The Outfit

by Russo, Gus

  When the operation reached fruition in 1998, three Mexican banks, dozens of their executives, and high-ranking members of the Mexican government were shown to be involved in the drug cartel’s money-laundering scheme. Although this part of Operation Casablanca was widely reported in the U.S. press, what was not covered was the complicity of U.S. financial institutions in the massive lawbreaking. One of the customs officers involved told investigators Denton and Morris, “Not a dollar was laundered by a Mexican bank that wasn’t in a U.S. account under American scrutiny at one time or another.” Based on their research, Denton and Morris concluded: “Operation Casablanca would document over a hundred money-laundering accounts in the case tracing to more than seventy U.S. banks, including many of the nation’s most powerful and respected - among them, Chase Manhattan, Banker’s Trust, Bank of New York, Chemical Bank, Citibank, Great Western, Nationsbank, Norwest, American Express Bank, and scores of others.”

  Denton and Morris found that in just the Florida banks implicated, the fraudulent trade transactions conducted by the banks to cover the laundering cost the American public $50 billion per year in lost tax revenue.

  Despite the discoveries of Operation Casablanca, no U.S. banking executive has even been charged, nor will they likely be.

  Another way the upperworld facilitates the money-laundering desires of the cocaine traffickers is by allowing them to purchase hundreds of millions of dollars in U.S. goods, which are then shipped to South America to be resold legally. The companies involved include many on the country’s most high-profile corporations. In 2000, IRS investigator Michael McDonald told PBS’s Frontline producer Lowell Bergman for his “Drug Wars” program, “Most of these companies know that they’re getting paid with money that comes from the black market. And the black market is fueled by the drug trade.” Greg Passic of the DEA told Bergman, “We’ve got the Fortune 500 involved in our drug-money laundering process.” The legal concept is known as ’willful blindness,’ and although hundreds of major U.S. firms are known to be committing it daily, no executive has even been charged. But interestingly, cigarette giants Philip Morris and British American Tobacco have been accused in a Colombian civil action of laundering drug money through sales of their tobacco products.

  All told, according to the U.S. Chamber of Commerce, white-collar crime accounts for a minimum $40 billion annual loss to the U.S. economy, above and beyond the tax issue. And yet John Gotti’s life in prison still gets the lion’s share of press attention.

  Government Crime

  The abduction of half a million Africans and the holocaust perpetrated against the Native American culture were but the first chapters in the history of government-sponsored organized crime. Although every stratum of officialdom has been implicated, the example has often been set at the very top: The administrations of Presidents Ulysses Grant, Martin Van Buren, Warren Harding, and Harry Truman were all tainted by scandals involving influence peddling and insider profiteering. Lyndon Johnson rose to prominence via fixed senatorial elections in Texas; Dwight Eisenhower installed a dictatorial shah in oil-rich Iran, against the desires of the populace, resulting in the murders of hundreds of thousands of dissidents; John F. Kennedy’s father enlisted the underworld in his son’s cause; Richard Nixon conspired to prevent the incumbent president, Lyndon Johnson, from succeeding in arranging Vietnamese peace talks in 1968 and then, as President, presided over the deaths of two million Asians and authorized the wholesale trampling of the U.S. Constitution to save his political skin; Ronald Reagan’s aides blocked the release of the Iranian hostages to prevent President Jimmy Carter from winning the 1980 contest; George Bush presided over the slaughter of hundreds of thousands of Iraqis to keep U.S. oil interests assuaged; and George, Jr.’s administration backed the Olympic bid of repressive China (which executed seventeen hundred political prisoners in 2000 alone), largely to appease the expansionist interests of U.S. upperworld businesses.

  In 1932, the U.S. Public Health Service began a forty-year project to withhold curative treatments from four hundred black male syphilis sufferers in Tuskegee, Alabama. The men, who were regarded as guinea pigs not unlike the Jews in Hitler’s World War II death camps, were not even told of their illness. When the abomination came to light in 1972, an Alabama court awarded the survivors, many of whom were now blind or insane, the grand total of $2.50 for each day they had been in the experiment. Unlike at Nuremberg, no one was ever imprisoned.

