December 25, 2005

Nevada's Online State News Journal


Modern History:


            (The committee reconvened at 2: 30 p. m. pursuant to the taking of the noon recess.)

            The CHAIRMAN. The committee will come to order. The chairman wishes to apologize for the 30-minute delay to the Senator and everyone else, but it was because of a conference in advancement of the work of the committee.

            Senator WILEY. Your fellow Senator accepts the apology, but don't make it a precedent. [Laughter.]

            The CHAIRMAN. Mr. Peterson, will you continue?


            Mr. PETERSON. Yes.

            Lincoln Fitzgerald and Daniel Sullivan were fugitives from Macomb County, Mich., until they finally went back and paid fines and costs totaling $52,000. About midnight on November 18, 1949, as Fitzgerald was leaving his home in Reno for his Nevada Club, he was ambushed and shot.

            With reference to the old Purple Gang in Detroit, it is claimed that Joe Irving and Izzy Burnstein are now in California. Joe Burnstein resides in San Mateo, Calif. Before he left Miami in July 1949, he had been in the beer distributorship in Florida. Irving Burnstein resides in Los Angeles and is daily observed in various restaurants where he associates with gamblers and hoodlums. In November 1942 the Los Angeles police arrested him and released him to Michigan authorities, who at that time suspected him of being the payoff man for the Purple Gang in Detroit. Izzy Burnstein has been reported as being active with Sam Koven in the wire service and bookmaking activities in the San Diego, Calif., area. Izzy and Joe Burnstein have been frequent visitors at the Pacific News Tavern at 356 East Third Street, San Mateo, which is a big bookmaking establishment.

            William Swartz, who was formerly the manager of Thomas J. McGinty's Mounds Club in Lake County, Ohio, as of May 20, 1936. McGinty's Cleveland office was then in the Hollenden Hotel, Cleveland. William Swartz came to the Hollenden Hotel to pick up the Mounds Club payroll on May 20, 1936. As he left the hotel he shot and fatally wounded Harry (Champ) Joyce. William Swartz was brought to trial and was defended by McGinty's lawyer, Richard Moriarty. He was convicted of manslaughter and on October 27,


1936, was sentenced to a term of 1 to 20 years in the Ohio State Penitentiary. He was released on parole November 8, 1938.

            At the time of the trial William Swartz testified that he lived at the Hollenden Hotel and the preceding winter he had worked for Thomas Jefferson McGinty in Miami. Joyce, the deceased, had gone to Miami with the rest of the McGinty crowd to operate McGinty's gambling establishment. Upon returning north Swartz began working for McGinty, but Joyce was not rehired. Apparently an argument ensued which resulted in the shooting. At the trial, William's brother Howard was one of the spectators. Approximately 10 years ago William and Howard Swartz went to Chesapeake, Ohio, where they operated the Continental Club. In 1949 Ohio refused to renew a liquor permit for the Continental Club. In its application the Continental Club alleged that it was run by the Chesapeake Operating Co. and named as its officers Jack Goodman, 2952 Hampshire Road, Cleve- land, as president; A. E. Giessey, vice president, and E. W. Sauers, secretary. These men, Giessey and Sauers, had been the accountants for the Cleveland syndicate. Jack Goodman is an ex-prize fighter and has been associated with Thomas Jefferson McGinty's operations for many years. Giessey is an accountant who represents the Pettibone Club operated by the Cleveland syndicate, and Sauers is an accountant in the same office. In the fall of 1949 William Swartz, Howard Swartz, and one James Dougherty moved into West Virginia and began remodeling a place in Huntington, W. Va., for gambling purposes. According to authorities in West Virginia, the same group are allegedly engaged in gambling operations in Clarksburg, Parkersburg, and Wheeling, W. Va. To all appearances, these operations are actually those of the Cleveland syndicate.

            I should have mentioned that in connection with the Cleveland group, but I got it in the wrong place.

            Going very briefly to St. Louis, the two first names are well known to this committee : James J. Carroll, of St. Louis, considered one of the largest betting commissioners in the United States; also located in St. Louis is Morris L. Cooper, another large betting commissioner who maintains connections from San Francisco to Boston.

