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Kefauver Committee Interim Report #1 Aug. 18, 1950

U.S. Senate Special Committee to Investigate Organized Crime in Interstate Commerce

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81ST CONGRESS             SENATE                    REPORT 2d Session                                        No. 2370

INTERIM REPORT ON INVESTIGATIONS IN FLORIDA AND PRELIMINARY GENERAL CONCLUSIONS

INTERIM REPORT OF THE SPECIAL COMMITTEE TO INVESTIGATE ORGANIZED CRIME IN INTERSTATE COMMERCE

PURSUANT TO S. Res. 202 (81st Congress)

AUGUST 18 (legislative day, JULY 20), 1950. --Ordered to be printed UNITED STATES GOVERNMENT PRINTING OFFICE 71659 WASHINGTON 1950

SPECIAL COMMITTEE TO INVESTIGATE ORGANIZED CRIME IN INTERSTATE COMMERCE (PURSUANT TO S. RES. 202, 81ST CONG.)

ESTES KEFAUVER, Tennessee, Chairman HERBERT R. O'CONOR, Maryland CHARLES W. TOBEY, New Hampshire LESTER C. HUNT, Wyoming ALEXANDER WILEY Wisconsin

RUDOLPH HALLEY, Chief Counsel

CONTENTS

Conclusions:                                           Page A. General..............................................1 B. Miami................................................2 Recommendations.........................................4 Practical results.......................................5 Discussion: A. Work of the committee to date........................6 B. Findings relating to Florida.........................7 Criminals gather in Miami............................9 Enforcement officers noncooperative..................9 Syndicates rich and powerful........................10 Bookmakers charged for protection...................11 Chicago gang "muscles in"...........................12 Law-enforcement.....................................13 Sheriffs grow wealthy...............................14 Deputies charge corruption..........................15 C. Findings relating to crime elsewhere in the United States...................15 Racketeers infiltrate legitimate business...........16

[Editor's note: Page numbers have been deleted from the text of the report. The numbers are shown above to provide a reference to the original printed report.]

81ST CONGRESS             SENATE                    REPORT 2d Session                                        No. 2370

INTERIM REPORT ON INVESTIGATIONS IN FLORIDA AND PRELIMINARY GENERAL CONCLUSIONS

August 18 (legislative day, July 20), 1950. --Ordered to be printed

MR. HUNT (for Mr. KEFAUVER), from the Special Committee To Investigate Organized Crime in Interstate Commerce, submitted the following

INTERIM REPORT [Pursuant to S. Res. 202] CONCLUSIONS A. GENERAL 1. There is substantial and strongly convincing evidence that organized groups of criminals have been engaged in many parts of the Nation in illegal activities, utilizing the channels of interstate commerce, and often operating throughout many States.

2. These organized groups of criminals command very large amounts of capital and are in a strongly advantageous position to compete both in criminal. and noncriminal activities.

3. These criminal organizations have succeeded in monopolizing certain of the channels of interstate communication and commerce by means of violence, bribery, corruption, and intimidation.

4. The committee's investigation has not yet proceeded far enough to warrant a conclusion as to whether or not the various criminal organizations are knit into one or more Nation-wide syndicates. It does begin to appear that the methods of operation are strikingly similar and either by coincidence or design follow a common pattern. It is clear, moreover, that there are several strong and powerful organizations with lines of interrelationship and cooperation between them which makes it feasible for them at least occasionally to combine their activities.

5. The criminal organizations about whose existence the committee now has definite proof presently operate in the field of gambling. However, many of the individuals have been active at times in other types of criminal violations, particularly in the illicit narcotics traffic and, in the past, in substantial and very lucrative violations of the national Prohibition Act. There is every reason to believe that these individuals have turned, and will turn, to any activity, criminal or otherwise, which will yield large cash proceeds which can be concealed at least in part from the Bureau of Internal Revenue.

6. These individuals, frequently using their criminal organizations, have engaged in various legitimate enterprises; in these legitimate enterprises they often use the same tactics of intimidation and monopolization which characterize their criminal activities.

7. It is essential that the true nature of the evil be recognized. The question is not whether gambling or any other form of illegal activity is morally good or bad. It is, rather, that we must weigh the full evil effects upon the body politic of permitting powerful groups of criminals to utilize the channels of interstate commerce for the purpose of controlling illegal enterprises, when it is clear that these groups now obtain and always have secured their power by (1) using violence and intimidation; (2) attempting to corrupt and control local government; and (3) obtaining overbearing economic power by amassing great wealth through nonpayment of taxes and by means of monopoly.

B. MIAMI 8. These general patterns of organized criminal activity were specifically evidenced in the situation uncovered by the committee in Florida in Broward and Dade Counties, and the cities of Miami and Miami Beach, which are located in Dade County. Moreover, although hearings bearing on this point have not yet been held, the committee has convincing evidence in its possession that analogous situations exist in other portions of the State of Florida.

9. Groups of known gangsters, from diverse sections of the country, many of whom have long criminal records, assemble primarily at Miami Beach. There they make their headquarters at certain hotels and establishments. Frank Erickson and the New York gang make their headquarters at the Wofford and the Boulevard Hotels; the Detroit gang, at the Wofford and the Grand Hotels, and the Philadelphia gang at the Sands Hotel.

