental fact may be noted at this point in connection with McBride: his interest in a Florida radio station whose license is now up for renewal by the Federal Communications Commission.

As late as March 1951 when the attorney general of Florida released an interim report on the Florida "antibookie" law, interesting indications of the continuing influence of the Chicago gangs were disclosed in Florida phases of the wire service. When an investigator checked into the activities of William "Butsy" O'Brien, Continental's Florida distributor for many years, he found none other than Alphonse "Sonny" Capone, son of the late "Scarface" Al Capone, printing bookie wall charts at O'Brien's Graham Press in Miami.

SYNDICATED BASKETBALL, FOOTBALL AND BASEBALL BETTING That horse-race betting was not alone in the field of big-time gambling was emphatically brought out in the testimony of Sydney A. Brodson of Milwaukee, Wis., who appeared before the committee in Washington. Brodson is a sharp-eyed college graduate, with a law degree. His luck at picking winners on cards distributed by operators of football and basketball pools diminished his interest in the practice of law until, some 7 years ago, he engaged in the betting business on a full-time basis.

Brodson established a small office in Milwaukee, setting himself up as a "food broker." With the help of several assistants, he read as many as 100 newspapers per day for information which might have a bearing on the outcome of college football and basketball games. Brodson frankly admitted placing bets with bookies or other gamblers in some 20 States to the amount of $1,000,000 per year, dealing almost exclusively over the telephone. He used three phones in his office, one of which was listed under the name, "Get the Vote Committee." Brodson readily conceded that in fact, this meant "get the bets." Long-distance telephone calls cost Brodson $15,000 yearly. After deducting such expenses as the cost of his newspapers and an athletic handicapping service somewhat comparable to the wire service in horse racing, known as Gorham Press, in St. Paul, Minn., Brodson nets some $80.000 per year and has amassed an admitted net worth of $250,000. Although Brodson maintained that he was not a "bookie," it was evident from his description of his activities that there was little to distinguish between his practice of betting man to man after negotiating as to points given or taken and the practice of handbook betting where the odds are set at the track.

Brodson explained that he maintained a lengthy list of individuals throughout the country who could be called and who would either accept his bets or channel them to bookies who would. Investigation established that Brodson himself could be called by individuals who wished to bet and would accept their play. Brodson had never met many of the individuals with whom he was betting daily but, through the mysterious grapevine of the gambling fraternity, was able to get in touch with them, determine their financial reliability and reputation as to paying off, and thus, participate in a veritable network of athletic betting on a Nationwide basis. In addition to his knowledge that these individuals were betting with him, Brodson knew that they were betting with one another.

In straightening out their accounts at agreed periods, Brodson and those with whom he bet exchanged checks or cash through the United States mail and used Western Union wires. He said that sometimes he received as much as $1,000 in cash through the mail and had won as much as $20,000 on one bet.

Of particular interest to the committee was the fact that the Milwaukee Police Department was aware that Brodson was gambling on a full-time basis and vigorously explored his activities, but was unable to establish - and Brodson verified the fact - that he made any bets with anyone in Wisconsin, thus avoiding prosecution at the local level. It seemed that Brodson thus had the correct legal answer to successful operation without fear of police interference without the necessity of arranging "protection." Brodson betrayed what must have been a sense of self-degradation when he said:

My wife has always brought pressure on me to get out of this thing and perhaps I should have abided by her advice. Brodson explained the "spread system" of basketball betting under which it is possible for a bookie to win both ends of bets on college basketball games if one team beats another by a score falling within the spread which may run from 2 to 7 points. Brodson readily conceded that this practice unquestionably contributed toward the corruption of college basketball players who could be talked into controlling the score of a game so that it ended within the spread and yet won the game for the school they represented. The transition from this stage of moral destruction in youth to the point where a player would accept money to throw the game completely became, thereafter, relatively simple.

COMEBACK MONEY As part of every major interstate bookmaking syndicate's operation there is the apparent necessity to maintain agents in the vicinity of the major race tracks to handle the syndicate's last-minute bets at the tracks. This practice is commonly referred to as the betting of "comeback money" possibly because some of the off-track, or illegal, handle is coming in to the mutuel machines. There are probably two reasons for these transactions:

1. The "comeback money" may represent large bets which illegal bookmakers are unable to "lay off" among themselves, bets which no one in the bookmaking organization desires to hold.

2. Sending of large bets to the tracks reduces the odds on the horse involved so that if it should win the odds which the illegal bookmaker would have to pay would be considerably less than if the "comeback money" had not been placed and, too, such a bettor collects on the winning tickets at the track. Paradoxical as it may seem, these bookies' bookies maintain that they hope that the horse selected by them for the betting of "comeback money" will lose. They explain that the procedure is merely a "balancing of their books" and, in many cases, because of the much larger amounts bet on other horses in the race, they maneuver themselves into a position where they cannot lose, no matter which horse wins.

Those race tracks which are members of the Thoroughbred Racing Association frown on the handling of "comeback money" and refuse cooperation and use of track facilities to the agents of these betting commissioners.

An official of the Thoroughbred Racing Protective Bureau explained the practice in terms of money this way:

Let's say a man goes to his bookie and bets $200 on a horse. The bookie knows that man normally is a $10 bettor, so he's suspicious and to protect himself against a large loss he "lays off" part of that bet with a bigger bookie.

The big bookie, in turn, might have an unusual amount of play on that same horse. He distributes some of his risk to commission houses in St. Louis, Chicago, Cincinnati, or Miami. The commission house is loaded with $20,000 worth of bets on one horse, let's say. The horse is 10 to 1 and if it wins the commission house will lose $200,000.

The commission house phones an agent at a gas station near the track and instructs him to bet $5,000 on the horse. The odds promptly are knocked down to 3 to 1. If the horse wins the payoff on a $2 ticket will be $8 instead of $22, in addition to which the commission house collects on its $5,000 bet to help pay off on the $15,000 worth of bets it held. And, of course, they have all the money bet on other horses in the race.

Naturally, they don't lay off all the money because gambling is their business. If the horse loses they pocket the $15,000 they held minus the $5,000 they bet and meanwhile they've insured themselves against taking a terrific beating.

In Washington hearings, three "comeback" men were heard: Fred Cogan, Richard Romer, and Joseph Uvanni. The first two were agents for Louis "Rosy" Rosenbaum, Newport, Ky., gambling mogul. Uvanni claimed to be an "independent contractor," working for the James Carroll-John Mooney betting commission organization in the St. Louis area.

Cogan explained that Rosenbaum paid him $150 a week to station himself at a telephone near a race track. Throughout the afternoon, he would remain in contact with Rosenbaum by telephoning collect to Rosenbaum's Kentucky headquarters. Cogan received money from Rosenbaum by Western Union money order and followed Rosenbaum's telephonic instructions each race by going into the track and placing the amount of money ordered on the horse specified. Cogan admitted that it was necessary to replenish his funds frequently in view of the fact that, over any period of time, the come-back operation was a loss.

Remer testified to similar operations for Rosenbaum with the notable exception that at one track on his circuit, Bowie, Md., special arrangements were made with some of the track officials. Remer was able to obtain the use of a telephone in the track office and thus save the leg work of running from an outside telephone into the track for each race. At Bowie, too, it was possible to deposit a bank roll with the mutuel clerk against which he could bet until it was depleted. Romer also advised that the replenishment of this bank roll was necessary from time to time, indicating that the procedure was a constantly losing proposition.

When Rosenbaum testified, he admitted that he used five telephones in a small office occupied by him in the name of the Northern Kentucky Hospitalization Insurance Agency. Asked if it wasn't a fraud to do business under the name of such an agency and not to sell hospitalization insurance, he retorted that it would be a fraud if he did sell the insurance. Rosenbaum estimated his telephone bill at $3,000 to $3,500 per month and the committee found, from telephone company records, that as many as 1,053 long-distance calls were charged to his telephones in 1 month.

In 1947 and 1948, Rosenbaum admitted that he paid Federal income tax of approximately $200,000. He claimed that he had never been arrested in the Cincinnati-northern Kentucky area. He admitted taking lay-off bets from numerous bookies and also laid off himself occasionally to other large operators such as John Mooney in St. Louis. In order to accomplish the payment of the bets he maintained a checking account in the name of a relative who was directed to send out checks as required through the mails and deposit the incoming money in the account.

The Carroll-Mooney come-back man, Joseph Uvanni, covered a circuit of race tracks including those at New Orleans, Detroit, New Jersey, Nebraska, Colorado and Kentucky. He said his operating bankroll was sent to him by Mooney, sometimes in the form of cash in registered letters, sometimes by cashiers' checks, and sometimes by Western Union money orders. His expense arrangements were such that he had wide latitude in financing the facilities arranged by him for his operations near the tracks. In New Orleans, he paid the owner of a house near the Fairgrounds race track for an ostensibly private phone. The committee found that it was listed under the name of Munez Collection Agency.

L. Edward O'Hara, general manager of the Bowie race track, presented an interesting version of the Bowie race track attitude toward the comeback problem. He readily conceded that Bowie, under his direction, permitted the comeback men to operate with the blessing of management. He thought the comeback system was very similar to the practice of insurance companies in letting out their policies to other insurance companies. From the figures presented by Mr. O'Hara, it is possible to estimate roughly the scope of operation of these bookies' bookies. Although Bowie is considered a minor track in racing circles, Norman Helwig, the comeback man of the Carroll-Mooney group, bet as much as $23,000 in a day. Helwig bet a total of $143,691 at the 10-day race meeting December 2, 1950. O'Hara estimated that the total of comeback money taken in by the track from all of the comeback men there during this period was probably $500,000. O'Hara identified a check made out to John Mooney in the amount of $20,105 on the track account, which he said represented the money forwarded to Mooney at the conclusion of the 1950 season which Mooney had left on deposit. O'Hara thought that stopping the comeback operations would put a "crimp" in the operations of the big commissioners but would not make their operations impossible.

There are these conclusions of great import to be drawn from this exposé of the technique of these big betting commissioners in transmitting their wagers to the tracks:

1. It has been advanced that the major bookmaking syndicates would be seriously hampered, if not forced out of business, if the practice were effectively fought, either on a local level or by Federal intervention.

2. The frequent, and in some cases almost exclusive, use of the channels of interstate commerce by the betting commissioners' entire operation, including the transmission and reception of the original lay-off bets, messages, transmission of money, brands the practice as one which is somewhat insulated from attack by local law enforcement and possible fertile field for Federal help in policing those channels of interstate commerce.

ILLICIT TRAFFIC IN NARCOTIC DRUGS The illicit narcotic drug traffic is an excellent example of a type of organized crime which is interstate and even international in nature. Considerations of time prevented the committee from giving to this problem the intensive attention which might be desired. However, sufficient testimony was obtained to give some indication of the nature and magnitude of this racket.

In recognition of a serious and rapidly developing narcotic-addiction situation in this country, the first comprehensive Federal narcotic law was enacted in 1914. That was the so-called Harrison Act. This law uses the taxing power of the Federal Government to legalize the commerce in medicinal and other legitimate narcotics. By the same means it seeks to outlaw illicit traffic in opium and its derivatives and in the coca leaf and its derivatives (cocaine, etc.)

Another important Federal law known as the Jones-Miller Act, or the Import and Export act, was passed in 1922. This law sets up a system of import and export permits and limits import of raw material to medical needs; also by amendment in 1924, it outlawed the very dangerous opiate heroin in that it prohibited the importation of opium for the manufacture of this derivative.