            Louis Casper "Red" Smith, who was mentioned in the testimony before this committee, is a well-known St. Louis, Mo., gambler and gangster. As a matter of fact, in a story in the St. Louis Post-Dispatch it was alleged that Smith participated in a conference of gamblers at the Hyde Park Club, Venice, Ill., just a short time before the gang murder of Charles Binaggio took place in Kansas City on April 5, 1950. It was claimed that there was some connection between the Binaggio affair and this conference.

            Thomas Whalen was a muscle man for the Egan gang of St. Louis for many years. It is claimed that Whalen made a good impression on Murray Humphreys, a top-ranking member of the Capone gang, and Humphreys induced Whalen to come to Chicago about 1947. Whalen has been considered a good St. Louis contact for the Capone mob in Chicago.

            Tony Giardano, handbook operator of St. Louis, Mo., is one of the foremost gangsters in the city. He also operates in Kansas City, Los Angeles, and other places.

            Tony Giardano is reportedly closely associated with Chicago Capone gangsters. It is claimed that he goes to Chicago on frequent visits



and that he is contacted in St. Louis by Chicago mobsters. He has: been associated with some of the most notorious hoodlums in the St. Louis area. In 1941 Tony Giardano and three associates were arrested as they were using field glasses to case a roadhouse they planned to rob. Tony Giardano has a record of 55 arrests in St. Louis. In 1941 the chief of police of Collinsville, Ill., was fired when it was exposed that he had released Tony Giardano a few hours before Los Angeles. authorities came for him with extradition papers. He was questioned in connection with a gang killing of one Lawrence Drewer in 1946. The same year he was questioned regarding a hold-up of a traveling-dice game known as Town Game. The hold-up occurred in University City, Mo. On May 23, 1946, he was arrested and identified as a participant in a big jewel robbery but the prosecuting witness later changed her story. Tony Giardano has two brothers, Sam and Joe. Information was received that Tony Giardano and his two brothers have been contacting Frank Cappola in Tia Juana. It was claimed that Cappola had connections with Frank Costello and that Cappola was deported from New Orleans in 1949.

            Joe Giardano, a brother of Tony and Sam, was charged with the killings of Vincent Barber and Salvatore Faraci, Italian gangsters in St. Louis, in the late 1920's. He was never convicted of the charge, however. Joe Giardano was convicted of an $8,000 payroll robbery of the East St. Louis & Suburban Railroad in 1928 but was later pardoned when a notorious hoodlum; Freddy Wooten, made an affidavit in prison that he and associates committed the robbery. In 1942 Joseph Giardano was held in the $21,000 robbery of the Crause Gold Refinery in Kansas City, but another ex-convict admitted the robbery and he was exonerated.

            Sam Giardano, who is an ex-convict, is considered the least harmful of the three brothers. He was arrested, however, in connection with the $16,000 robbery of the Country Club Distributing Co., Alton, Ill., on May 8, 1941. Sam Giardano was arrested in this case in Los Angeles. Nothing came of the charges.

            These men as I mentioned before allegedly have been contacting Frank Cappola in Tia Juana, who in turn has a connection with the. New York mob.

            Frank Buster Wortman, East St. Louis, Ill., has long been considered one of the most important figures in the organized gambling racket in that area. Wortman is said to have served in Alcatraz, and while there he met Cotton Eppelsheimer, who hid out at Wortman's place until he died in 1948. Wortman was at one time connected with the Egan gang of St. Louis and with the Shelton gang in southern Illinois. In 1948 it was reported that Wortman and Chippy Robinson were field agents for the Capone gang in the vicinity of St. Louis and East St. Louis, Ill.

            Frank Robinson, alias Chippy Robinson, the man I just mentioned together with Frank Wortman, is considered one of the important figures in the organized gambling racket in that area, and they are claimed to be field agents for the Capone syndicate.