  Toward a New Definition of “Organized Crime”

  For those Americans not in denial of their history, the term organized crime has always meant something other than Al Capone, Mooney Giancana, or Meyer Lansky. Without doubt, the best organized crime in the United States is a coalition of upperworld businessmen, pliant politicians, and corrupted law enforcement officers. “Corruption is as American as cherry pie,” wrote author and former Senate staff member Nathan Miller. “Graft and corruption played a vital role in the development of modern American society and the creation of the complex, interlocking machinery of government and business that determines the course of our affairs.”

  The crimes of this shadowy partnership surpass in spades the criminal escapades of underworld cliques like Chicago’s Outfit. However, this very upperworld paradigm gives both rationale and inspiration to the underworld gangsters we choose to vilify in their stead. As a society we no longer have to purchase our vices from gangsters: We can merely sit at home and, thanks to the General Motors-owned DirecTV, have pornography delivered straight to our television sets (or to our Hilton Hotel room in Vegas); through state-sponsored commercials, we are enticed to play the G’s lottery, a game so tilted in the state’s favor as to make the hoods’ numbers racket seem like charity.

  A modest proposal: Both the press and the Justice Department should suspend their infatuation with gangsters and instead direct their resources toward the criminals who, in proportion, deserve the long overdue attention. There is little belief here that this will or can actually happen unless the citizenry demands it. It is my earnest hope that this book will in some small way help awaken the sleeping giant.

  1. Pretty Boy Floyd by Woody Guthrie Copyright t 1958 (renewed) by SANGA MUSIC, INC. All rights reserved. Used by permission.

  Appendix :

  The Outfit and Gambling

  It has been called the “meat and potatoes” of organized crime, providing an uninterrupted flow of income for the nation’s generations of hoods. Gambling was also a close runner-up to booze and sex as the most desired vice secretly coveted by the repressed Puritans of early America. Boston mob boss Vinnie Teresa opined, “Gambling is the standby and the foundation. From it comes the corrupt politicians and policemen, the bribes and the payoffs, and sometimes murder. If you could crush gambling, you would put the mob out of business.”

  Gambling, like alcohol consumption, was recognized by the nineteenth-century Euro immigrants as a fundamental human drive that would probably someday be legalized. Luckily for them, it wasn’t yet, allowing the new arrivals to have the playing field to themselves if they so desired. The early gangs knew what it took officialdom many years to admit. In 1985, law professor Jerome Skolnick told the President’s Commission on Organized Crime something it probably already knew: “Clearly, gambling is not perceived as a deplorable evil by an overwhelming majority of Americans.” Dr. Gustav Carlson, a sociologist and gambling expert, pointed out that gambling is a universal human activity.

  Although gambling is most obviously tied to the genetic mandate for self-preservation (i.e., money = security), Skolnick pointed out that there was much more to the subject. He noted that the compulsion to gamble is an extremely complex drive, but is clearly linked to a person’s desire to exponentially increase his interest in any event he or she is observing. “Gambling seems, above all, then, to offer self-interested recreational involvement,” Skolnick said. And it does not take a large wager to greatly affect the gambler’s interest in an observed event. “A ten-dollar bet is what keeps a Chic
ago fan from turning off a televised football game between Miami and Chicago,” Skolnick testified. The eminent University of California scholar went on to point out the many paradoxes in the long history of illegal gambling, especially noting the otherwise antigambling Catholic Church’s flourishing bingo enterprises. Social scientist Robert Herman, writing in Gamblers and Gambling, asserts that the tug of gambling is also linked to the need for personal autonomy. Herman wrote, “[Gamblers] seek an activity that allows them to set themselves individually apart, to establish their distinctiveness, and their autonomy.”

  Skolnick also addressed the more serious gambling associated with horse racing and casinos, noting that “deep play” was a mark of social status dating back to sixteenth-century English noblemen. Anthropologist Geoffrey Gorer, in The American People: A Study in National Character, called the gambler’s winnings “the adult equivalent of the marks and grades which signified the schoolchild’s relative position in regard to his fellows.” Legendary Las Vegas oddsmaker Nick the Greek perhaps summed up all the theorizing most succinctly: “Money is just a way of keeping score.”