10. These racketeers operate various gambling and bookmaking establishments openly and notoriously in clear violation of Florida law and apparently with the full knowledge of the entire community including the law-enforcement officers, who in some cases incredibly insisted to the committee that they had no knowledge of the operations.

11. Allocation of territory, at least by acquiescence, is apparent. Gambling in various areas is controlled by different groups. It appears that each group is maintained in its territory with the connivance of the other groups of racketeers and of police officers who have shown unusual zealousness in performing their duties when an outsider has attempted to operate in previously occupied territory.

12. In Miami Beach a group of five local residents, through a syndicate known as S & G Syndicate, have controlled the racing-wire services and the bookmaking establishments for a number of years prior to 1949. This control was so tight that the bookmakers in effect worked for the syndicate.

13. The S & G Syndicate operated with the protection of the Miami Beach Police Department and of the Dade County sheriff, and apparently under cover of a complacent city council, at least one of whose members was proven to have had profitable financial dealings with syndicate members.

14. In 1949, a Chicago resident, Harry Russell, whose connections with the Chicago Capone group are clearly established, obtained a substantial interest in the S & G Syndicate under most suspicious circumstances.

15. Russell was not in a position to contribute anything of value to the syndicate. The syndicate did not need additional capital and had been operating successfully. It did not need any additional members nor did it desire any. Some testimony was offered that Russell was attempting to compete with the syndicate and that he might obtain concessions at certain hotels. This testimony must be viewed, however, in the light of admitted facts that the syndicate did not offer partnerships to any other competitors. Significantly, shortly before Russell was accepted into the syndicate, the racing news wire service at Miami Beach, which was the nerve center of S & G's own monopoly, was terminated by the regional distributor for Continental Press Service, and an investigator especially appointed by the Governor, acting on tips and information furnished by Russell, proceeded to attempt to arrest various bookmakers of the S & G Syndicate on charges of gambling.

16. This investigator admitted to a friendship with one William H. Johnston, a principal in the operation of a number of horse and dog tracks in Florida and the Chicago area. He testified that Johnston was a friend of Russell's. During the period of the investigation both the investigator and Russell met with Johnston, although they deny they discussed the investigation. Johnston contributed about $100,000, of which $40,000 was his own money, to the election campaign of Gov. Fuller Warren of Florida. Johnston's attorney in track matters was one John A. Rush, who professed to a friendship with Gov. Fuller Warren. Shortly afterward, the S & G Syndicate paid a $10,000 fee to Rush for legal services of a very limited and tenuous nature in connection with drafting a bill for legalizing a companion measure to one proposed by Raymond Craig, who operates large gambling establishments unmolested in Miami.

17. The sheriff of Dade County, with jurisdiction in Miami and Miami Beach, had done nothing effective to enforce the Florida laws against gambling. Several members of his staff testified as to actual financial corruption in his office involving him and his chief deputies. It was perfectly clear that the sheriff and at least one of his deputies accumulated large amounts of property while in office for which they accounted by vague explanations. This deputy, Burke, lived up to a Florida adage that a sheriff can retire after one term in office. Although only a deputy, Burke did retire after one term.

18. The sheriff of Broward County, in which horse-racing establishments and several large gambling casinos have been operated, was a member of a business partnership which operated gambling games. For several years he received the greater part of his income from this partnership. He received substantial help in election campaigns from the operators of gambling casinos. He accumulated a considerable amount of wealth while in office. During his tenure in office the gambling casinos in Broward County were operated by syndicates of known criminals from all over the United States, includ- ing notorious racketeers from New York, Philadelphia, Detroit, Cleveland, and Chicago.

19. Many citizens of Florida had become complacent, regarding gambling as "good for business," but they apparently were unaware of what was happening to their local government. They tried not to see the viciousness of the persons who had been allowed to gain a very strong strangle hold on the community. Already these gangsters have obtained control over a considerable number of legitimate enterprises in the State of Florida. Much of the revenue of gangster operations is siphoned by them out of Florida to other States.

20. Some of the principal gangsters and operators of the illegal enterprises whom the committee attempted to subpena have deliberately evaded the committee's process servers. Their absence and failure to appear to deny the evidence that piled up against them is strongly indicative of an admission of guilt. Since the committee's original hearings certain of these witnesses have been served and have appeared before the committee. The committee will continue to seek out and bring before it the remaining witnesses from whom it desires testimony.

RECOMMENDATIONS 1. The committee will continue its investigations in as many States and cities as possible to determine the Nation-wide pattern of interstate criminal activities.

2. The public must be made aware of the basic menace involved in gambling on a widely organized basis because it brings corruption into government and into many branches of industry, and permits the accumulation of economic power in the hands of those who rely on violence, intimidation, bribery, and extortion as means of achieving their ends within the community.

3. Immigration laws should be reviewed to ascertain whether they can be tightened to remove from this country certain known notorious criminals who are not citizens.

4. Consideration should be given to the question of whether more severe prison sentences should be mandatory in connection with certain types of criminal offenses, particularly narcotic violations, and more particularly in the case of second and third convictions.