            Going briefly to Kansas City, as you know, on the night of April 5, 1950, Charles Binaggio, the gambling boss and lord of the underworld in Kansas City, Mo., was shot and killed in a typical gang slaying. The partner and bodyguard of Binaggio, Charles Gargotta, a notorious gangster, was also slain at the same time. The kingpins of the


Kansas City underworld today are largely associates of Binaggio and Gargotta.

            Just a few names.

            The first one, James Balestrere, alias James Balestreri, is one of the most powerful hoodlums in Kansas City. Some well-informed individuals from Kansas City considered this man of equal importance in the underworld with Binaggio prior to his murder.

            Charles Vincenzo Carollo, alias Charley the Wop, has been one of the most notorious gangsters in Kansas City, Mo., for many years. His power goes back to the days of Johnny Lazia in the early 1930's. Carollo was a close associate of the slain gambling bosses, Charles Binaggio and Charles Gargotta, both of whom were killed on April 5, 1950, James Balestrere Gaetano Lacoco, and Tony Gizzo, who are other pals of Carollo. In 1939 Federal Judge Albert L. Reeves said of Corollo: "I never saw any one individual in all the years I have been connected with the United States Government who seemingly had so much power * * *." That was said of Corollo in 1939.

            Gus Gargotta is a Kansas City, Mo., gambler and underworld leader. He is a brother of the slain Charles Gargotta. Gus Gargotta, Charles Binaggio, Nick Penna, and Tony "Slick" Bondon, and Fred Wedow operated the notorious Green Hills Country Club, a gambling resort, in Platte City, Mo.

            Gus Gargotta also, incidentally, was arrested in Iowa some time ago in connection with an alleged robbery of a gambling joint there when they were muscling into that area near Council Bluffs.

            Tony Gizzo is a well-known Kansas City, Mo., hoodlum who was closely associated with Charles Binaggio for at least two decades before Binaggio was slain on April 5, 1950. For example, on January 18, 1930, 20 years ago, Gizzo was arrested with Binaggio in Denver, Colo., on charges of carrying concealed weapons. Each received a 90-day sentence which was suspended on condition that he leave Denver, Colo., within 6 hours. At the time of Binaggio's murder, the Duke Sales Co. was the wholesale distributor for Canadian Ace beer in Kansas City. Both Tony Gizzo and Binaggio were profitably connected with the Duke Sales Co. Gizzo persuaded tavern keepers that they should use Canadian Ace beer. Gizzo received 25 percent of the profits. Louis Greenberg, a principal stockholder in the Canadian Ace Brewing Co., Chicago, testified before the congressional committee investigating the paroles of four notorious Capone gangsters by the Federal Government that he had known Tony Gizzo for the past 15 years. He stated that Gizzo had been connected with a distributing company that handled Canadian Ace Beer in Kansas City. Greenberg also admitted knowing the four paroled Capone convicts, Phil D'Andrea, Charles Gioe, "Little New York" Campagna, and Paul Ricca. He also admitted that when Frank "The Enforcer" Nitti, head of the Capone gang, committed suicide in 1943, that he, Greenberg, was holding $65,000 of Nitti's money, which he turned over to Nitti's estate. Tony Gizzo has been prominently identified with the gambling racket in Kansas City. In 1941 Tony Gizzo, Charles Binaggio, Mel Levitt, and Joe Danzo started a horse-race Cook in the Coates House cigar store. The Federal grand jury recently found that the net take in this place in 1947 was $100,000.

            Edward P. Osadchey, alias Eddie Spitz, is one of the most important gamblers in Kansas City. He was a henchman of Charles Binaggio


before the death of Binaggio on April 5, 1950. When the Binaggio gang muscled into the Stork Club, a gambling casino at Council Bluffs, Iowa, the place was managed by Edward Osadchey and Morris "Snag" Klein, of Kansas City, and George Beskas and Charles "Snooks" Hutter, Jr., of Omaha. The latter two, Beskas and Hunter, are of Omaha. Another Binaggio henchman frequently appeared at the Stork Club at regular intervals, Kansas City gambler and Binaggio associate, Louis "Duke" Sarno. Just before they were killed, Binaggio and Gargotta left the Last Chance Tavern on the Kansas-Missouri State line for their headquarters, where they were murdered. The Last Chance was a gambling establishment owned by several partners including Charles Binaggio, Charles Gargotta, Tano Lacoco, Morris "Snag" Klein, Edward P. Osadchey, alias Eddie Spitz, and John Goulding. The wire service in Kansas City which services the handbooks is also owned by Tano Lacoco, Edward P. Osadchey, Morris "Snag" Klein, and, before his death, Charles Gargotta. The horse-race news has been furnished by Continental Press in Chicago.