The Opium Poppy Act of 1942 was passed to insure against any practice of growing opium poppies here.

Since, like the opium poppy, coca leaves are not grown in this country it is obvious that the raw material, both for the legitimate and for the illicit traffic in these narcotic drugs, must come from abroad. There is a tremendous excess of opium production throughout the world. The great bulk of this excess is consumed in Asiatic and Middle East countries where the opium habit is a form of dissipation employed by large segments of the population. Some of this excess in one farm or another is directed at markets in this country.

The Federal agencies principally concerned with narcotic-law enforcement are the Bureau of Narcotics and the Bureau of Customs, both under the Treasury Department.

Enforcement of comprehensive Federal narcotic laws began about 1915 and was intensified at the close of World War I. This has been accompanied by much action at the State and local level in the way of enforcing uniform State laws and city ordinances against the traffic. Along with law enforcement on a broad front there has been an active campaign spearheaded by the Government of the United States to restrict world opium production and to take such international action in the way of exchange of information as to shut off supplies of illicit narcotics to so-called victim countries such as the United States. Under this program there has been for a generation, up to and including World War II, a steady decline in the incidence of narcotic addiction in this country according to the United States Bureau of Narcotics.

Prior to the beginning of narcotic-law enforcement in the United States it was estimated that there was one narcotic addict in every 400 or 500 of the population. Surveys made about the beginning of World War II indicated that the rate had declined to less than 1 in 3,000 and the Bureau of Narcotics reports further declines during the war years. Moreover, the Bureau estimates that the incidence is very much lower in certain localities such as Pennsylvania and Minnesota. A survey by the Bureau in Minnesota in July 1950 showed only 1 addict in each 25,000 of the population.[3]

This drop in addiction was accompanied by a general rise in prices of illicit narcotics and by an increasing relative scarcity of the amount of narcotic drugs available to illicit traffickers. Several years before World War II the cocaine traffic, for all practical purposes, disappeared. This favorable trend in narcotic-law enforcement continued until about 1948 which year was marked by a large influx of Peruvian cocaine into this country. This was coincident with the loosening of controls on cocaine in Peru. Active countermeasures in the way of convictions of several rings of smugglers in this country and corrective action by the Peruvian Government in that country have again greatly reduced the cocaine traffic.[4]

HEROIN USE INCREASES ALARMINGLY However, coincident with the reappearance of cocaine, there began a trickle of heroin which gradually increased to stream proportions. Where heroin had been scarce it now appeared in increasing volume. In some areas where it had been absent for several years it could be found in the underworld. Much of this influx was absorbed by established narcotic addicts who were able to increase their daily intake. Some of it was used by new addicts who also commenced to appear in increasing numbers. A most disquieting feature is that in several localities, principally in large cities, a substantial proportion of the new addicts are young people, persons in their late 'teens and early 20's. At the present time this phase of the narcotic problem is a matter of acute public interest and widespread alarm. In one city alone, a civic crime-prevention group, in its study of the narcotics problem, estimated that the value of property stolen annually to provide the addicts with funds to buy dope is $60,000,000.

There can be no doubt that the narcotic traffic is highly organized crime. Early in narcotic-law enforcement there was considerable diversion from legitimate stocks. Controls which were established with the cooperation of the drug manufacturers and the medical and pharmacy professions have made diversion at the higher levels virtually nonexistent. (There was a wave of robberies and burglaries of pharmacy houses during World War II.) While there is some diversion at the addict level due to forgery and small thefts and a very few venal registrants, existing controls keep this at a stage relatively unimportant in the over-all enforcement picture.

Therefore drugs for the illicit narcotic traffic must necessarily be smuggled from abroad. Prior to World War II, important sources for these were India, China, Japan, and Iran. Also in the 1920's there was an enormous diversion from European drug manufacturers and drug production by clandestine plants there. Largely on the insistence of and through the leadership of the United States this was pretty well checked by energetic enforcement and multilateral agreements among the nations involved.

Presently, a large flow of heroin is coming from Turkey where it is manufactured from excess opium production in that country and Iran. Also, a large amount of heroin has been coming from Italy lately as the result of diversion from medical stocks available by reason of allotments of heroin obviously excessive for alleged medical purposes. Cooperative American-Italian law-enforcement efforts plus action by the Italian Government in greatly reducing the amounts of heroin allotted for medical use may help solve this problem admittedly made difficult by the presence in Italy of numerous racketwise deportees from the United States now repatriated there.

Testimony before this committee of one representative of the Bureau of Narcotics[5] is to the effect that the influx of heroin from Italy coincided with activity there of Salvatore Lucania ("Lucky" Luciano) who was deported to Italy in February 1946. The United States Bureau of Narcotics learned that this deportee had left Italy and had arrived in Cuba late in 1946, reportedly for the purpose of using Cuba as a base for narcotic and other crimes. The Bureau asked the United States State Department to make representations to Cuba which resulted in the prompt banishment of Luciano to his native Italy in 1947, an excellent example of the necessity and value of international cooperation in narcotics control.[6]

TWO POUNDS OF DOPE MAY RETAIL FOR $100,000 The profits of the illicit narcotic business are big. Calculated on the basis of the pure drug, a kilogram (approximately 2.2 pounds) of heroin costing the smuggler a few hundred dollars in Turkey may eventually bring approximately $50,000 to $100,000 or more at prices actually being paid in the narcotic traffic today (approximately $1,500 to $3,000 per ounce or more). This, of course, is after the drug is adulterated to many times its volume.[7] (Incidentally, despite the rise in addiction these fantastic prices may indicate a high effectiveness of law enforcement.)

The lure of such proceeds is attractive to the conscienceless racketeer. At one time or another, a great many of the bigger interstate racketeers in the United States have dipped into the narcotic traffic. This fact has made the files of the Bureau of Narcotics a veritable gold mine of information on interstate racketeers to the committee's investigators. In the 1920's, for example, there thrived in Europe the Eliopoulos brothers, so-called drug barons of Europe,[8] who had access to the narcotic production of several chemical factories there. These men formed conspiracies with outstanding American racketeers such as "Legs" Diamond, the Newman brothers, "Dutch" Schultz, and others.

Narcotics were shipped to United States ports generally concealed in cargo, sometimes in baggage, and from New York were distributed throughout the length and breadth of the country.

In the 1930's the sinister power of "Murder, Inc." was injected into the illicit drug traffic. The case of Louis "Lepke" Buchalter, its leader, has often been described; however, it is so illustrative of interstate crime operations in the narcotic field that it will bear repeating here in brief: [9]

In the middle 1930's, Buchalter emerged as the head of an extortion racket organization in New York. He maintained preeminence for some time by a practice of ruthlessly killing persons who did not accede to his racket demands. Possible witnesses to murders and his other crimes were also mercilessly eliminated. During the time of Buchalter's preeminence certain long-established figures in the illicit narcotic traffic formed a conspiracy to smuggle drugs from Tientsin, China. This gang was headed by Jasha Katzenberg, Jacob Lvovsky, and several others. A cleverly devised scheme to introduce narcotics was successful. These drugs were being smuggled into the port of New York at a rate estimated sufficient to supply the current needs of a fifth of the country's then addict population. Buchalter had no part in the formation of this scheme, but when he heard of its success, he promptly declared himself to be entitled to one-third of the profits. The smugglers apparently felt they had no choice but to agree. The arrangement was not a total loss to them since it insured them the protection of the "muscle" of "Murder, Inc." against competitors and hijackers.

When investigations by the Treasury's Bureaus of Narcotics and Customs broke up this operation, Buchalter's part was disclosed. He was placed on trial and convicted; then he pleaded guilty to additional narcotic offenses for which he received prison sentences totaling 12 years. This blow shook the Buchalter empire. He subsequently was to be taken from the Federal penitentiary and made available to New York authorities for conviction on extortion charges and finally placed on trial with his first lieutenant, Emanuel "Mendy" Weiss, and another to be convicted for murder and electrocuted.

The case of Emanuel "Mendy" Weiss,[10] Buchalter's lieutenant, was an interesting variation. Unlike Buchalter, he was an active organizer of narcotic ventures. He was implicated in a smuggling case at Rouses Point in 1937 involving a large quantity of heroin but the case collapsed when the principal witness against him committed suicide by hanging himself in his jail cell. In May 1940, Weiss was indicted at Dallas, Tex., with 28 other persons comprising an organization distributing narcotics from New York to Chicago, Texas, and other places. All except five of these persons had long criminal records, several involving such desperate crimes as robbery and murder. Weiss forfeited bond on the narcotics charges and became a fugitive when he learned of the pending murder charges against him and Buchalter. Later he was captured by narcotic agents and was turned over to the State of New York for murder prosecution. He was convicted and electrocuted with Buchalter.

During World War II some of the United States narcotic traffic was supplied from Mexican sources where the opium poppy is illicitly grown. At the present time, the Mexican Government, according to the Bureau of Narcotics, is attempting to do a good job of narcotics policing, particularly with respect to opium.

MARIHUANA NOW COMES IN FROM MEXICO There is, however, a tremendous flow of marihuana into this country from Mexico. The postwar revival of the narcotic traffic is now being carried on by the successors to the Diamonds, Buchalters, etc. It centers principally in New York from which city distribution is made to all parts of the country. The trend of the traffic seems to be to the smuggling of heroin in relatively small quantities. This is carried on either by international travelers or by seamen. The task of intercepting the drug at ports and borders is tremendously difficult due to the small bulk and high value of the product. (Many thousands of dollars' worth of drugs can be readily concealed under the clothing of the smuggler.)

This same consideration makes extremely difficult the catching of narcotic culprits once the contraband is successfully landed. Its small bulk, extreme portability, and ready destructibility make the catching of the narcotic criminal "with the goods" a task of great practical investigative difficulty. This, according to the Bureau of Narcotics agents who testified, is particularly true in the light of the very strict requirements of the Federal courts in the matter of evidence.

The Bureau of Narcotics has had particular occasion to deal with interstate crime organizations in specialized forms. One of these types was the Chinese tong, ostensibly a nationalistic, family, commercial or social type of organization. Some of these have been found to be perverted as covers for organized crime, particularly gambling and narcotics distribution. The Bureau of Narcotics reported[11] that an investigation disclosed the use of a Chinese tong as a cover for a widespread narcotic traffic ranging through most of the large cities in the country.

Originally most of the supplies for the tong members were obtained in New York from Mary De Bello, reputed wife of Tommy "The Bull" Pennachio, aide to "Lucky" Luciano.

The Bureau also reports that there are indications that some tong organizations now are again active in the narcotic traffic.

From the available information it appears that the narcotic traffic in this country after a slow but steady decline for a generation has recently shown a sharp upsurge. This is accompanied by an outbreak of youthful addiction noted in many large urban centers. The major traffic appears to be in the hands of some of the most astute, wily, and desperate criminals who operate interstatewise.

The identity of the criminal groups behind this rise in the distribution and use of narcotics was the subject of testimony by field agents of the Bureau of Narcotics in Kansas City and New York.

Particularly illuminating on this score was the testimony of Agent Claude A. Follmer, of the Kansas City office of the Narcotics Bureau. In that city, he said, traffic in illicit drugs involved "for the most part persons * * * banded together in a secret society known as the Mafia." (A more detailed account of the criminal activities of the Mafia is to be found elsewhere in this report.)