5. Consideration should be given to tightening income-tax laws under which racketeers can report huge sums of money in cash income and disbursements without any specification or supporting detail in their books or records.

Consideration should similarly be given to the possibility of legislation requiring that in addition to the usual income-tax returns, persons deriving income from illegal activities submit a complete financial statement at the end of each year showing particularly any increase or decrease in net worth.

6. Consideration should be given to utilization of the antitrust laws in connection with monopoly in the dissemination of gambling information across State lines and to the use of the mail-fraud statutes to prevent the use of the mails in schemes to defraud States of taxes, including taxes on racing wagers.

7. The committee favors and recommends the enactment into law of S. 3357, popularly known as the slot-machine bill, which would prohibit the transportation of these-gambling instruments in inter- state commerce. S. 3358, the so-called "bookie" bill, which has for its purpose the prohibition of interstate transmission of certain gambling information, involves more complex considerations and the committee is not yet in a position to make definitive recommendations respecting it or similar legislation until its investigation has progressed further.

8. Certain other approaches have been suggested but the committee is not yet ready to recommend them for serious consideration. Such questions would include legislation making available to local authorities all Federal tax information and other information in the possession of any Federal agencies relating to a violation of local law. Another possibility would be a Federal statute providing criminal penalties for persons conspiring to violate certain local laws when channels of interstate commerce are utilized to carry out the conspiracy. More factual data and study are needed before the committee can form a conclusion as to the desirability of such recommendations.

9. Many of the Federal law-enforcement agencies are grievously understaffed and are unable to fulfill their duties as thoroughly as they would wish. Increased appropriations sufficient to enable these agencies to employ a full complement of officers would be a sound financial investment for the Government. Consideration should also be given to the question of whether the compensation received by many employees of the Federal law-enforcement agencies is commensurate with their duties and responsibilities.

10. Manifestly the sphere of the committee's inquiry is from coast to coast and from border to border. Pursuant to its mandate which calls for the completion of its inquiry and submission of a final report by February 28, 1951, a scant 7 months hence, the committee is now operating to the maximum limit of effort on the part of its staff. Within its budget, it has employed as many competent staff members as its present appropriation will permit. However, even with the volunteered and gratuitous assistance of a great many public-spirited citizens, the executive departments of the Federal Government and many sincere and zealous local law-enforcement officials the committee has been unable to extend its inquiry as speedily and to as many places as it would like, due principally to the lack of funds to engage the additional personnel necessary and to provide for the essential traveling expenses and witness fees involved. The committee believes that an additional appropriation for these purposes should be made at this time.

PRACTICAL RESULTS Before the publication of this report, counsel for the S & G Syndicate in Miami Beach announced that it is being dissolved. The sheriff of Broward County has been suspended and his brother, a deputy sheriff, has resigned. Grand juries in Broward and Dade Counties are considering evidence pertaining to gambling and to those affording protection to gamblers. The Florida Legislature has opened its own crime investigation.

The Governor of Florida has warned all of the State's 67 sheriffs and 187 constables to end gambling within 30 days or face summary suspension.

The Florida State Racing Commission has announced that it will undertake a sweeping investigation into contributions to political cam- paigns by individuals connected with the operation of horse and dog racing tracks. Such contributions are prohibited by State law. In evaluating this announcement, however, it should be noted that notwithstanding the uncontradicted testimony before the committee that William H. Johnston had contributed $100,000 to the gubernatorial campaign fund of Gov. Fuller Warren, Johnston has obtained racing dates for his four Florida dog tracks for next season.

The Florida Bar Association has commenced an investigation of the participation in gambling operations by members of the bar.

Bookmaker James J. Carroll in St. Louis has announced that he has gone out of business, as have almost all of the gambling casinos and operations investigated by this committee.

Law-enforcement officers throughout the country have reported that they are encouraged in their work.

It is significant that these operators who long have sanctimoniously proclaimed their respectability have been flushed and scattered with the very opening of a full congressional investigation. To the committee, this indicates a consciousness of guilt. It also encourages the committee to believe that organized interstate crime can be suppressed. Even if it should tend to rise again after this investigation has been concluded, the Nation will know that at least some criminals can be stopped by a speedy and vigorous public exposure of their activities.

It remains to be demonstrated in the future how effective a deterrent the committee's spotlight may be when focused on more sinister and violent offenders.

DISCUSSION A. THE WORK OF THE COMMITTEE TO DATE The committee was authorized by Senate Resolution 202 adopted on May 3, 1950. It held several organizational meetings pending the signing by the President of Senate Joint Resolution 176 on May 17, 1950 (Public Law 515, 81st Cong., 2d sess.) This resolution authorized the appointment of counsel and staff along lines deemed necessary to the committee's operations. Since then the committee has held 15 days of executive meetings at which 71 witnesses were heard, and it has held 11 days of open hearings at which 61 witnesses were heard.

In addition, the committee has corresponded with 918 mayors, attorneys general, chiefs of police, and district attorneys throughout the country to ascertain their views on subject matters of the committee's investigations. It has held numerous and almost continuous conferences with persons expert in the field of crime, such as law-enforcement officers, newspaper editors, crime reporters, and criminologists.