            Max Jaben, Kansas City, Mo., gambler and associate of Charles Binaggio, took over the policy wheels formerly operated by Celestine (Bud) Tralle through muscling tactics. Jaben 's partner in the policy racket is John Mariginacini. In 1949 Max Jaben and Charles Binaggio obtained the gambling concessions at Central City, Colo. It was also claimed that Max Jaben, Charles Binaggio, Walter Rainey, and others operated slot machines in Colorado Springs, Trinidad, and Pueblo, Colo.

            Tano Lacoco is one of the top-ranking underworld characters of Kansas City. He is an associate of James Balestrere and is considered a gangland enforcer. As previously indicated, he has been a partner with leading Kansas City gamblers in the Last Chance Tavern and is one of a group that controls the wire service. He is also known as Tano Lococo.

            Joe La Scuolla, alias Joe School, is another Kansas City underworld character who was associated with Charles Gargotta and Charles Binaggio. He has been a part of the Kansas City gambling set-up and has a lengthy record. Another well-known Kansas City hoodlum is Sam Goldberg. Recently he was charged with a race-track swindle involving $112,000, but was freed.

            Charles Bruno, another associate of Charles Binaggio, has a police record going back to 1919. He was shot just the other day. He has been convicted on narcotic violations and has been arrested on charges of car theft and robbery, although not convicted of those offenses. He owns three taverns which have been characterized as breeding places of juvenile gangsters. Together with Raymond Muller he operates the Kansas City Bonding Co., the largest concern that bonds criminals in the city. Bruno was born in Italy as Vincenzo Pasqualino.

            About two decades ago the underworld in Colorado was dominated by a gang headed by Pete and Sam Carlino. These men were killed in gang warfare. In Pueblo, Colo., Charles Blanda succeeded to the leadership of the underworld. Associated with Blanda in that area as a leader of the rackets is Tom Incerto, alias Whiskers Incerto. Early in 1950 the Los Angeles police, when they seized records from Jack Dragna, it was brought out that these records contained the address of Charles Blanda, 1104 Cartaret Street, Pueblo, Colo., indi-


cating the close connection between Blanda and Jack I. Dragna, the most notorious gangster on the west coast.

            Also recorded on the address book of Dragna's lieutenant was the following : Carl Cascio, 506 East Evans Avenue, Pueblo, Colo., as well as his telephone number, 6462. Carl Cascio is said to be the guiding spirit behind the Owls Den, formerly known as the Forty Niners Club, located near Blend, Colo. Cascio is in the gambling racket and is associated with Turk Spinuzzi and Scotty Spinuzzi, who are known as the enforcers for Charles Blanda.

            Likewise recorded in the address book recovered from Jack I. Dragna in Los Angeles was the following : Joe Salardino, 827-4, the telephone number, address 725 Greenward, Canon City, Colo. Joe Salardino and his brother, Gus Salardino, operate the Paradise Club, which is an important gambling establishment on the outskirts of Canon City, Colo. This place receives its wire service from the North Federal Brokerage Co., 4501 North Federal Boulevard, just outside of Denver. It is known definitely that Clyde Smaldone has a connection with the last-mentioned place.

            Clyde Smaldone and Eugene Smaldone are in control of a gang that dominate northern Colorado. The principal enforcer for the Smaldone gang is Frank "Blackie" Mazza, who is principally a slot-machine man.