Follmer detailed a long list of police characters and traced their activities and associations across State lines into various sections of the country and even across national boundaries into foreign countries where they obtained their supplies of dope.

Numerous suggestions for the suppression of the traffic in drugs were made by these agents and their Chief, Commissioner Harry Anslinger, head of the United States Bureau of Narcotics.

One of these is the proposal that more severe sentences be meted out to offenders against the narcotics laws. The average prison sentence for dope traffickers in Federal courts is under 2 years. Those charged with enforcement of the narcotics laws aver that these short sentences do not act as a sufficient deterrent. Both the United Nations and the League of Nations before its demise urged more severe sentences for offenders in this category.

It is also apparent from the testimony that the present authorized strength of the Bureau of Narcotics is too low to cope adequately with the situation. Commissioner Anslinger testified that his present force consisted of 190 agents; before the war it was approximately 250. Obviously an increase in this working force is called for.

Another phase of narcotics-law enforcement has to do with the comparative ease with which individuals known to have been associated with the dope racket and with other individuals in it are able to enter and leave the country almost at will.

It would be effective if such persons, upon proper identification by the Bureau of Narcotics, could be restricted from international travel when their obvious purpose is either to meet others engaged in the nefarious business in other countries or where they might be suspected of arranging for further importation of narcotic supplies into the United States.

The simple expedient of refusing a passport visa to such individuals would probably accomplish the purpose and would undoubtedly prevent such meetings as that Meyer Lansky testified he had with Charles "Lucky" Luciano in Cuba, and on another occasion in Italy.

Also submitted by Commissioner Anslinger as worthy of study is a proposal that some centralized agency maintain a gallery of major interstate racketeers and that it systematically collect, correlate, and disseminate information respecting them. The Treasury Department does this now with respect to major narcotic suspects.

Often the operations of modern big-time racketeers are so diverse and so extensive, geographically, that few local law-enforcement officers can carry in mind a catalog of all of them. A device of this sort which would spotlight the operations of major criminals would prove most helpful.

INFILTRATION INTO LEGITIMATE BUSINESS One of the most perplexing problems in the field of organized crime is presented by the fact that criminals and racketeers are using the profits of organized crime to buy up and operate legitimate enterprises.

This committee has no quarrel with the sincere efforts of men with criminal records who have seen the error of their ways and who now wish to earn an honest living by going into some type of legitimate business. The committee realizes that many men sow their "wild oats" in the form of crime, in their younger years, and then settle down to become decent citizens. This process of rehabilitation of offenders should be encouraged in every possible way. What the committee does object to, however, and what the committee finds is fraught with great danger to our country, is the extent to which gangsters and racketeers continue to pursue their vicious careers and invest the spoils of their illegitimate activity in legitimate enterprises.

A gangster or racketeer in a legitimate business does not suddenly become respectable. The methods which he used to achieve success in racketeering and gambling enterprises are not easily sloughed off. Thus, evidence was produced before the committee concerning the use of unscrupulous and discriminatory business practices, extortion, bombing, and other forms of violence to eliminate competitors and to compel customers to take articles sold by the mobsters. Monopoly is the key to big money in criminal activity. It is also sought by mobsters when they enter legitimate business. A racketeer who has contempt for the law and who enters legitimate business has no hesitation in engaging in black-market practices. This gives him a considerable advantage over a more timid competitor and is one of the means whereby the racketeer can push such a competitor to the wall.

There is another aspect of gangster infiltration into legitimate business which troubles the committee. The big-time gamblers and racketeers usually live a life of luxury but they must have some way of explaining their source of income to prying income-tax officials. One of the functions of investment into legitimate business enterprises is to provide a source for income which cannot be impeached by the Internal Revenue authorities. Returns from gambling and other illegitimate enterprises are extremely difficult to check. Some of the winnings may be invested in legitimate business and taxes may be paid on the income from such business. Taxes on the huge returns from gambling and other illegitimate enterprises have not been paid.

RACKETEERS PREFER BIG-TURNOVER BUSINESSES It should be noted, however, that gangsters and racketeers have an affinity for enterprises in which there is a large turn-over and in which problems of accounting and control are difficult. Thus, even when the ill-gotten gains of a racketeer or gangster are invested in a legitimate enterprise there is no assurance that the Government will not be defrauded to a considerable degree of its taxes.

There can be little doubt that the public suffers from gangster penetration into legitimate business. It suffers because higher prices must be paid for articles and services which it must buy. This is the result of the monopoly which is often secured and because of unfair trade practices frequently applied. The public suffers because it may have to put up with shoddy and inferior merchandise in fields where gangsters have been able to obtain a monopoly. One such olive-oil dealer, Joseph Profaci, was cited for a series of violations of the pure food and drug laws including one for which he was fined $12,000. The tax load of the general public is increased when gangsters and racketeers fail to pay their lawful return on the enterprises in which they are engaged. Finally, the public suffers because the vast economic resources that gangsters and racketeers control enables them to consolidate their economic and political positions. Money, and particularly ready cash, is power in any community and over and over again this committee has found instances where racketeers' money has been used to exercise influence with Federal, State, and local officials and agencies of government. An official who is beholden to the mob for his election or appointment thinks first of his boss and only secondarily of the people of the community that he must serve. The money used by hoodlums to buy economic and political control is also used to induce public apathy. The committee found that hoodlums, behind the front of their respectable enterprises, contribute enormous sums to hundreds of worthy causes. While the committee in no way wishes to reflect on the worthiness of such causes, it has found that hoodlum contributions do tend to fool uninformed people and thus contribute to the relaxation of public vigilance. The committee has had before it evidence of hoodlum infiltration in approximately 50 areas of business enterprise. These include:

Advertising Amusement industry Appliances Automobile industry Baking Ball rooms, bowling alleys, etc. Banking Basketball Boxing Cigarette distribution Coal Communications facilities Construction Drug stores and drug companies Electrical equipment Florists Food (meat, sea food, dairy products, groceries, cheese, olive oil, fruit) Football Garment industry Gas stations and garages Hotels Import-export business Insurance Juke box and coin-machine distribution Laundry and dry cleaning Liquor industry Loan and bonding business Manufacturing (gambling equipment, broilers, etc.) Nevada gambling houses News services Newspapers Oil industry Paper products racing and race tracks Radio stations Ranching Real estate Restaurants (taverns, bars, night clubs) Scrap business Shipping Steel Surplus sales Tailoring (haberdashery) Television Theaters Transportation While the committee has not been able in the time available to explore fully the situation in these fields, it has developed enough information to clearly indicate the problems and dangers involved in hoodlum penetration of legitimate industry.

One of the most shocking problems in this connection, and one which constitutes a black page in the history of American industry, is the indisputable evidence obtained by the committee of cooperation with major hoodlums on the part of important segments of business enterprise. In Detroit, the committee found leading industrial concerns admittedly cooperating with notorious hoodlums for the purpose of suppressing labor difficulties. (See discussion of Detroit elsewhere in this report.) In New York, the same situation prevailed in connection with the Phelps-Dodge Co. which invited in hoodlums from the gang of Albert and Anthony Anastasia to help break a strike. Where business uses racketeers, there is a tendency for labor unions to use tactics of violence and vice versa. Finally, the committee found leading hoodlums holding valuable franchises in the liquor and automobile industries.

The specific discussions below must not be read as an index or directory of all known instances. They are rather a sampling of typical situations.

THE LIQUOR INDUSTRY The committee found that leading hoodlums have penetrated the liquor industry, principally the distribution end of the business, due to failure of the industry to assume its proper share of responsibility and to failure of our laws and law-enforcement agencies adequately to cope with the situation.

Many of the Nation's leading hoodlums got their start as bootleggers during prohibition. Many have a history of prohibition arrests. The transition from bootlegging to the legitimate liquor business was a natural one. Unfortunately, however, many racketeers found it hard to drop the methods of operation which characterized their rum-running days and consequently, the committee was not surprised to find hoodlums involved in huge liquor black-market deals during World War II and in present-day bootlegging operations into dry areas. After the committee found the hoodlum element playing a dominant role in liquor distribution in Kansas City, it decided that this situation was serious enough to warrant further investigation since competition within the industry, at least in Kansas City, was definitely affected; the reputation of the overwhelmingly legitimate members of the liquor industry was involved and most important, the public interest was vitally concerned.

Accordingly, the committee proceeded to accumulate information on the conduct of the liquor industry in various parts of the country, questionnaires were addressed to the Nation's leading distillers and breweries; and the industry's attitude was explored in hearings before the committee.

In Kansas City, the committee found such notorious hoodlums as Joe and Vincent di Giovanni holding exclusive franchises for several leading brands of whisky including Schenley's and Seagrams. After the disclosures made by this committee, the liquor licenses of these two Mafia hoodlums were revoked by the State liquor control supervisor. However, the committee feels that the revocation was nullified by the subsequent reissuing of these licenses to the sons of these gangsters. The committee also found evidence in Kansas City that the retail liquor dealers association was mob controlled and that violence was used to force liquor dealers into the association.

In Chicago, the Manhattan Brewery was owned and controlled by the Capone mob during prohibition days. At the present time it is called the Canadian Ace Brewery and is controlled by Alexander Greenberg, who was an associate and financial backer of many Capone syndicate members. Canadian Ace Beer was sold in Kansas City by Tony Gizzo, a leading member of the Binaggio-Gargotta mob, and a suspected leader of the Mafia. He told the committee that he persuaded tavern owners that they should use Canadian Ace, but he denied using violence.

The committee found several other former Capone associates involved in a substantial manner in the wholesale and retail distribution of liquor. Joseph Fusco, an old-time bootlegger and present associate of such Capone mobsters as Pat Manno, the policy racketeer, is president of a $2,000,000 corporation which holds exclusive franchises for many leading brands of whisky. Rocco DeStefano, another Capone syndicate associate, controlled a chain of retail liquor stores in Chicago. He is also a stockholder along with Fusco in the Bohemian Brewing Co. of Joliet, Ill.

In New Jersey, Joseph Reinfeld, a leading liquor distributor, and Abner (Longie") Zwillman owned substantial stock as late as August 1950 in the whisky distilling firm of Browne-Vintners Corp., which they controlled until 1940 when it was sold to Seagrams. Reinfeld, Zwillman and, among others, Jimmy Rutkin, an associate of Zwillman, were notorious bootleggers during prohibition, during which time they were partners in some of Bronfman's operations in Canada. Zwillman and Rutkin now claim that Reinfeld defrauded them in the Browne-Vintners sale and Rutkin is presently suing Reinfeld for $22,000,000. Since 1940, Reinfeld has been unable to obtain a liquor license in New York State, but he has a license in New Jersey. New York State, however, allows his son-in-law to operate and Reinfeld sells all of his imports of certain products to his son-in-law's company in New York. Reinfeld Importers, Ltd., of New Jersey, is the exclusive distributor in 38 States for Gordon's Gin and also is the exclusive importer for Haig and Haig and Piper Heidsick champagne.