It has set up an extensive filing system in order to correlate material gathered by crime commissions in the various States and by law-enforcement officers, both of the United States and in the respective States. It now has the nucleus of what will ultimately be an extensive and complete file of known criminals conducting substantial operations on an interstate basis.

The committee has received and processed more than 1,000 letters from members of the public volunteering information, much of which is proving valuable. A considerable amount of this information comes from specially qualified and informed sources. This material is being classified, analyzed, and followed-up.

The committee has set up its investigations primarily on a geographic basis seeking to explore as expeditiously as it can the operations of organized criminal groups in the various areas where interstate activities clearly exist. As the committee has progressed further in its investigations in each locality, it has discovered lines of correlation in connection with various subject matters. The committee expects to be able to ascertain the nature and ramifications of these interstate activities by tying together the findings made in the various localities.

The committee and its staff members have enjoyed the fullest measure of cooperation from a number of Government departments which have law-enforcement divisions. The committee would here like to express its appreciation of this cooperation to the Treasury Department, the Bureau of Internal Revenue, the Bureau of Narcotics, the Immigration and Naturalization Service, the Customs Bureau, the Alcohol Tax Unit, and to the Department of Justice, the Attorney General's Office, and the Federal Bureau of Investigation.

The thanks of the committee are due also to the crime commissions of a number of States and cities, among them the Crime Commissions of Greater Miami, St. Louis, Kansas City, Chicago, and the State of California.

The activities of the committee have received the widest publicity on the part of press and radio; by thus bringing sharply to the attention of the people the existence of organized criminal operations on such a large scale they are performing a public service of the highest order. Perhaps the best proof of this was the admission by members of the S & G Syndicate that the publicity given to the committee's revelations of the extent of gambling and corruption in Miami and Miami Beach was the biggest factor in compelling the dissolution of this illegal multi-million-dollar gambling syndicate.

B. FINDINGS RELATING TO FLORIDA The committee held executive hearings in Florida on May 26 and 27, 1950. At that time it heard a total of 13 witnesses and subpenaed the books and records of the Greenacres Casino, Club Boheme, the Colonial Inn, the Farm Casino, the Club 86, the Hotels Wofford and Boulevard, and a great number of records relating to the individuals active in these and other gambling enterprises in the cities of Miami and Miami Beach and elsewhere in Broward and Dade Counties, Fla. The testimony at the executive hearings established substantially that large numbers of known gangsters and racketeers from New York City, Philadelphia, Detroit, Cleveland, Chicago, and other cities gathered together in Miami and Miami Beach and consorted at certain meeting places, including the Wofford Hotel, the Boulevard Hotel, the Sands Hotel, the Grand Hotel, and others.

These gangsters and racketeers operated at the Colonial Inn, the Greenacres Gambling Casino, the Club Boheme in Broward County, and the Island Club, and Club Collins in Dade County.

The group operating at the Colonial Inn, which has since transferred its activities to the Club Greenacres and the Club Boheme, included Frank Erickson, of New York; Joe Adonis, of New York; Meyer and Jake Lansky, of New York; and Mert Wertheimer, of Detroit. These operations show tremendous profits, the net reported income totaling $348.821.48 in 1948 and $509,073.44 in 1949. In addition, they operated what was known as the “big New York craps game," conducted by William Bischoff and Joseph Massei. This cash operation of a single craps table yielded $222,056.47 in reported income for the 1949 season.

The closed hearings established that bookmaking on a large scale was conducted in Miami and Miami Beach and in West Palm Beach, and it indicated that the bookmaking was an interstate operation. From the closed hearings the conclusion was drawn that the sheriffs of Broward, Dade, and Palm Beach Counties must have known of the open and notorious gambling and law violations but made no effective efforts to stop them.

The closed hearing also developed that Frank Erickson, acting through Abe Allenberg, an attorney, invested upward of $250,000 in the Tropical Park Race Track in 1935; that Erickson's chief associate was John Patton, Sr., prominent in Chicago racket activities for years, and an associate of William H. Johnston. Both Erickson's and Patton's interests were sold in 1941, at which time Erickson financed Allenberg in the operation of the Wofford Hotel. This was a joint operation in which there also participated John Angersola (Johnny King) of Cleveland and Anthony Carfano (Little Angie Pisano) of New York. The Wofford then became the meeting place for notorious racketeers and gangsters from all over the country, and headquarters for Erickson's very extensive bookmaking operations in Florida, which included concessions at the Roney Plaza, Boca Raton, and Hollywood Beach Hotels, and very :large-scale illegal bookmaking activity within the confines of the various Florida race tracks. There at the tracks, Erickson's agents accepted bets from customers, using the Wofford Hotel and the Boulevard Hotel as their headquarters and utilizing the banking facilities of these hotels for cashing checks tendered in payment of lost wagers on horse races. Balances and results were transmitted to Erickson in New York and New Jersey. It is possible that this activity involved a scheme to defraud the State of Florida of taxes, which may render those involved subject to prosecution under the Federal mail-fraud statutes.

Questioned about his contributions to political campaign funds, Allenberg said that in 1947 he had bought 10 tickets to a Democratic fund-raising dinner for $2,500 but that they were actually paid for by Erickson.