            Also recorded in the address book from Jack Dragna was the name Joseph Bonanno, 114 Jefferson Street, Brooklyn, N. Y. This man also is known as Joe Bananas. He is allegedly tied up with several enterprises, including laundries, and he is also connected with the Colorado Cheese Co., Trinidad, Colo., which is a distributor for Italian cheese.

            In Louisiana the Frank Costello mob of New York has been deeply entrenched for almost two decades. In 1934 Mayor LaGuardia of New York launched an effective campaign against the slot-machine activities of Frank Costello and Dandy Phil Kastel. Through a deal with Huey Long, Costello and Kastel moved into New Orleans where their business flourished. In recent years Mayor deLesseps Morrison drove the slot-machine business of Costello and Kastel out of New Orleans proper. Several hundred machines owned by this group were seized in a New Orleans warehouse. Kastel instituted legal proceedings but the mayor prevailed in court. In Jefferson Parish, just outside of New Orleans, there is located the Beverly Country Club, one of the most elaborate gambling casinos of the Nation. This place is principally owned and operated by Frank Costello, Philip (Dandy Phil) Kastel, and Costello's brothers-in-law, Dudley and Harold Geigerman.

            Carlos Marcello, 320 Romain Street, Gretna, La., is also a stockholder in the Beverly Country Club gambling casino. It is said that he is practically equal in power with Dandy Phil Kastel in the operation of this place. In 1949 Marcello and associates attempted to organize a union of handbook employees through a local A. F. of L. leader. An attempt was made by Marcello to effect a deal with the New Orleans administration whereby 150 handbooks would be permitted to operate in the city. Carlos proposed that the city hall would have the right to name many of the handbook employees and the city treasury would receive a certain amount of the proceeds. The Continental Press Racing Service was to serve the handbooks. Carlos


Marcello apparently was active in the affairs of the Continental Press in that area. The Continental Press dispatched its service into an office building in Gretna, La., the parish seat of Jefferson Parish.

            Incidentally, the offer that Marcello made was not accepted. It was turned down, of course, obviously by the city administration. It was also understood that Marcello and associates are in the money-lending business for barroom and night club proprietors and various other establishments in Jefferson Parish. Marcello and associates supply slot machines, pinball machines, juke boxes, and coin machines. Marcello and his associates lend money at an annual interest of 2 percent. In return for this low rate of interest the proprietor must agree to use only syndicate machines. The barroom or tavern keeper is thus under a financial obligation directly to the Marcello syndicate. Marcello has the reputation for being the head of the Mafia in that area. He has the reputation for being a dangerous individual and no one will testify against him. The mayor of New Orleans has indicated that he is also facing deportation proceedings.

            The CHAIRMAN. He is a. native of Italy, I believe.

            Mr. PETERSON. Yes. Mayor Morrison informed me he understands that he is facing deportation proceedings at the present time. I have not verified that.

            In Las Vegas, Nev., members of the notorious Frank Costello mob became firmly entrenched through Benjamin "Bugsy" Siegel, who constructed and operated the Flamingo Hotel, one of the most elaborate gambling establishments in America. Siegel was one of the most notorious gangsters in the country, and in the East was associated in illegal activities with Frank Costello, Joe Adonis, Meyer Lansky, Charles "Lucky" Luciano, Abner "Longie" Zwillman, Moe Sedgwick, Louis Pokrass, and numerous others. Louis Shomberg, alias Dutch Goldberg, was one of the most powerful gangsters in America in the early 1930's, and was also associated with this group in the East.

            It is claimed that Siegel was brought to the west coast by Joe Adonis. In 1940, he was arrested for the Hollywood murder of Harry (Big Greeny) Greenberg. Greenberg was once the chief muscle man for Louis (Lepke) Buchalter, head of Murder, Inc., in New York City. When Greenberg threatened to blackmail Buchalter's mob, Siegel was alleged to have murdered him. Siegel had been closely associated with Buchalter's mob in the East as had many others in the Costello organization. In the East, Siegel, Charles "Lucky" Luciano, and Meyer Lansky had comprised the enforcement branch of the Costello organization. It was known as the Bug and Meyer mob of executioners. Siegel was not convicted for the Greenberg murder. While in custody he was given privileges which indicated he was considered a man of importance. He made 19 visits outside the jail while awaiting trial for murder.