In 1948 the State Liquor Authority of New York revoked the liquor license previously held by Irving Hahn for the International Distributors Co. Haim promptly moved over to New Jersey. This company has the exclusive agency for King's Ransom and House of Lords Scotch. In 1937 Haim, an ex-bootlegger, negotiated the purchase of J. Turney & Sons, the holding company for William Whitely Liquors, Ltd., the distillers of King's Ransom and House of Lords Scotch. The purchase was made in the name of Haim with money obtained from a New Orleans bank with notes secured by Haim, Phil Kastel, and Frank Costello. Prior to this purchase, Phil Kastel was the "good will" man for this company and received an override commission on every case of this Scotch sold in the United States. Part of the original purchase deal was for Costello to take Kastel's place, in receiving the override, which was to be increased in amount. In 1940, according to Haim, Costello and Kastel disassociated themselves from the distribution of William Whitely Liquors at the insistence of the late William Helis, one of the partners in the enterprise. Yet, in 1943 Frank Costello was bragging that King's Ransom and House of Lords scotch were "his whiskies." And there is evidence that in 1943 Hahn delivered to Costello a small package, valuable enough to have to be placed in a safe.

In Tampa, the committee found a Mafia hoodlum, Salvatore "Red" Italiano, to be the general manager of a wine and beer distributing business. The committee also found a man with a narcotics distributing record, Louis Swed, to be the principal distributor of Budweiser beer in Florida. In Des Moines, Iowa, Lew Farrell, an alleged Capone syndicate hoodlum with a considerable criminal record, who allegedly controlled the race wire in that city, and who helped get the notorious Gargotta brothers of Kansas City out of jail in 1947, distributes Blatz and Prima-Bismarck beers. Until recently he handled Canadian Ace beer. His inactive partners in the Canadian Ace distributing firm were the brother and sister of Alexander Greenberg, owner of Canadian Ace. In spite of Farrell's record and an adverse report on him by field supervisors of the Federal Alcohol Tax Unit in Des Moines and St. Paul, the ATU gave him a license in 1945 to distribute beer. His license is now up again before the ATU.

The fact that the committee has mentioned the names of certain leading distillers and brewers should not be construed to mean that they have been the only or even the worst offenders. Practically every large distillery and brewery has granted franchises to racketeer dealers, most of whom were blanketed in under the original licensing activities of the Alcohol Tax Unit after the repeal of prohibition.

Following some of these disclosures, the committee invited representatives of the major distillers to a private hearing in Washington. The committee wanted to give the industry an opportunity to review the committee's findings and to suggest measures for correcting this situation.

As a result of this meeting, the industry did make certain constructive recommendations. However, the committee found that the industry as a whole believes it is the responsibility of the Government to keep hoodlums out of the industry.

The committee feels that while no industry can control the character of those who deal in its products, any industry has a responsibility for the character of distributors holding exclusive franchises.

The attitude of the industry was further explored in the committee's hearing on March 9, 1951, with revenue and liquor commissioners from most of the Southern States. These commissioners told a sordid story of a huge bootlegging operation extending into the South out of Cairo Ill.

This bootlegging operation is fully reminiscent of the 1920s, with its hijacking of trucks, camouflaging of liquor shipments, use of fictitious names, counterfeiting of Federal and State liquor stamps, violation of ICC regulations and corruption of public officials. Some of the wholesalers involved in the current ring were found by the committee to have been connected with a huge World War II liquor black-market ring.

The leading distillers were asked by a conference of southern revenue and alcohol commissioners to cancel the franchises of distributors found to be engaging in the bootlegging ring and they agreed to do so, but conditions failed to improve.

In a further effort to determine the extent of hoodlum infiltration in the liquor industry, and what was being done by the industry to correct this situation, questionnaires were addressed to the principal distillers and breweries throughout the country requesting information with respect to their distributors and their franchise policies. An analysis of replies from over 100 distillers and 240 breweries indicates that while the large majority of franchises are granted to legitimate, upstanding businessmen, all the major distillers and some of the leading breweries have granted distribution franchises to some hoodlums, including some in the top ranks of organized crime. While these distillers and brewers state that they did not know of the criminal associations at the time they granted the franchises, they were almost all vague on the question of whether they would fire a distributor upon finding he had criminal associations.

Perhaps the best summing up of the general attitude of the industry is the reply of one major distiller whose products, incidentally, were found to be involved in past black market and present-day bootlegging activities:

Since practically all wholesale distributors handle the products of many distilleries, we do not believe that any purpose would be served by our termination of the distribution franchise * * * we feel that if this criminal record were such as to make him an undesirable distributor * * * his license should be revoked by the proper authorities * * * we believe that it is the responsibility of the various governmental departments who issue these licenses to weed out undesirables.

The committee feels that the industry should share responsibility with the Federal Government for getting and keeping the hoodlum element out of the industry. The Federal Government, however, has a number of powers at its disposition which it has not used to full advantage. In addition to the need for a State license to operate in the liquor business, it is necessary to have a license from the Alcohol Tax Unit of the Treasury Department. The committee fails to understand, for example, how the Alcohol Tax Unit could grant a wholesaler's permit to hoodlums such as Joe DiGiovanni and Lew Farrell. Much can be done by stiffer application of existing regulations to correct the situation but the committee feels that additional legislation is also needed.

AUTOMOBILE AND TRUCKING BUSINESS In many communities, gangsters have obtained valuable automobile dealer franchises. In Brooklyn, for example, Joe Adonis was able to control the distribution of a number of automobiles out of the Kings County Buick Co., which ran up an unsavory record of black-market deals during World War II. Adonis also owns stock in the Automotive Conveying Co. which hauls Fords from Edgewater, N. J., to various points in the East. He obtained his exclusive franchise during Harry Bennett's regime at Ford. Ford has publicly deplored this situation and is taking action to rid itself of Adonis.

The committee also found that Anthony D'Anna, a former Detroit bootlegger and racketeer, also received a Ford haulage franchise, and a sales agency during Harry Bennett's regime. While Ford has largely succeeded in ridding itself of the Bennett influence, D'Anna is a notorious exception. Today, his company - E. & L. Transport, Inc., of Michigan and Indiana - hauls most of the Fords produced in the Dearborn and Highland Park plants, although numerous other carriers hold ICC authority to transport this same traffic. The manner in which D'Anna, an associate of notorious hoodlums Joe Massei and Pete Licavoli, was accepted by Ford provides one of the best examples in the committee's record of how hoodlum penetration is accomplished. In 1931, after a meeting between Bennett and D'Anna, the latter went into partnership with one William Pardo. Until shortly before that time, Pardo had held a franchise from Ford. Suddenly, it was mysteriously terminated. Pardo found that if he wanted to get his franchise back it would be wise to take D'Anna in the business. In 1939, however, the partnership was dissolved on orders from one of Bennett’s underlings and D'Anna turned up in a new company, Superior Motor Sales, Inc., of Wyandotte, which today is operated by his son. D'Anna received the E. & L. Transport Co. franchise in much the same manner. D'Anna seldom appears in the company's offices but nevertheless enjoys income from Ford to the extent of at least $27,000 a year.

The use of huge, illegally acquired resources to obtain strong economic and political influence is well illustrated in the case of "Longie" Zwillman. Zwillman was a leading racketeer during prohibition and made a fortune out of his illegal ventures. Today he owns a number of very profitable legitimate enterprises, including a truck sales company which holds a valuable General Motors franchise. This company does a sizable business with the city of Newark. It may be more than coincidence that the registered agent for Zwillman's truck company and most of his other legitimate businesses is also the corporation counsel for the city of Newark. It is also significant that Zwillman's control of the truck company is exercised through his accountant, I. George Goldstein, who testified that the reason he fronted for Zwillman was that Zwillman was afraid he would not obtain the General Motors franchise if his name appeared.

TRANSPORTATION In addition to hoodlum penetration of the automobile business, they have made some inroads in other areas of interstate transportation. The twin cities of Minneapolis and St. Paul, Minn., were recently rocked by evidence showing that the hoodlum element had nearly succeeding in taking over the Twin City Rapid Transit Co. Fred Osanna, a lawyer for and a director of this company, led an almost successful fight to oust the present management. Fortunately, the company's president, Charles Green, discovered just in time that Osanna was associating with such notorious hoodlums as Kid Cann. In Cleveland, Arthur “Mickey” McBride of Continental Press operates the Yellow Cab Co. In New Jersey, an interstate trucking firm - People's Express Co. - is run by a notorious hoodlum, Jerry Catena, and an ex-bootlegger and long-time friend of "Longie" Zwillman - Philip Dameo. Dameo buys his trucks from Zwillman's company.

STEEL Further illustration of how tremendous illegitimately obtained resources are invested in legitimate enterprises is provided in connection with the steel industry. In Detroit, the committee found that members of the notorious Cleveland syndicate invested large sums of cash to help put over a stock deal whereby the Detroit Steel Corp. was able to take over another steel company. Longie Zwillman is a heavy investor in the steel industry. He is one of the largest stockholders in the A.M. Byers Co. of Pittsburgh and furnished the chief support behind the management in a recent proxy fight. Zwillman also controls the E. & S. Trading Co. of Newark, which deals in iron and steel. This company had gross sales in 1948 of $336,000.

In Philadelphia, hoodlum penetration of a steel-fabricating concern was accomplished through political influence. A numbers racketeer by the name of Louis Crusco bought his way in to the Strunk Steel Co, by virtue of his close association with the son of Philadelphia's mayor. Until Crusco came along, the company had never been able to get any business from the city of Philadelphia but while Crusco was negotiating his stock purchase in the company it received a contract from the Philadelphia Rapid Transit Co., a local public utility, on which there were no competitive bids. The president of the company testified that this deal had been suggested to him by the mayor's grandson, who, coincidentally, was placed on the company's payroll as part of the Crusco stock deal.

OIL INDUSTRY The committee obtained evidence that a number of hoodlums have invested heavily in the oil business, another example of how illegal gains may be invested as a cover or foil to avoid taxes. A number of Capone syndicate associates are involved in an oil venture in Wyoming, including Pat Manno, who has over $55,000 in the concern, Joe Fusco, and Rocco deStefano, together with several well-known hoodlums from St. Louis, including Louis Calcaterra and Thomas Hynes. Frank Costello has invested over $40,000 in a Texas oil company, with Frank Erickson and George Uffner while other hoodlums, including Carlos Marcello, Joe Poretto, and Moe Dalitz have also invested in the oil industry.

BANKING AND FINANCE While the committee has evidence of hoodlum penetration of major industries by means of stock acquisition, there is actually no way in which the committee or any other group can determine the full extent of hoodlum ownership of stock in the Nation's major industries, but the few examples that the committee has unearthed leads it to believe that very large amounts of stock are owned directly or indirectly by hoodlums. The danger of such infiltration is not great where hoodlums have only a small amount of the stock outstanding of large industries. The danger arises when hoodlums control enough of the stock so as to exert influence on the management of a given industry.

It is not a healthy situation when William Molasky, a substantial stockholder of one of our largest companies, Western Union, is also a dominant figure in the gambling world which depends so heavily upon the facilities of Western Union. Molasky also tried unsuccessfully to influence the appointment of a St. Louis police commissioner by means of a campaign contribution.