Extensive bookmaking in West Palm Beach and at the Boca Raton Hotel, including interstate activities, was admitted by John O'Rourke, another bookmaker and former operator of a gambling establishment with crap tables and other games. O'Rourke disclosed that he had handled bets for Mickey Cohen, California hoodlum, via long-distance phone calls made daily from California to Florida. In settling their accounts O'Rourke transmitted payments totaling approximately $60,000 to Cohen through the mails by checks drawn on his Florida bank and by wire via Western Union Telegraph Co.

After the conclusion of the executive hearings, the committee conducted a staff investigation until July 13 when it opened its public hearings in Miami.

CRIMINALS GATHER IN MIAMI The public hearings developed more fully that the Miami area had become a gathering place for racketeers from all over the country; that criminals brought substantial assets into this area and invested in both illegitimate and legitimate enterprises; that they continued to gather and consort together and conspire to violate the laws of the State of Florida.

Appended to this report are two charts received in evidence at the Miami hearings. One, captioned "Gambling," shows the top gambling establishments in Broward County and the names of the individuals financially and otherwise interested in each.

The other chart, captioned "Hotel Operation," shows graphically the known racketeers making each of the named establishments their Miami Beach headquarters, further augmented by their gangster affiliates and associates. In all cases, the place of residence of the individuals is also given.

The committee heard further corroboration at these open hearings with regard to the almost unrestricted operation of bookmakers and gamblers in Dade and Broward Counties. Horse books operated openly in most of the hotels. A considerable number of plush gambling casinos with crap games. roulette games, and card games were opened to the public and could be visited readily by anyone desiring to do so. In certain cities, bolita, and other forms of numbers games, flourished and one such operation was conducted by a partnership in which Walter Clark, the sheriff of Broward County, was a major participant and from which he derived the greater portion of his income.

Under these circumstances, the committee's interest centered upon the effect of such activities on local government and the reasons why criminals from all over the Nation were able to operate in this way. It became clear that the concentration of economic power brought into the community from outside, by criminals enabled these undesirable persons to control local government and to corrupt substantial portions of the community.

Certain public officials testified of abortive efforts which had been made to curb gambling and corruption. Walter Morris, the foreman of a grand jury which sat in Miami, testified to the findings and presentment of the grand jury that bookmaking existed on a large scale and on an organized basis, and that law enforcement had broken down to such an extent that bookmaking, card games, dice games, roulette, bolita, and a number of rackets were operating under the eyes of the police who made virtually no effort to curb them.

ENFORCEMENT OFFICERS NONCOOPERATIVE Judge Stanley Milledge of the judicial circuit that includes Dade County testified that on one occasion when he had taken independent action by appointing elisors to serve a. warrant on a gambling establishment, the police officers who appeared on the promises while the raid was in progress sought to hinder the elisors in the performance of their duty.

Daniel P. Sullivan, operating director of the Crime Commission of Greater Miami, a private organization of public-spirited citizens, testified extensively as to the particular criminals and their individual operation, and he stated that his commission had not been able to obtain cooperation from the sheriff of Dade County.

Hon. Richard Ervin, attorney general of the State of Florida, testified that wire service was provided to 140 drops in south Florida by Western Union Telegraph Co., and that after Western Union was forced to discontinue this service, it was then provided by long-distance telephones. He stated that this service was provided by Continental Press Service as part of a Nation-wide wire service. Said Attorney General Ervin:

A lot of people say it is not right for the Federal Government to encroach on our law enforcement, but the picture is well known about the tie-ins of this wire net-work and all the people who are a part of it. They are encroaching on us and the morals of our community and we need the help of the Federal Government. When I ran for office, I didn't realize what the implications were. I didn't realize the moral and economic points involved in it, but there is no question in my mind, Senator Hunt, but what we. are having a moral reawakening in this community and in the State. They say, too, that people are going to gamble regardless of what you are going to do. They say it is necessary for the tourist business. I think they are mistaken.

SYNDICATES RICH AND POWERFUL Attorney General Ervin also testified that the bookmaking and gambling in Florida are dominated by syndicates with men in them so powerful and wealthy that they can bribe and influence public officials.

Melvin J. Richard, a councilman of the city of Miami Beach, testified that Phil Short, a lieutenant of the Miami Beach police force, who formerly had been chief of police, admitted to him that he had orders from the city manager to refrain from raiding gambling operations. Short admitted to Richard that the operations could easily be closed down and that on two occasions they had been closed down, but he stated that he, had been ordered to allow the gambling to stay open. Much of Richard's testimony was corroborated by the transcript of a telephone conversation with Short, which Richard had recorded with a wire recorder. Efforts were made to get Richard to "go along with the syndicate" and when these failed a petition was circulated for his recall. Ben Cohen, attorney for S & G Syndicate, was one of the principal movers of this petition. Richard was also vigorously opposed over radio station WMIE. Principal stockholder of this radio station is Arthur B. McBride, whose son, Edward J. McBride, is the sole owner of Continental Press Service.

Short testified and substantially corroborated Richard's story. He also said that when he was chief of police he simply refused to have anything to do with the enforcement of the gambling laws and deputized that task to a member of the police force, Pat Perdue, whom he told: "You understand what these fellows are doing. Just carry on. I don't want to know anything about the bookmaking or how they run it."