  It is doubtful that Joe Accardo and his crew spent any time debating the allure of gambling. But they certainly were experts in the ways of satiating the gamblers’ cravings. Like alcohol, gambling (especially lotteries, off-track betting, and slots) would eventually be legitimized by the upper-world. But until that day, gangs like the Outfit were more than happy to fill the supplier void.

  Chicago enjoyed a long history with gamblers and their culture. And since the days of nineteenth-century gambling czar Mike McDonald, Chicago officialdom happily looked the other way - at least as long as the graft kept flowing. After McDonald, Jacob “Mont” Tennes took up the baton, using the newly devised telegraph wires to transmit instant horse-racing odds and results to “handbook” operators (authorized bet-takers operating in poolrooms and bars). In 1911, Tennes spent a rumored $20,000 to insure the election of Mayor Carter H. Harrison. Former director of the Chicago Crime Commission (CCC) Virgil Peterson wrote: “With the election of Harrison it was commonly understood that gambling would be permitted to flourish without interference from the police.” The CCC learned that the number of gambling establishments in the Loop was doubling every two months. Harrison’s City Hall and police department were even found to have sided with Tennes in his war with the wire service competitor, the Payne New Agency. A Civil Service Commission inquiry concluded that the pols had conspired with Tennes’ General News Bureau to drive out “nonsyndicate” gamblers, essentially guaranteeing an uninterrupted flow of payoffs to the corrupt officials. It also guaranteed the constant reelection of Harrison, who served for five terms.

  After the Tennes-Harrison association came the Capone-Thompson arrangement, which permitted the Capone Syndicate to propagate in the twenties. Now, with Capone’s heirs running the games, the latest pushover to occupy the mayor’s office was the notorious Ed Kelly. When Outfit adversary Mayor Anton Cermak was assassinated in 1933, it fell to Cook County Democratic Party chairman Pat Nash to appoint a successor. Nash, a tax cheat to the tune of $175,000, chose the even more corrupt chief sanitation engineer, Ed Kelly, to assume the mayoralty. Kelly had already been indicted three times for fraud involving civil workers who had grown rich off patronage without having worked a single day. Kelly later admitted that, while with Sanitation, he had an annual salary of just over $13,000, but a total income of $66,000.

  In the years after Kelly’s mayoral ascension, the Internal Revenue Service found that he had grossly underreported his income. It seemed Kelly had earned at least $750,000 per year above his salary from “incidental income” - in other words, graft. That estimate may have been conservative. The Chicago Crime Commission estimated that the Kelly-Nash machine received $20 million per year from the Outfit alone to allow its gambling empire to proceed undeterred. “The fix is in at the top,” said one local observer. The CCC’s Virgil Peterson called the Kelly-Nash machine “one of the most ruthless political organizations in American political history.” The machine operated smoothly for fourteen years, thanks in large part to the self-perpetuating nature of the patronage system and the flagrant vote fraud that accompanied Kelly’s reelections. Adding in the muscle of the Outfit for good measure, Chicago had the greatest vote-producing machine in American history.

  Much like Volstead’s nonimpact on America’s thirst, the outlawing of gambling parlors in the nineteenth century only forced the players to go underground, and not very deep at that. Thus, before legalized casino gambling in the twentieth century, the only place a blackjack, craps (dice), or poker aficionado could obtain any real action was at illegal gambling parlors run by the local crime syndicate. Often, the big-stakes players were forced to locate a movable feast, otherwise known as a floating game. In this version, only gamblers who were known to the organizers were directed by intermediaries to the one-night-only site for the big game, usually in a well-guarded rural locale.