It is far from reassuring that Terry Fayhe, a well-known hoodlum and associate of such racketeers as Waxey Gordon, almost succeeded in manipulating a fraudulent stock deal which would have enabled him and his associates to take control of the Follansbee Steel Co. William Gallagher, vice president of the $20,000,000 Pennsylvania Exchange Bank of New York, is reported to have assisted Fayhe in this deal by recommending him to reputable bankers as respectable and financially well off, although Fayhe had been permanently restrained from ever engaging in the securities business in New York. The president of the bank, James Miller, was also permanently enjoined from engaging in the securities business in New York following several indictments for fraudulent stock schemes and Gallagher himself has a prohibition record. Gallagher is closely identified with Frank Erickson, who was allowed to maintain accounts in the bank under assumed names, to aid his gambling operations. The committee, incidentally, had a difficult time serving a subpena on Gallagher; when he finally was served, he refused to answer questions of committee counsel in an informal conference attended by his lawyer because no member of the committee was present; and when the committee did come to New York, he presented a doctor's certificate asserting that he was too ill to testify.

It is difficult to understand how one of New York's worst criminals, Albert Anastasia, was able to obtain a first and second mortgage totaling $30,000 on his $48,000 home in New Jersey, prior to its completion, from the president of the Fort Lee Trust Co. of New Jersey, who handled the deal personally. It is also significant that Anthony D'Anna, an ex-bootlegger and racketeer, who had lucrative Ford franchises, and who has maintained relations with notorious hoodlums in Detroit, is also a bank director.

The committee also found evidence of hoodlum infiltration into the loan and bonding business. Charles Fischetti of the Capone syndicate and Meyer Gordon (a jewel fence sentenced in 1946 to 20 years in the penitentiary) ran the Liberal Loan Co. in Chicago. Joseph DeLuca, a Kansas City hoodlum who owns three liquor stores, is a major stockholder of the Colony Finance & Loan Co.; Charles Bruno of Kansas City, a Binaggio associate with a long police record, operates the Kansas City Bonding Co. with Raymond Muller. This concern does a large business in bonding criminals in Kansas City. In Cleveland, Anthony Milano, a notorious hoodlum, owns the Brotherhood Loan Co. Milano, who did 6 years in the penitentiary for counterfeiting, was alleged by Mickey Cohen to have loaned him money. Milano admitted knowing Cohen, but denied making any loan. Arthur "Mickey" McBride testified that he once put up some money for this company.

Irving Glasser is a partner in, and fronts for many of the gambling operations in the Los Angeles area. He also has a loan business and handles the major portion of the bail bond business there, including bonds for Mickey Cohen.

THE GARMENT INDUSTRY This industry has attracted some of the top gangsters in the country. Harry Stromberg, alias Nig Rosen, a tough Philadelphia criminal, was a partner in the Dearest Miss Dress Co. in New York City. In 1947 he was production manager of the company with a one-third interest in its profits. He also has a one-third interest in the Jay Lou Dress Co. and the Lou Jay Dress Co. in the Bronx with his brother and David Bernoff.

Irving Sherman, the gambler associate of both Costello and Mayor O'Dwyer, is a partner in Courtshire Fashions which manufactures ladies' coats and suits.

Albert Anastasia, one of New York's major criminals, has a dress business in Hazelton, Pa. Thomas Luchese, whom the Narcotics Bureau states to be associated with, an important narcotics ring in New York, but who has consistently denied any gangster affiliation, is an officer in a ladies coat manufacturing concern. Frank Livorsi, whose criminal record includes a narcotics conviction and numerous arrests, and who was involved in a big black-market sugar operation during World War II, was in a dress concern with Max Edler, who also had a narcotics record. The firm dealt extensively in black market textiles during World War II.

JUKE BOXES, CIGARETTE VENDING MACHINES, AND SLOT MACHINES There seems to be a natural affinity of underworld characters for the distribution of these machines. The committee has found that juke box and cigarette vending machine distribution is usually the front employed by hoodlums for the illegal distribution of pinball and slot machines. Distribution methods, moreover, are often based upon the use of muscle. In Chicago, there is some evidence that certain Capone syndicate associates have muscled into the tobacco and cigarette vending-machine business and that they have seriously affected the business of their legitimate competitors. Cigarettes have been hijacked and cigarette-metering machines, used to affix the Illinois tax stamp, have been stolen.

Ed Vogel, who has been known as the slot-machine king of Cook County, Illinois, and an old Capone syndicate associate, is secretary and treasurer of the Apex Cigarette Service. This company is one of the largest distributors of phonograph and cigarette machines in Cook County. Al Capone's brother, Ralph, operates the Suburban Cigarette Co. which has vending machines throughout Cook County.

Evidence of strong-arm methods in the juke-box distribution business was found by the committee in Chicago, Kansas City, and Detroit. Joe Peskin, one of the old Capone gang and a leading juke-box distributor in Chicago, admitted threatening a former associate who later became a competitor. In Kansas City, Wolf Riman, before his murder, successfully pressured tavern owners into using his juke-box machines with the help of the county sheriff. More refined methods of shake-down and extortion were found by the committee in connection with juke box distribution in Detroit. Here, a union was used as a front by underworld characters to extort money from juke-box distributors. These distributors were forced to join the union as "honorary members" and pay initiation fees and dues, or risk having a picket line thrown around their locations. Another more refined technique for forcing juke box distributors into line was found by the committee in New Orleans where Carlos Marcello, one of the worst hoodlums in the country, supplies juke boxes and slot machines to bars, night clubs, etc. He also loans money to these bars and clubs at a very low rate of interest. In return for this low rate, the proprietor agrees to use only Marcello's machines.

Most of the Nation's leading hoodlums, including Frank Costello, Jake Lansky, Joseph Stacher, Phil Kastel, Buster Wortmann, and many others, have been engaged in the distribution of juke boxes and slot machines.

LAUNDRY AND DRY CLEANING The phenomenon of Willie Moretti, one of Costello's associates, in making a success of a large linen-supply company because "he knew a lot of people" and "got plenty of business in a. polite way" (which his competitors found not so polite) is one of the darker chapters of American business.

In Detroit, Louis Riccardi, an associate of such Detroit hoodlums as Angelo Meli, and who was arrested five times for murder, operates a very profitable laundry - the Clean Linen Service Co. Riccardi made $56,000 out of this business in 1949. It is alleged that customers who drop his service may find that no other laundry will dare to accept their business.

Moe Dalitz and other members of the Cleveland gang operate laundries in both Cleveland and Detroit.

REAL ESTATE, HOTELS, RESTAURANTS, AND NIGHT CLUBS In many large cities important real-estate holdings, hotels, office buildings, night clubs, restaurants, and taverns are acquired by gangsters and mobsters. In Miami, for example, valuable ocean-front property was acquired by the S and G. Syndicate. In true gangster disregard of established laws and existing vested interests, the S. and G. Syndicate teamed up with Thomas McGinty of the Cleveland Syndicate in an attempt to have this property rezoned in order to triple its value. They set up a dummy corporation. By a strange coincidence, the lawyer hired by the syndicate to put through the rezoning application turned out to be Ben Shepard, the city attorney. A member of the city council, who was expected to vote on the zoning proposal, turned out to be an officer of the dummy corporation.

Al Polizzi, John Angersola, and Arthur "Mickey" McBride are associated in lucrative real-estate ventures in the Coral Gables section of Florida. The notorious Kid Cann of Minneapolis owns valuable ocean-front property in Miami Beach in addition to several hotels and apartments. T. J. McGinty, of the Cleveland syndicate, told the committee he had invested some of his gambling profits in valuable real estate in Florida, which includes the property in Miami on which Hickory House is located and certain race-track property. Frank Costello recently made a large profit on the sale of a valuable office building in Wall Street. In Chicago, Rocco DeStefano owns stock in a profitable real-estate venture, and Alexander Greenberg runs a large real-estate business.

Gangsters from all over the country met in Florida at three hoodlum run hotels: The Wofford, Grand, and Sands. The Wofford Hotel, for example, which was for a number of years operated by Abe Allenberg, Frank Erickson's front man in Florida, is now owned by Thomas Cassara, who has fronted for various Capone syndicate members in Chicago, John Angersola of the Cleveland mob, and Anthony Carfano, a Costello associate. The hotel was originally leased on funds borrowed from Frank Erickson. George Sax, the Chicago punchboard king, has a large investment in the Saxony Hotel in Miami Beach, while in Chicago, Greenberg operates the Seneca Hotel, where he was once associated with Charlie "Cherry Nose" Gioe, who still lives there along with several other Capone hoodlums. In Los Angeles, Fred Evans, a former Capone associate has an interest in the Hayward Hotel.

Among the leading hoodlums in the restaurant, night club, bar, and tavern businesses, are Frank Costello, Phil Kastel, Charles Fischetti, Carlos Marcello, Mushy Wexler, Harry Russell, and Mike Lascari.

FOOD PRODUCTS The committee found numerous hoodlums engaged in the distribution of food products, including Big Bill Tocco, Joe Massei of Detroit, Carlos Marcello of New Orleans, Paul DiGiovanni (nephew of Joseph DiGiovanni), Emilio Georgetti in California and many others. The committee found evidence of muscle tactics in connection with the baking business in Kansas City, where a hoodlum-dominated bakery owned by the late Charlie Binaggio, Joe Cusumano, and Joe Filardo was muscling in on legitimate bakeries. The committee also found number of hoodlums engaged in the olive oil, cheese, and other food-importing businesses, including Joe Profaci of New York, Anthony Milano in Detroit, and Jack Dragna on the west coast. There is evidence that the olive-oil business has been used as a front for narcotics operations.

UNIONS The committee found that hoodlum penetration of labor unions has decreased steadily over the years. In the 1920's and 1930's hoodlum infiltration into the cleaning and laundry, dairy, the beverage, stage hands, and retail clerk's unions, was on such a large and violent scale that it threatened to disrupt entire industries. Today, however, the hoodlum element has been driven to the wall in all but a few important instances. One union which is still infested with hoodlums is the International Longshoremen's Union on the east coast. Here after 20 years of repeated efforts to correct conditions there still persists one of the ugliest situations in labor-union history.

BREAKDOWN OF ENFORCEMENT MACHINERY Although the committee has seen and paid tribute to many fine, efficient, honest, and able law-enforcement officers and officials, law enforcement has broken down in many of the communities visited by the committee. Where criminal gangs and syndicates operate openly as they have done in such places as Saratoga; Bergen County, N.J.; the Newport-Covington area of Kentucky; the Miami area of Florida; many of the parishes outside of New Orleans; many of the Illinois and California counties and the area of Jackson County outside of Kansas City, to cite only the most notorious examples, it is apparent that too many local police, sheriffs, prosecutors, and courts are failing to do their sworn duty.

The committee places no stock in the professed inability of many law-enforcement officials to detect violations of the law which are apparent to any informed citizen. The blindness which afflicts many law-enforcement officials in wide-open communities is for the record only.

There can be little question that these officials know perfectly well what is going on. Nor can there be little doubt in the mind of the committee that vigorous, honest law enforcement can put an end to wide-open conditions in a very short time. The fact that Saratoga was run without open gambling in the racing season of 1950; that Sheriff "King" Clancy could give the order to shut down operations in Jefferson Parish; that Pat Perdue, the so-called "one-man vice squad" of Miami Beach, could boast that he could shut down operations in Miami Beach in 24 hours if he were given the order to do so, is an indication of what can be accomplished where law-enforcement officials really wish to act.

It can be assumed that this failure of law-enforcement officials to suppress gambling and vice conditions in their community affects their law-enforcement responsibilities in other fields. By refusing to act against the racketeers who run bookmaking operations, slot machines, gambling casinos, and houses of prostitution, law-enforcement officials give aid and encouragement to some of the worst hoodlums and criminal gangs in this country. These hoodlums and criminal gangs do not restrict their operations to exploiting the human desire to gamble.