The testimony with respect to Miami Beach showed unequivocally that the S & G Syndicate, a partnership consisting of five persons up to 1949 and six thereafter, conducted the largest organized bookmaking operation. In 1948 alone this business, according to its own books, grossed over $26,500,000 in bets. In that year it reported a net income of $166,504. This figure of nearly half of million dollars is only the reported profit of the partnership. It does not include the profits of numerous bookmaking agents, the profits of the wire service furnishing racing news, the salaries and wages which were reported at over $450,000, the profits which hotels made by renting booking concessions for as much as $45,000 for a 3-month season, nor possible graft payments to law officers.

The S & G Syndicate did not keep adequate books and records on its large cash transactions. But by using a mathematically established minimum gross return of 15 percent, it is possible to compute a minimum gross return to the syndicate for one year of $3,975,000 in 1948, assuming that the gross bets were correctly reported at about $26,500.000. Deducting the expenses claimed by S & G for 1948, the net profit of its five members would be over $2,000,000 on this basis.

But the public testimony of one bookmaker, which was corroborated by private information gathered from others, indicated that the gross bets handled by the S & G Syndicate in the course of a year may well be in excess of $50,000,000. This estimate is based on information as to the amount of money handled daily by the average bookie and the number of bookies operating for the S & G Syndicate.

BOOKMAKERS CHARGED FOR PROTECTION The S & G Syndicate in reality itself operates each bookmaking establishment to which it provides wire service. In many instances it finances the operation. In all instances it takes a certain service charge for the wire service, plus a certain additional service charge for miscellaneous expenses, such as providing protection, and in addition it receives half of the profits of each bookmaker's operation. Most of the bookmakers are, in effect, only employees of S & G. One bookmaker testified that he had to pay S & G $75 per week for "ice" but had never seen the "iceman." This bookmaker, like almost all of the others, was compelled to give up his independent operation and was forced to become an S & G bookie.

S & G has had a firm grip on the Miami Beach City Council, which controls the city manager and the police department. At least one member of the city council has had extensive and profitable business transactions with one member of the S & G Syndicate. The city council never took any action to interfere with the operations of the syndicate. The police feared to act without instructions from above.

The individual bookmakers understood that they would be arrested from time to time; that their fines would be paid out of the profits so that S & G would participate in one-half of the fine if the bookie did not have it; and that after the fine was paid, the bookmaking operation could continue unmolested. The bookmakers were almost always represented by an attorney named Ben Cohen, a brother of Sam Cohen who is a member of the S & G syndicate. There is concrete testimony on the record that Ben Cohen appeared on the scene of gambling raids almost immediately after the police, and the evidence indicates that S & G had information in advance about raids which were to be conducted.

Obviously, this lucrative and well-protected business was too good a thing to remain unchallenged by outside interests. First, Frank Erickson succeeded in obtaining the gambling concession at the Roney Plaza Hotel in the face of the competition of the S & G Syndicate. Erickson was also able to obtain a one-half interest in the gambling concession at the Boca Raton, also operated by the same interests. The rental paid by Erickson for the bookmaking concession at the Roney Plaza was $45,000 per season; at the Boca Raton it was $22,000.

S & G Syndicate bitterly fought Erickson's competition at the Roney Plaza Hotel. Meyer Schine, owner of the hotel, testified that Pat Perdue, the Miami Beach detective who was in complete charge of enforcing gambling laws by order of Chief of Police Short, attempted to dissuade him from giving the concession to Erickson and urged him to give it to the local syndicate. Shortly after Erickson obtained the concession, the Roney Plaza was raided by Perdue and the con-cession was forced to discontinue. Great publicity was given to this raid as contrasted to raids on other hotels which were not widely publicized and which usually resulted in a fine with the gambling allowed to be resumed.

CHICAGO GANG MUSCLES IN A second and much larger encroachment on the local operation of the S & G Syndicate took place in 1949 immediately after the election of Gov. Fuller Warren.

In January of 1949, there appeared in Miami a special investigator for the Governor, named W. O. Crosby. He proceeded to the office of Sheriff Jimmy Sullivan of Dade County and asked for assistance in conducting raids on certain gambling establishments. The places raided were all S & G bookies. Crosby admitted on cross-examination that he received his information from Harry Russell, well-known Chicago racketeer, and associate of Capone syndicate members, with whom he stated he became friendly. He did not make the acquaintance of any of the S & G members.

A mutual friend of Crosby and Russell was William H. Johnston, who has had a long career of close association with Chicago racketeers of the Capone gang, and who was one of the three men who each contributed large sums of money to the campaign fund of Governor Warren. During the Crosby investigation Crosby met with Johnston on several occasions and Russell also met with him at least once, but Johnston denies that they discussed the investigation. Johnston's attorney, John A. Rush, of Jacksonville, admitted under cross examination that he had had a partnership in certain gambling establishments in the Jacksonville area. Rush also has known Harry Russell for about a year and a half, although he testified that he did not know any other S & G members. During 1949, Rush received a $10,000 fee from the S & G Syndicate for work in drafting a bill legalizing the gambling business. The work described by Rush and the file produced by him to show his work were both nebulous and scanty and could hardly justify a substantial fee. Rush testified that he has known Crosby for at least 6 or 8 years, and Johnston testified he had known Crosby 4 or 5 years.