            In Los Angeles, Siegel became closely associated with Allen Smiley, whose real name is Aaron Smehoff, FBI No. 1306281. Smiley has a long criminal record. He has been arrested numerous times and was charged with failure to register under the Alien Registration Act. When Siegel moved into Las Vegas Smiley went with him as a constant companion and aide.

            Closely associated with Benjamin "Bugsy" Siegel in the Flamingo Hotel venture in Las Vegas was Louis Pokrass, who had been connected with the Costello-Siegel-Lansky group in the East, and Moe


Sedway, also a long-time associate of Siegel. A large amount of money for the Flamingo Hotel venture was obtained from the East from the Rothberg brothers, Henry and Sam, or Harry. I don't. have their exact names. There was also a strong indication that $300,000 in the form of a loan was furnished by Charles Fischetti and Rocco Fischetti, leading members of the notorious Capone syndicate of Chicago. As of 1947, the principal officers and directors of the Flamingo Hotel included Benjamin Siegel, president ; Louis Pokrass, vice president ; G. H. Rothberg, treasurer ; and Moe Sedway was one of four directors, including Siegel, Rothberg, Pokrass, and Sedway. N. Joseph Ross was listed as secretary, and his residence address was given as 9700 Wilshire Boulevard, Los Angeles. Benjamin "Bugsy" Siegel became the "big shot" of gambling in Las Vegas.

            During this same period the Chicago Capone syndicate was launching its Nation-wide drive to control the racing-news service through the Trans-American Publishing & News Service, Inc., which it had formed and placed in competition to the Continental Press. There was considerable violence in many parts of the Nation. James M. Ragen, part owner and general manager of Continental Press, had been threatened by Tony Accardo, Murray Humphreys, and Jack Guzik, leading members of the Capone syndicate in Chicago. Ragen was ambushed and shot on June 24, 1946, and subsequently died.

            In Las Vegas Benjamin "Bugsy" Siegel was the Capone syndicate's representative for the Trans-American Publishing & News Service, Inc. He engaged in muscling tactics, and many handbooks that did not want to drop the Continental service found it necessary to take the Trans-American service as well, and pay for both services.

            A bitter fight was waging among the wire-service representatives. On June 13, 1947, Ralph O'Hara announced in Chicago that the Capone syndicate's Trans-American Publishing & News Service, Inc., was going out of business. A few days later a conference among the wire-service representatives of Nevada and California was held in Siegel's Flamingo Hotel. A few days later Benjamin "Bugsy" Siegel was shot and killed in gangland fashion as he sat on a couch in a home at 810 Linden Avenue, Beverly Hills, Calif. This place had been rented by Siegel's girl friend, Virginia Hill, who had departed for Paris about a week earlier. Allen Smiley was with Siegel when he was shot.

            After Siegel was killed, Sanford Adler became the president of the Flamingo Hotel. Morris Rosen from New York then entered the picture. Morris Rosen was believed to be a representative of the Frank Costello group in New York. Information was received to the effect that Morris Rosen had been a close associate of Louis Shomberg, alias Dutch Goldberg, since prohibition days.

Rosen entered into a controversy with Sanford Adler over the Flamingo Hotel. Morris Rosen demanded that Sanford Adler deliver certain stock certificates to him which would give Rosen and his associates control of the Flamingo Hotel and gambling Casino. About April 5, 1948, Rosen and Adler had a fight in the patio of the Flamingo Hotel. Adler ran into the hotel calling for help. Fearing for his life, Adler apparently relinquished his interest in the Flamingo to Rosen and his associates. He also sold his interest in the Rancho

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Vegas and purchased a hotel and gambling spot known as the Calineva on the Nevada side of Lake Tahoe.