They also engage in activities which are even more devastating to the community and to the welfare of the people; the sale and distribution of narcotics, various forms of extortion and shake-downs, various types of business and labor-union racketeering, as well as outright robbery, burglary, and larceny. Inevitably, their operations in gambling and other fields bring in their train aggravated forms of violence against persons and property. The ultimate weapon that these mobsters have is murder and they have not hesitated to use it in communities all over the country.

Nor should it be assumed that law-enforcement agencies, which are ineffective in suppressing gambling operations, suddenly become efficient instruments of justice when confronted with other crimes. The record is clearly the other way. Police officials, sheriffs, and district attorneys who refuse to do their duty in enforcing the gambling laws because of corruption or the use of political influence do not prosecute vigorously when the racketeers and gangsters operating gambling enterprises become involved in other crimes.

If money or political influence will fix a gambling case, it will also fix a case involving a more heinous offense. The creeping paralysis of law enforcement which results from a failure to enforce the gambling laws, therefore, contributes to a breakdown in connection with other fields of crime

It is axiomatic in the underworld that once a public official allows a case to be fixed, thereafter the underworld owns him.

One other aspect of this breakdown must be noted. Wherever organized criminal gangs are entrenched in a particular community and have been given the green light to operate, it is not unusual to see the forces of law enforcement being used against their competitors, while protected operations are left severely alone. This fact helps to explain the growth of such vast bookmaking conspiracies as the S. and G. Syndicate in Miami, the Guarantee Finance Co. in Los Angeles, and the Gross bookmaking empire in New York. Only too frequently, bookmakers, slot-machine operators, policy bankers and punchboard sellers have been given to understand that they must come to terms with the "syndicate" or the "combination" that has the "in" with law enforcement. The penalty for failing to come to terms is continual harassment by the police and other agencies of law enforcement. In the Miami story, we saw this weapon of inequaI enforcement of the law by a State official being used against the S. and G. as one of the weapons to compel it to capitulate to the demands of Accardo-Guzik-Fischetti crime syndicate.

OVERLAPPING JURISDICTIONS IMPEDE ENFORCEMENT The breakdown in law enforcement is not entirely due to corruption of law-enforcement officials or to the use of political influence to paralyze law-enforcement processes. Much of the responsibility must be placed upon the present organization of law-enforcement agencies. In metropolitan communities like Cook County, Ill.; Los Angeles County, Calif., or Bergen County, N.J., there is a congerie of independent local police forces covering the county. In addition, a sheriff's office with wide law-enforcement responsibilities and the State police with a wide jurisdiction to enforce State laws, may also operate within the county.

There is no centralized direction or control and no centralized responsibility for seeing that a single uniform law-enforcement policy is applied over the entire geographic area of a county. The situation lends itself to buck-passing and evasion of responsibility which can only inure to the benefit of gangsters and racketeers. It makes it possible for hoodlums to find those cities and towns where law enforcement is lax and to concentrate their operations there.

It is obvious that many factors contribute to the breakdown of law-enforcement agencies. No single panacea can make law-enforcement agencies more efficient and effective in dealing with organized crime. It is suggested, therefore, that each State make an over-all survey of its law-enforcement agencies to see whether or not they are adequately organized and equipped to cope with modern racketeering and gangsterism. It is obvious that a survey of this character must not only inquire into the organization and operations of law-enforcement agencies, it must also determine whether they are so beset by corruption and political influence that no matter how they were organized, they would continue to be ineffective.

Surveys in each State are necessary because of the difficulty of making suggestions which are applicable to the entire country.

The peculiar problems of each State vary and there are significant differences in the organization of their law-enforcement agencies. However, there is sufficient administrative know-how in the various States to make it possible to lay out a plan and a method for dealing with organized crime which will considerably curtail this threat to our institutions.

OFFICIAL CORRUPTION AND CONNIVANCE IN ORGANIZED CRIME The most shocking revelations of the testimony before the committee is the extent of official corruption and connivance in facilitating and promoting organized crime. Nevertheless, it should not be assumed that our revelations cast doubt as to the integrity of the great preponderance of law enforcement and other public officials. On the contrary, our findings and conclusions relate only to a small but disturbing minority of such officials. The committee found evidence of corruption and connivance at all levels of government --- Federal, State, and local. The evidence of the corruption of Federal Government officials is primarily in connection with the enforcement of the income-tax laws. Certain officials of the Bureau of Internal Revenue in California conceived the scheme of selling stock which they owned in a company that they controlled to persons who were likely to have trouble with their income taxes. The stock was worthless, but its purchase assured immunity from a too-careful scrutiny of income-tax returns. This is not an indictment of the Bureau as a whole; most of these employees have been discharged and some have been indicted by a Federal grand jury.

The evidence of corruption and connivance with organized crime in State and local government is present in four different forms:

(1) Direct bribe or protection payments are made to law-enforcement officials, so that they will not interfere with specific criminal activities.

(2) Political influence and pressure of important officials or political leaders is used to protect criminal activities or further the interests of criminal gangs.

(3) Law-enforcement officials are found in the possession of unusual and unexplained wealth.

(4) Law-enforcement officials participate directly in the business of organized crime.

Just before his death, James Ragen, head of Continental Press, told the State's attorney that over a 3-year period, the wire service had in the past paid out $600,000 in political contributions.

EVIDENCE OF DIRECT PAYMENTS TO OFFICIALS At the local level, the committee received evidence of corruption of law-enforcement officers and connivance with criminal gangs in every city in which it held hearings. The testimony at the Tampa hearings indicates the Sheriff Culbreath, of Hillsborough County, was the center of the criminal conspiracy to violate the gambling laws. Evidence was received of direct and regular payments of protection money by gamblers to Culbreath and to other law-enforcement officials in Tampa.

The sordid story of direct payments to law-enforcement officials in return for the protection of criminals, is repeated in Philadelphia, where the "bag" man for a Captain Elwell, would come into the station house with his pockets bulging with money. Three thousand dollars to four thousand dollars a month was alleged to have been paid in each of 38 police districts or approximately $152,000 a month, not counting payments to the higher ups. In New York City it has been estimated that the Gross bookmaking empire paid over $1,000,000 a year for police protection. In Dade County, Fla., a deputy sheriff is alleged to have turned over to the wife of the sheriff seven, eight, ten, and eleven thousand dollars at a time in cash and obtained signed receipts therefor. In Jackson County, Mo. (K. C.), some deputy sheriffs were on the payrolls of slot machine distributors and taverns that violated the liquor laws. In Los Angeles, at least half a dozen police officers "borrowed" money from the Guarantee Finance Co., a big bookmaking operation. One suspended officer worked as a collector from bookmakers for the Guarantee Finance Co. during the period of his suspension. An entry of $108,000 on the books of the Guarantee Finance Co. for "juice" undoubtedly indicates payoffs to law enforcement officials. The strong box which Sheriff Grosch of Orleans Parish, La., bought with such elaborate precautions at a time when he was a city detective, was intended to keep not his legitimate earnings but the fruits of his betrayal of the public trust – protection money from law violators. But official behavior was similar to that of many other important enforcement officials in the New Orleans area. This is illustrated by the extraordinary story of Moity who discovered that he could not stay in the slot-machine business without paying "ice."

There is also the case of former Police Chief George Reyer, of New Orleans, who once was president of the International Association of Police Chiefs. Squeezed by a change in administrations, Reyer took his pension and switched to the wire service payroll at $100 a week without the loss of a payday.

Law enforcement has been an easy road to affluence for many law-enforcement officials. The case of Dan "Tubbo" Gilbert, "the richest police officer in the world," who was chief investigator in the State attorney's office in Chicago, is well known. Such officials as "King" Clancy, sheriff of Jefferson Parish, La., and Walter Clark, sheriff of Broward County, Fla., have grown rich, powerful, and arrogant from their association with the underworld elements who ran the gambling and prostitution enterprises in their jurisdictions. There are many other illustrations in the testimony before the committee. Typical of this is the fortunate economic position of John English, the city commissioner in charge of the police department of East St. Louis, who was able to obtain a $100,000 summer home, various interests in real estate in East St. Louis, interests in a restaurant and a gas station, on a salary of $4,500 to $6,000. The fact that the city was wide open for years and only two or three gambling arrests were made in 1950 may have some relation to the commissioner's wealth.

POLITICS USED TO PARALYZE POLICE The attempt to paralyze law enforcement by political means is encountered again and again in the testimony before the committee. The success of mobster Frank Costello in exercising control over the New York County Democratic organization is typical of what one can expect from the alliance between politics and crime. Mobster Joe Adonis' influence upon the Kings County (Brooklyn, N.Y.) Democratic organization may go far to explain why neither he nor a major subordinate like Anastasia was ever subjected to prosecution and punishment. The committee developed at great length the extraordinary attempt by Binaggio, a powerful political leader to acquire control of the Police Board of Kansas City so that he could install his candidate Braun as chief of police. Binaggio finally offered a substantial bribe to one of the commissioners who had refused to go along with his program. Gene Burnett, police chief of Granite City, Ill., was apparently willing to close down the gambling places and the handbooks in his town, but the orders from the mayor were to let them operate as that is how the city council wanted it. There is more than a remote connection between the orders to Police Chief Short of Miami to "lay off" gambling," although the city could be closed in a matter of hours," and the fact that one of Miami's councilmen had had many extremely profitable deals with Harold Salvey, a member of the S and G Syndicate. The story of Governor Fuller Warren of Florida is told elsewhere. After accepting a huge campaign contribution from William H. Johnston, who has close connections with present and past members of the Capone syndicate, Warren allowed the power of his office to be used by the Capone syndicate in its successful effort to muscle into Miami Beach gambling. Most recently, Warren has reinstated Sheriff James Sullivan of Miami without any satisfactory explanation of the serious evidence and charges brought against Sullivan before this committee.

There was considerable evidence before the committee concerning contributions to political campaigns by gamblers and gangsters. For example, Molasky contributed $2,500 to the gubernatorial campaign in Missouri in the hope that he would be given the right to name a member of the St. Louis Police Board. When he was unable to do so he claimed to have been double-crossed. Pat Noonan, an associate of the mobsters in the Binaggio gang, did considerable political work in the campaign to elect Governor Smith. Much of his expenses were paid by persons involved in violations of the gambling laws. The fact that Emilio Georgetti, "the Gambling King of San Mateo County," worked "like hell" for the election of Sheriff McGrath and "accumulated a little money for the campaign," did not hurt him in his gambling operations.

Evidence has also been presented to the committee that certain law-enforcement officials or their relatives not only received protection money from gangsters but that they actually ran gambling operations themselves. The bookmaking operation which was run right in Sheriff Culbreath's office by his brother and an employee of the sheriff, may or may not have been as insignificant as the sheriff tried to show. But the same thing cannot be said for the partnership which Sheriff Clark of Broward County had in the Broward Novelty Co. This company operated bolita games (policy) and slot machines and provided the sheriff with his principal source of income. The participation of public officials in the New Orleans area in the operation of slot machines has almost come to have the status of an established institution.

It is obvious that law-enforcement officials who are themselves engaged in gambling operations will have no special desire to enforce gambling statutes.

PUBLIC RESPONSIBILITY The committee has been most gratified by the tremendous interest which the general public has demonstrated in the hearings conducted by the committee over the past 11 months. That interest has confirmed anew the committee's fundamental faith that the heart of America is basically sound.