At about the same time, the Continental Press Service, distributors of the racing wire news, cut off the wire service to Miami Beach so that the S & G Syndicate was left for a period of about 10 days without any wire service. The committee has information that bookmakers in other sections of Florida attempted to supply Miami Beach with this information by long-distance telephone and that as a result of their doing this, the wire service for the entire State of Florida was cut off by the distributors.

At about the same time, C. V. Griffin, a $154,000 contributor to the Fuller Warren gubernatorial campaign, was named a special investigator by the Governor to look into gambling, but he testified that his commission was revoked immediately after Johnston paid a visit to Tallahassee. Johnston admitted having had lunch with Governor Warren on the day in question but denied having discussed the revocation of Griffin's commission.

A third large contributor to the campaign fund was Louis Wolfson, who also contributed about $150,000 but who apparently had no connection with any other matters discussed herein. Yielding to all this pressure, the S & G Syndicate accepted Russell as a partner. Russell was given a full participation. Russell's background is that he is the operator of a bar and grill and bookmaking establishment in Chicago and a close associate of one Ralph Pierce, a notorious Capone gangster. There is no showing that Russell could contribute anything to the success of S & G. The syndicate had a very profitable year in 1948 and was not in need of funds and the testimony is that Russell had no technical qualifications which could help. It appears perfectly clear to the committee that Chicago interests had decided that they should be permitted to participate in this lucrative illegal enterprise, and through Russell "muscled" their way into the lush Miami territory.

LAW ENFORCEMENT The sheriff of Broward County, Walter Clark, testified that he believed in a "liberal policy," and that he did not believe that he was elected to close gambling establishments. In his testimony in the executive hearing he neglected, although carefully and closely questioned, to list among his assets his partnership interest in the Broward Amusement Co., later known as the Broward Novelty Co., which the committee subsequently learned operates an illegal bolita and slot-machine business

During 1945 to 1947, the gross sales from this illegal bolita and coin (including slot) machine business, amounted to approximately $1,135,420.43, of which sum, Sheriff Clark's and his brother Robert's share in 1945 was declared by them as $12,910.89 each, representing one-quarter interest each in this business. In 1946, their declared income amounted to $16,710.09 each from this business, while in 1947, they declared an income of only $4,221.15 each. During this period Walter Clark's income as sheriff was not in excess of $6,500 a year.

Further, Sheriff Clark admitted deputizing the guards who ran the armored trucks in which Broward County gamblers transported their bank rolls, and in which armored-car service his brother Robert had an interest. The persons so deputized were paid by the Rolfe Armored Car Co.

Clark testified that he did not know about the gambling at the Green Acres and Boheme Club, where in a. 4-month season in 1949 the admitted gross receipt amounted to approximately $1,600,000. However, he did state that he was compelled to close Green Acres for a short period as a result of complaints of neighbors resulting from it disturbance on the premises. On this occasion, he found gambling, but he never went back to check on the matter after the club reopened. His testimony is in direct contradiction with that of employees of these clubs who state that the gambling was open and notorious and that any member of the public could walk in and see it.

The committee is of the opinion that Sheriff Clark failed to state the full and correct facts in his testimony before the committee, both at its executive and public hearings.

Clark admitted that his election campaign managers received substantial help from gangsters engaged in the gambling business in his county. He specifically mentioned Jake and Meyer Lansky, notorious racketeers with large interests in the Colonial Inn, Green Acres, and Club Boheme. His testimony as to his wealth shows that he has accumulated considerably more than could be accounted for by his rather limited salary.

SHERIFFS GROW WEALTHY Clark admitted that he had made an investment of about $25,000 in the Ribbonwriter Co. which he said was put in his name but was for the account of his brother, Robert. The Ribbonwriter Co. made a substantial loan from the Reconstruction Finance Corporation, which is under investigation by a subcommittee of the Senate Committee on Banking and Finance. He also admitted an investment of $30,000 to $35,000 in a garage and admitted the possible correctness of testimony received by the committee that this investment was made in cash in $5 and $10 bills. Robert Clark's net worth was estimated in 1940 at about $18,000, as contrasted to almost $300,000 in 1947. Both Sheriff Clark and his brother had extensive real estate and business holdings. There is no doubt that he completely failed in his duty to enforce the laws of the State of Florida and that he not only aided and abetted violations, but that he personally participated in a major violation.

In Dade County, which adjoins Broward County, Sheriff Jimmy Sullivan also testified, incredibly, that he was not aware of law violations. Here, as in Broward County, the testimony is uncontradicted that bookmaking and other forms of gambling are on a wide-open and notorious basis. Complaints were made to the sheriff by the grand jury, the crime commission, and others, but the sheriff took no effective action.