  The Chicago underworld not only profited from indoor table games, but from outdoor sporting events such as horse racing. It is generally believed that Al Capone became involved in the races in 1927. At the time, the sport of kings was in transition. When horse racing debuted in nineteenth-century Europe, it was the domain of the leisure class. However, the lower classes soon co-opted the sport for themselves, not by competing for ownership of the expensive equines, but by wagering on the races they ran. This led to rampant race fixing by anyone with access to the stables: jockeys, trainers, stable boys, etc. In America, the Whitneys and Vanderbilts were shocked to learn that their “pets” were being routinely doped, jabbed with electric prods, or raced under false names. In 1894, industrialist J. P. Morgan joined banker August Belmont in providing low-interest loans to a failing U.S. Treasury. Their resultant influence in Washington virtually guaranteed that the government would take a laissez-faire attitude when Morgan, Belmont, and others set up their own racing monopoly in New York, The American Jockey Club. This trust gave the upperworld total control of licensing for jockeys, trainers, and owners. In 1905, Morgan and Belmont built Belmont Park racetrack in New York.

  But the abuses continued unabated, and pressure mounted from prohibition-type reformers to enact the thoroughbred version of Volstead. Much as they would with the sale of alcohol, most states outlawed horse racing altogether during a reform wave in 1908. Some entrepreneurs, such as Kansas City boss Tom Pendergast, ran “underground” horse-racing tracks despite the bans. By the 1920s, operators like Al Capone embraced dog racing, as yet not rendered illegal, as their entry-level sport. Fronting for Capone, before the ascent of Accardo, were Johnny Patton and “Artful” Eddie O’Hare, nicknamed for his sartorial splendor. Patton was known as the Boy Mayor, being the twenty-five-year-old mayor of the Chicago suburb of Burnham. He was known to associate with the Syndicate since at least 1925, when he convinced Johnny Torrio to purchase the Arrowhead Inn and convert it into a brothel/saloon (see Prologue). Torrio made Patton the club’s manager, and Mayor Patton hired his chief of police to tend bar while many Burnham town officials moonlighted as waiters. That same year, 1925, the Boy Mayor was briefly arrested with Frank Nitti. After Torrio returned to New York, Patton was absorbed first into the Capone gang, for whom he also dabbled in political fixes, and eventually the Outfit.

  A natural athlete who excelled at golf, horseback riding, and swim ming, Edward O’Hare was a cultivated and skilled attorney, who gave the impression that his only criminal activity involved his racing businesses with Capone and Patton. “You can make money through business associations with gangsters,” O’Hare said, “and you will run no risk if you don’t associate personally with them. Keep it on a business level and there’s nothing to fear.” It was a fine line that O’Hare futilely attempted to walk. In actuality, during prohibition, O’Hare had been arrested for using his office to store $200,000 worth of whiskey for national bootlegging king George Remus. He was released only after cutting a deal with Remus, with each refusing to
testify against the other. In addition, it is commonly understood in Chicago that O’Hare took a hefty agent’s fee for managing the gang’s Wall Street investments. As with innumerable other upperworld businessmen, O’Hare was happy to use the gangs to get rich, but would sell them out at the drop of a hat. When he tried to scam the Outfit, his luck ran out. Years after the Big Guy’s conviction, Nitti and Accardo learned that O’Hare had tipped off the court that Capone possessed the jury list and was prepared to fix his 1931 tax trial. (Recall that it was the last-minute jury switch that sealed Capone’s conviction.) O’Hare had also pointed the feds to Capone’s bookkeeper, a turn that became a critical component of the prosecution’s case. Worse still, “the boys” were told that O’Hare had continuously informed for the government in the years after Capone’s trial. Thus on November 8, 1939, while the stoolie O’Hare was driving down Ogden Avenue, another car pulled alongside and its two occupants drew their shotguns, blasting him into oblivion. Eight days later, Al Capone was released from prison. Those on the streets of Cicero understood that O’Hare’s murder was intended as a coming-out gift for the Big Guy. So much for there being “nothing to fear.”1

  The Capone-Patton-O’Hare triumvirate chose Capone’s town, Cicero, as the site for their first dog track, the Laramie Kennel Club, later renamed the Hawthorne Kennel Club. (In a few years, the track would be switched over to harness horse racing, once Capone’s councilman, “Mr. Malaprop” Libonati, introduced legislation authorizing the change. In this incarnation, the track would be called Sportsman’s Park.)