The active participation of an informed public is essential to the correction of the conditions which the committee's investigation has shown to exist throughout the country. The committee has emphasized time and again that organized crime cannot exist without political protection. It is the responsibility of the voting public to insure that their representative governments at all levels are made up of men who are not open to corruption or persuasion by criminals and racketeers.

In the course of its investigations, the committee has seen numerous examples of public apathy toward the operation of organized crime and its alliance with officials at various levels of government.

In the State of Florida, it seemed clear to the committee that the highest officials in the State condoned, and in some cases, affirmatively aided the operations of organized gamblers. In the State of Illinois, where there can be no question as to the honesty and integrity of the Governor and his aides, the committee found evidence that numerous local law-enforcement officials made no effort to interfere with illegal gambling operations. More shocking than the defection of individual law-enforcement officials was the testimony before the committee that many of these men were elected and re-elected by a voting public which was well aware of their tolerance of illegal gambling.

Equally shocking is the fact that efforts to remove and punish such officials for their obvious acts of malfeasance are often nullified by juries that refuse to recognize the venality of such behavior.

There is a segment of public opinion in many cities that believes that gambling, in some cases "just a little gambling," is good for business, and that strict enforcement of the antigambling laws would be a mistake. This attitude on the part of normally law-abiding citizens can only come from a failure to comprehend the violence and racketeering which inevitably accompany gambling operations, and the extent of the resulting damage to the economic and social fabric.

The theory that gambling is good for business was expounded in Kansas City, in Las Vegas, and in Miami. The fact of the matter is that the huge sums which accrue as a result of gambling are pocketed by criminals, hoodlums, and corrupt politicians, and the general public receives little or no part of the income from the milking operations carried on by the big-time gamblers.

It is established practice for big-time gamblers and gambling syndicates to contribute generously to charities, fraternal organizations, and other worthy causes as part of their program to ingratiate themselves with the community and convince the public that while more or less illegal, their activities are thoroughly moral.

In the light of the tremendous profits which gamblers enjoy so long as the public will tolerate their operations, they can well afford to expend substantial sums of money to cloak themselves with an aura of public-spiritedness.

It is the hope of this committee that as a result of its investigations and report specific legislation aimed at dealing with organized criminal activity will be enacted; that certain changes recommended by the committee will be made in Federal, State, and local law-enforcement procedures.

However, the ultimate responsibility for the success of the suggested legislation and reforms rests squarely in the hands of the public. Unless the public expresses an affirmative desire for the elimination of organized criminal operations and official corruption through the continued exercise of the vote, through active participation in the work of such organizations as local and State crime commissions, and through the careful attention to the efficiency and honesty of the men whom they employ to govern them, there can be no real and lasting progress toward the elimination of organized criminal activity in this country.

Ultimately success in the war against crime depends on the uplifting of standards of public and private morality, a rededication to basic spiritual values, which will entail righteous indignation over crime and corruption. To this end, the committee looks with confidence to the great force of religion and morality as applied in all phases of life and to sound education of the generations which follow.

ACCOMPLISHMENTS, RESULTS, AND EFFECTS OF COMMITTEE WORK The popular misconception has existed in many circles that the committee was dedicated to a crusade against crime looking toward the jailing of every criminal in the country. As a matter of fact, the committee was - and is - properly an inquisitorial body with no prosecutive or law-enforcement functions. Nevertheless, there have been many results both directly and indirectly affecting the previously smooth path of many criminals with prison sentences presumably in store for many of them.

About the only pitfall which faced witnesses appearing before the committee which could result in legal action against them initiated by the committee, was a possibility that the witnesses by their answers or refusals to answer would be guilty of contempt of the United States Senate or, by reason of false information, would be guilty of perjury. A number of witnesses seemed unable to avoid these pitfalls and have been the subject of Senate citations and referral to the appropriate United States attorneys for prosecution. Among those cited for contempt were the following 33 individuals:

Harry Russell (acquitted)      John J. Fogarty Joseph Dote, alias Joe Adonis  Phil Kastel Anthony J. Accardo             Anthony Marcello James Lynch                    Mike Rubino Arthur Longano                 Joseph A. Porretto Salvatore Moretti              Jacob Guzik Walter Pechart                 Frank Costello Patrick Manno alias Manning    Frank Erickson Jack Dragna                    Stanley Cohen Joseph Aiuppa                  John Doyle Joseph DiCarlo                 George Bowers James Licavoli                 William G. O'Brien Peter Tremont                  Ralph J. O'Hara David N. Kessel                John Croft Carlos Marcello                Morris Kleinman Peter Licavoli                 Louis Rothkopf Russell Trilck Occasionally the committee found a witness contradicting another to the extent that it was apparent that one or the other was giving false testimony. A number of these situations have been referred to the proper United States attorneys for inquiry and prosecution. In other cases the testimony appeared to be false on the basis of records of sworn statements of others and these, too, have been referred for prosecution. Already indicted for perjury are James Moran and Louis Weber in New York and Sheriff John Grosch in New Orleans.

There also have been certifications to the United States attorneys many other witnesses for investigation of possible perjury charges.

PUBLIC AWAKENING BRINGS LEGISLATIVE ACTION Beyond any question a noteworthy effect of the committee's work has been the tremendous response in the nature of public awakening and its constructive reaction to enlightenment. There has been a far-reaching chain reaction, the extent of which can only be assayed broadly because in many cases the translation of this awakening into action is only in a formulative phase at the time of this writing. Aroused citizenry has accounted for increased interest in the problem at State and local levels, as indicated by the formation in many State legislatures of little Kefauver committees with the avowed purpose of exploring, exposing, and eradicating the cancerous conditions existing in these areas. Some of these legislative inquiries have already produced needed corrective legislation. The State of Florida has recently sought to curb bootlegging of racing information to the bookmakers by supplementing the wire-service prohibition already on its statute books with an enforced 20-minute delay in the transmission of racing news by legitimate news-gathering organizations.

Grand juries too numerous to mention are delving into areas untouched for many years. Reports of action by alert officials in cleaning up crimination conditions and in throwing out corrupt officeholders come from every State. Such a racket stronghold as Cook County, Ill., has seen, within the last 3 months, 11 men indicted for conspiracy to violate the gambling laws and this investigation is continuing. In Florida, grand juries have indicted 50 gamblers and law-enforcement officers. Five sheriffs were removed, two of whom were later reinstated. In Tampa, Fla., where the committee sought in vain for evidence of law-enforcement activity looking toward the prosecution of perpetrators of 15 unsolved gang-type killings, nearly all identified with the gambling rackets, the grand jury has reported more activity than at any time within 15 years.

Nearly every section of the country is experiencing a wave of grand jury activity with ensuing disclosures and indictments which are a testimonial to the American system of justice and the ability of the people to rid themselves of the scourge of the underworld by judicial process. It is reasonable to forecast that venal politicians whose corruption has permitted the racketeers to become so firmly entrenched will in large measure be eliminated as aroused and awakened citizens go to the polls.

Outside recognized judicial channels, other potent forces in citizen crime commissions are springing up to wage war against the criminals. The committee finds that crime commissions, where established, have played an important part in focusing attention on evil conditions by giving them publicity and spurring sometimes disinterested law-enforcement agencies into action. Where crime commissions wore formed prior to the advent of this committee, it was apparent that criminal activities in those communities such as Chicago, Miami, and California were being scrutinized most carefully, resulting in the elimination of many rackets and the operation of others being made more hazardous.

Some of the places where now crime commissions have been formed or are in the making are Tampa, Fla.; Dallas, Tex.; New Orleans, La.; Des Moines, Iowa; New York, both State and city; Detroit, Mich., and in New England. It has been indicated that a California crime study commission which had expired will likely be re-created.

Trained personnel from our committee has been drawn upon to serve in important capacities in local anticrime groups.

Definite indications of increased interest and awakening, possibly due to committee activities, have been noted in law-enforcement fields both Federal and local.

GANGSTERS REVISE INCOME TAX RETURNS

Perhaps the figures will never be known but informed sources advise the committee that fear of scrutiny of their tax returns, either by this committee or other agencies having prosecutive powers has caused a great number of racketeers, large and small, suddenly to become extremely circumspect in the filing of returns. They are being careful to report their real income more accurately, resulting in a gain of perhaps millions of dollars to the Government in taxes for income which might have gone unreported. It is strongly intimated that this tax gain to the Government has been many times the entire cost of this committee's work. Moreover, spurred by the committee's revelations, the Bureau of Internal Revenue has now set up a special Frauds Section consisting of racket squads across the Nation, which, if they realize their full constructive potentialities, may be expected to regain additional millions for the Treasury. Indictments have already been announced against racketeers and gamblers like Mickey Cohen and Washington, D.C., gamblers Emmett Waring and Sam Beard. Then, too, the various State tax coffers have benefited, not only from the increase in income taxes paid by racket figures but from such indirect sources as increased taxes received from money bet at race tracks where horse racing is permitted. For example, New York has filed tax claims amounting to $715,152 against Frank Erickson. State taxes are levied on the "handle" or volume of money bet. Because of the activity of this committee it has been found that in every area visited by the committee where racing is legal the "handle" at the race tracks was considerably higher than in precommittee times.

At the local level accelerated police activity has accounted for the complete revision of some police departments, shaking up of indifferent vice squads and formation of new, more vigilant, racket squads. Disclosures by the committee of the identity and location of gamblers in many instances resulted in immediate raids and arrests. An interesting example developed during the testimony in Washington of Sidney Brodson, a Milwaukee, Wis., betting commissioner. The Brodson hearing was televised and as he revealed the name, address and telephone number of individuals across the country with whom he placed bets, it was found that police officers viewing the televised proceedings learned for the first time of the gambling activities in their towns. They immediately visited the addresses mentioned and, before Brodson had left the stand, they had located and arrested his betting associates in cities separated by thousands of miles.

Mayor Dorothy McCullough Lee of Portland, Oreg., advised that she would follow through further in the case of Irving Hasson, a book maker mentioned by Brodson. Hasson was arrested for bookmaking immediately following Brodson's testimony. The mayor stated that she would revoke Hasson's city licenses such as those for card room or restaurant. In other localities, prosecutors learning of these telephone bookmaking activities have directed the telephone companies to discontinue service to the bookmakers thus removing from them the instrument which is sine qua non of their activity.

From time to time it was found that certain lawyers seemed to have overstepped the bounds of legal ethics either by actively engaging in criminal operations or by giving improper advice and counsel to the criminal that it can be only concluded that the lawyer was aiding and abetting the perpetration of the offense rather than defending his client. Disbarment proceedings by bar associations have followed. The disclosures of the activities of these lawyers have become the subject of study by a special committee of the American Bar Association which is attacking the problem with a view to purging the ranks of the profession of those who have been discredited.

NEW ACTION ON OLD CASES Other Federal law-enforcement agencies have caught the competitive feeling and have pursued matters in many cases that have been dormant for many years. While the committee was in the New Orleans area the Immigration Service, at the insistence of a committee investigator, found a long-sought immigration violator, Sylvester (Sam) .Carrollo, who had long-sought hiding out near New Orleans, and deported him. The Department of Justice has announced an intention to make an annual survey of racketeers to determine whether any Federal laws are being violated and to concentrate on certain areas with special Federal grand juries to probe matters brought to their attention by the heads of the various Federal law-enforcement agencies and by local complainants.