On the other hand, during his 5-year tenure in office, the sheriff's assets increased from about $2,500, which in 1944 he stated to be his net worth in an application for a bank loan, to well over $70,000 by his own admission, and at least one of his deputies who appeared on the stand made enough money in 4 years to retire to a $26,000 farm. Sullivan testified that he did not trust banks and sometimes as much as $12,000 wrapped up in a blanket in his home. He also sometimes kept his money in an old fishing box. In this respect his distrust of banks was like that of his deputy, Burke, who avoided banks and kept his cash money in a tin box. Approximately $10,000, which Sullivan termed "unexpended political contributions." was retained and pocketed by him in 1944 and 1948. Sullivan testified that he is now amending his income-tax returns for the years 1944 through 1948, admitting large deficiencies in income reported during those years. Sullivan explained that these were an error by his accountant, but this explanation appears to the committee to be implausible.

DEPUTIES CHARGE CORRUPTION Three former deputy sheriffs testified to actual corruption in the sheriff's office and stated that they were instructed to refrain from making arrests for bookmaking. One of these was fired from his job after making inquiries about a certain bookmaking establishment. The sheriff claims that he fired this man because he was running for public office, but his testimony in this respect appears to be inconsistent with the facts, inasmuch as the man the sheriff fired never ran for public office. Another deputy who resigned voluntarily after the first was fired did file for public office about 3 months later. This apparently induced the sheriff's story, but Sullivan admitted that he did not fire other deputies who ran for similar public offices.

Much of Sullivan's testimony was vague and evasive and the committee does not consider it credible.

The testimony of several of the other witnesses is similarly unworthy of belief. The committee is impelled to state for its record that in its opinion portions of the testimony of the witnesses Rush, Burke, Johnston, Cohen, Jules Levitt, Leo Levitt, Saivey, Rosenbaum, and William Burbridge, city councilman of Miami Beach, appeared to be inconsistent with the facts developed by the committee and were in many cases evasive.

C. FINDINGS RELATING TO CRIME ELSEWHERE IN THE UNITED STATES The committee has heard convincing testimony from a number of witnesses, and particularly from Virgil W. Peterson, operating director of the Chicago Crime Commission, and Harry Anslinger, Commissioner of the Bureau of Narcotics, which indicates that substantial segments of the crime picture in many communities are tied into one or more Nation-wide syndicates which operate interstate on a large scale. Commissioner Anslinger testified that a great many of the criminals engaged in these syndicates have previously been in the narcotics trade, many of them having been convicted. They appear to turn to whatever form of criminal activity can be monopolized, so that it will produce the greatest amount of profit in a short time.

An essential general characteristic of the operations of these criminal syndicates wherever the committee has looked into them is an attempt to monopolize by the use of intimidation, physical violence, connivance or assistance of public officials, or political pressure. Usually these criminals indulge in political activity in order to obtain protection for themselves and oppression for their competitors. They contribute generously to local benevolent and philanthropic organizations to gain public good will. These contributions, of course, are deductible from income for tax purposes.

At the moment the chief known source of income of these gangsters is gambling. They appear particularly to have been active in obtaining the monopoly now enjoyed by Continental Press Service, race wire distributor, and by its regional and local distribution agencies. Although it is maintained by Continental Press Service and also by the individual racketeers that there is no connection between them, it would appear to be more than coincidence that Continental Press Service and its distributors enjoy a monopoly which has been forcibly established by these closely knit groups of gangsters.

In every city the committee has checked, there have been many similarities to the pattern disclosed in Florida. Many profitable criminal activities have been infiltrated or absorbed by them. In some cases violence has been used and in others corrupt political influence. In every case, the operations have been possible because of the connivance and acquiescence of local enforcement officers. The committee has direct evidence of the corruption of at least some of these officers.

RACKETEERS INFILTRATE LEGITIMATE BUSINESS Similarly these criminals have invested large sums of money in enterprises which are normally considered legitimate. In most cases, these are enterprises in which gangster methods have been used to obtain monopolies so that their vicious practices taint otherwise legitimate business. They have particularly been attracted to enterprises in which large amounts of cash are handled or which have had black-market profiteering potentialities, such as hotels, restaurants, night clubs, meat and provision companies, liquor stores, beer and whisky distributorships, automobile dealerships and distributorships, small steel companies. Recently transportation companies and public utilities, which have large purchasing programs, have been added to the list. They control some banks and are in a position to provide large sums of cash capital for many purposes.

They are able to compete unfairly with legitimate businessmen because of their accumulations of cash and their vicious methods.

The committee has specific factual data with regard to most of these matters. The general conclusions are not any longer a subject for conjecture. However, with the exception of Miami, where the committee has already held public hearings, it will refrain from further specification at this time and defer naming specific individuals and companies until its later reports.

It is also noteworthy, in the opinion of the committee, that not only is there a similarity of pattern of operation between the organized criminal gangs of the present and those that made such a lawless shambles of the Prohibition Act, but there is also a continuity of identity of the groups and of those individual members who have survived.

In the sphere of organized gambling as surveyed nationally by the committee are to be found many racketeers who established the basis for their long criminal records as members of the Capone gang in Chicago, the Costello gang in New York, the Purple gang in Detroit, and so on over the country. Virtually all of these gangs survived the demise of prohibition; reactivated, they have turned with new vigor and with the profit they were able to hoard during the bootlegging twenties to a new and probably more lucrative racket -- organized gambling.