Civic or citizens' groups have rallied and it is everywhere apparent that community leaders are unwilling to accept evidence of complacency or apathy on the part of their law-enforcement officers. These groups with programs of education and research into the problems of their communities will serve as an inspiration to the competent and honest law-enforcement officer and as a deterrent to the crooked. The recommendations of these groups have led to enactment of new legislation and consideration of additional legislation to tighten laws, to close loopholes and to increase the severity of penalties for the violator. In Maryland the legislature will consider a law making gambling a felony, heretofore only a misdemeanor. Judges have announced and put into practice an intention to cope with the problem by jailing offenders. Heretofore small fines paid willingly by the gamblers have been accepted, and looked upon by the criminals as a small license fee to continue their lucrative practice of milking the public.

Even during the committee's investigations those who operated outside the law were found to be constantly scheming and devising new ways to defeat law enforcement. Some of these attempts were exposed during the committee's hearings. For example, the committee found that in New Orleans a factory had been rented and dies ordered to manufacture slot machines. All slot machines are illegal in Louisiana. Obviously the enterprise was designed to defeat the recently enacted Federal law prohibiting interstate transportation of slot machines, or parts thereof. Disclosures at the committee hearing resulted in the abandonment of the project. Similarly the committee's investigators found in San Francisco a pilot model of a new slot machine which operated electrically which was not "coin operated." This device, too, was exposed and the distributor, who had imported the device from Chicago, announced an intention to abandon distribution of them.

Not the least remarkable adjunct of the activities of the committee has been a Nation-wide dislocation of principal hoodlums from their well-entrenched haunts.

Invariably the committee found that when racket leaders became fugitives from committee process, the flight may have diminished in some cases the speed of the committee's accomplishments, but unquestionably the racketeers' efforts to avoid service foreclosed to them their ability effectively to function, and temporarily at least, caused the shutdown of many criminal operations.

SHOULD GAMBLING BE LEGALIZED? The widespread incidence of illegal gambling disclosed by the committee's investigations has resulted in the suggestion, made by many well-meaning and conscientious individuals, that the anti-gambling laws should be abandoned as unenforceable, and that the business of gambling should be legalized and licensed.

This suggestion appears to be premised on the dual assumptions that once gambling is legalized the crooks and the cheats will retire from the field and leave the operations of the handbooks, policy wheels and the gaming rooms to honest and upstanding businessmen, and that public officials, who have previously been persuaded to ignore or affirmatively aid illegal gambling operations, will automatically prove incorruptible when entrusted with responsibility for controlling these same operations through a licensing system.

It seems to this committee that the simple statement of these premises is sufficient to demonstrate how invalid they really are.

It is the nature of the business of gambling, and not its legality or illegality, that makes it so attractive and lucrative for gangsters and hoodlums.

Elsewhere in the report the committee has described the ways in which professional gamblers can and do protect themselves from loss, and the size of the profits which can be made from a well-run gambling operation. The tremendous profits to be made from these completely nonproductive operations offer obvious attractions to the lawless and parasitic elements in our society. Legalization of gambling in no way diminished its attractions for underworld elements, nor did it prevent them from maintaining their domination of the field through intimidation and corruption.

Proponents of legalization often argue that the urge to gamble is inherent in human nature and that the enforcement of antigambling laws is an impossible and impracticable task. It is undoubtedly true that a great number of people enjoy gambling but the investigations of this committee have disclosed ample evidence of the evils which inevitably accompany the gratification of the desire to gamble. The fact that it is undoubtedly impossible to eradicate gambling completely would not justify the abandonment of attempts to limit the operations of the professional gamblers.

The history of previous experiments in legalization of gambling has shown that legalization results in an increase in gambling, particularly in increased participation by small-wage earners - the people who are least able to bear the inevitable losses. Wherever large-scale gambling has been carried on it has been the experience of law-enforcement officials that violence and crime increase in proportion to the size of the gambling operations. The promise of income to the gambling operator is sufficient to encourage large-scale intimidation and corruption in order to maintain a monopoly of the gambling operation. The losses incurred by victims of gambling have driven them to embezzlement, robbery, and other crimes committed by men desperately attempting to recoup gambling losses they could not afford to sustain.

SITUATION IN GREAT BRITAIN COMPARED The committee has studied with interest the scholarly report which was recently returned by the British Royal Commission on Betting, Lotteries, and Gaming. The commission stated its conclusion that gambling on the scale on which it is indulged in the British Isles at the present time, does not impose a serious strain on the national resources or manpower, or constitute a serious inducement to criminal activity.

The commission estimated that the annual turn-over in all forms of gambling for the year 1950, amounted to about 650 million pounds, or about $1.8 billion. This committee has estimated that the present annual turn-over in the United States is about $20 billion. It is the belief of this committee that the conclusion of the Royal Commission that gambling can be satisfactorily licensed and controlled, is explicable in terms of the size of the problem with which they were dealing.

Under the system presently in force in England, off-track betting is legal only if bets are credit transactions placed through phone or wire, and not by the bettor in person. The commission reported that despite the illegality of handbooks operating on a cash basis, off-track bookmakers do a flourishing cash business. The commission also reported that although it had found occasional evidences of attempted corruption of officials by persons illegally carrying on gambling operations, there was little evidence of actual corruption or violence as a result of betting and gambling. Gambling casinos and dice and roulette games are illegal in England, and the Royal Commission did not find any evidence of organized illegal operations in this field.

The investigation which our committee has carried on for the past year has shown that an entirely different situation exists in the United States. The extravagant profits to be made from the continuous operation of gambling casinos, handbooks and lotteries in this country have attracted the worst gangster and hoodlum elements. The amounts of money involved are so tremendous that the expenditure of large sums of money for corruption of enforcement officials, and officials at even higher levels, can and is absorbed as an expense of doing business.

It should be noted that the Royal Commission's conclusion that gambling in the British Isles was not necessarily accompanied by violence and corruption was based on a study of extra-legal as well as legal gambling. Their conclusion that off-track betting on a cash basis should be legalized was based on their findings that the comparatively small-scale operations carried on in the British Isles had not resulted in conditions similar to those which this committee found prevailing throughout the United States. Whatever the reasonableness of the commission's recommendations may be in terms of the situation existing in the British Isles today, there is no argument by analogy from their recommendations to the legalization of a $20 billion a year empire built on corruption.

In short, in the United States the question is not solely whether or not gambling in itself is harmful to the public. Here gambling has led to harmful byproducts that can be controlled only by continuously fighting organized professional gambling. The committee is convinced that this will produce far lesser evils than legalized gambling.

WHAT TESTIMONY IN NEVADA DISCLOSED If legalized gambling could be successfully divorced from the evils of crime and corruption, the State of Nevada would offer the most ideal climate for its operation. Nevada is a State with a small population, where gambling operations can be policed easily and the comings and goings of undesirables can be noted, yet the State of Nevada has found it necessary substantially to increase police surveillance as a result of the legalization of gambling and the accompanying influx of hoodlums, racketeers, and the other inevitable parasites who spring up like weeds wherever gambling operations are carried on.

While it is true that the revenue received by the State of Nevada in connection with the licensing of gambling in that State contributes somewhat to the rather meager finances of the State, it should also be noted that the revenue from such operations as the Flamingo Club, which netted $400,000 in 1949, finds its way into the pockets of men like Rosen and Sedway. At the same time, the taxpaying citizens of the State must foot the bill for large expenditures for relief and police protection, expenditures which are necessary accompaniments of the wide-scale gambling operations in the State.

COMMITTEE OPPOSES LEGALIZATION OF GAMBLING It is often argued that it is impossible effectively to outlaw the operation of handbooks, lotteries, and other forms of gambling in States where pari-mutuel betting is permitted. The fact that a number of States have considered it desirable to permit on-track betting under conditions that are most easily subject to policing and control does not furnish any basis for the legalization of other forms of gambling which are far more likely to be dominated by underworld elements and most apt to lead to violent competition and criminal activity.

Those States which have legalized pari-mutuel betting have done so in an attempt to satisfy the gambling urge in the manner which can be most closely controlled and least likely to be accompanied by the familiar evils of gambling. While race-track wagering undoubtedly results in individual personal tragedies as a result of undisciplined betting, the damage can be more or less limited to persons who can better in afford to incur financial losses. The operation of handbooks and other gambling establishments in places that are easily accessible to the workingman and the nonhabitual bettor results in the spread of the evils of gambling to increasingly larger segments of the population.

In the opinion of this committee there is no sense or logic in legalizing the greater evils of off-track betting simply because it has been the considered judgment of a number of States that pari-mutuel betting can be controlled and operated without undue detriment to society.

There has not been presented to this committee any plan for the extension of controlled gambling which carries with it a substantial chance of success. On the contrary, each plan for extending legal gambling appears to play into the hands of the gangster element.

In many communities, the professional gambling element is synonymous with the gangster element. This is particularly true in the large cities which lie committee investigated. In these cities, much of the propaganda for legalized gambling can be traced to organized and professional gamblers. They have attempted through public relation channels open to them to persuade legitimate businessmen that an open town is good for business. They have succeeded in many cities, primarily Miami Beach, in intimidating law-abiding citizens so that they are reluctant to enter into political campaigns against the candidates supported by the gangsters. Particularly in resort areas where wide-open gambling had the connivance of local police have these efforts been made to persuade the non-gambling businessmen to support the gamblers. But during the last year when both Miami Beach and Saratoga were closed to gambling, each of these resorts enjoyed an unusually successful season. The Miami area, in particular, has just made available reports showing the success of its 1950-51 season. Apparently, more tourists spent more money in this area than ever before, and more of the money which was spent was diverted into normal legitimate trade channels. Of course, some illegal and clandestine gambling existed, but the fact is that closing down the wide-open gambling did not adversely affect the economy of the resort. It did result in an upsurge of awareness on the part of the honest citizens and dealt a serious financial and political blow to the racketeers engaged in organized illegal gambling.

If, on the other hand, gambling were legalized in the Miami area, and the imprint of respectability placed upon the racketeers who have been controlling and corrupting law enforcement, it is the committee's opinion that they would renew and extend their efforts to control and corrupt State and local government with a resultant decay of governmental morality far in excess of that which the committee found to exist during its investigations.

NOTES Salvey, a member of the syndicate, had taken a 99-year lease with Burbridge for $5,000 a year, for a piece of land on which Salvey was to pay the taxes. The other half of the property Salvey had bought outright for $25,000. Salvey had taken loans of $40,000 from Burbridge for short periods and paid interest at the rate of 20 percent. A cashier's check for $1,000 sent by Salvey to Burbridge from California could not be explained by either man; they simply did not know what it was for. On crimes other than those for murder. (The "perfect murder case" was abandoned.) Files, U. S. Bureau of Narcotics. Annual reports, U. S. Bureau of Narcotics 1947-48. Files, Bureau of Narcotics. Sam Levine, New York. Files, U. S. Bureau of Narcotics. Files, U. S. Bureau of Narcotics. 1941 Annual Report, U. S. Bureau of Narcotics. Files, U. S. Bureau of Narcotics. Annual Report, U. S. Bureau of Narcotics, 1939, 1940, 1941, 1943, 1944. Annual Report U. S. Bureau of Narcotics, 1939, 1940, 1941. Annual Report 1937, U. S. Bureau of Narcotics.