            By the latter part of June 1948, the majority stockholders of the Flamingo Hotel were Gus Greenbaum of Phoenix, Ariz., who had been friendly with Siegel, Elias Atol, Minneapolis, Minn., believed friendly with the Siegel interests, Moe Sedway, the former partner of Siegel, and Morris Rosen.

            After Morris Rosen became the "big shot" in the Flamingo operations, Rosen and Moe Sedway attempted to control the wire service in much the same manner as had Benjamin "Bugsy" Siegel. On November 13, 1948, following a so-called cold warfare over the wire service, Dave Stearns, Sam Stearns, and Ed Margolis of the Santa Anita Turf Club of Las Vegas filed a suit in Federal court naming as defendants the following : Tom Kelly, Chicago manager of the. Continental Press, Arthur (Mickey) McBride, and Moe Sedway, and Morris Rosen, as well as Connie J. Hurley, a Continental official. Sedway and Rosen were the owners of the Golden Nugget Racing Service of Las Vegas. Damages in the sum of $137,879 were sought on the ground that the defendants had been refusing the plaintiffs wire service in violation of the Sherman Antitrust Act. A defense to the suit was made on the ground that Arthur McBride was wrongfully named as a defendant since Continental Press was owned by McBride's son, Edward J. McBride, and not by Arthur McBride, as named in the suit. The Nevada Tax Commission, after hearings on the wire service, forced Rosen to cease active operations in the State. Morris Rosen returned to New York City, but at last reports, which is a number of months ago now, he still claimed to own a sizable interest in the Flamingo Hotel.

            Morris Rosen, through whom it is believed that the Siegel-Costello mob's interest in the Flamingo was perpetuated, was born in Russia on December 4, 1899, and is a naturalized citizen. His wife and son live at 118 Riverside Drive, New York. His sister, Leah Rosen, operates the Mid-Manhattan Liquors, a package liquor store on Eighth Avenue, New York City. The New York State Liquor Authority held hearings with reference to this establishment because of allegations that Morris Rosen had an undisclosed interest in the place. This fact could not be established, however. Morris Rosen stated at the hearing that he was connected with the American Spirits, Inc., a subsidiary of the American Distilling Co. with which the Rothbergs are affiliated. It will be recalled that the Rothberg brothers furnished large sums of money for Siegel's Flamingo Hotel.

            Morris Rosen was convicted in New York City March 21, 1940, for bookmaking and was fined $40. Arrested with him at the time were Emil Gleickman, Henry Siegel, and Charles Cooke. As previously indicated, Morris Rosen was formerly friendly with Dutch Goldberg.

            Barney Ruditsky, who handled bad checks for the Flamingo Hotel during the Siegel regime, claimed that Louis Shomberg, alias Dutch Goldberg, together with Abe Zwillman from New Jersey, Harry Rosen from Philadelphia, and the Fischettis from Chicago, had money invested in the Flamingo. This assertion, of course, has not been verified.

            With reference to Elias Atol, who became a director in the Flamingo Hotel, information received from New York alleged that Moe Sedway was friendly with a Mike Atol who was an associate of Meyer Lansky in a Las Vegas gambling venture.


            Mike Atol, allegedly a friend of Meyer Lansky, and who is engaged in gambling activities in Las Vegas, Nev., was formerly affiliated with the Gopher Sales Co., 143 Michigan Avenue, Duluth. He was engaged in the distribution of slot machines and juke boxes. It is also alleged that he was closely associated with Sam Taran from the Twin Cities.

            Next to the Flamingo Hotel, the Desert Inn, which was opened in Las Vegas Nev., in 1950, is perhaps the next most elaborate gambling casino in America. As of February 1950, the Desert Inn was controlled by the Cleveland syndicate. Moe Davis, alias Moe Dalitz, is the treasurer and secretary of the Desert Inn. The attorney, as I previously mentioned, for Dutch Schultz of New York, wrote in 1939 that Moe Davis was the Cleveland representative for Charles "Lucky"' Luciano, Benjamin "Bugsy" Siegel and Meyer Lansky.

            Members of the Davis group are known to be in touch with Abner "Longie" Zwillman in New Jersey. Moe Davis is also a contact of Allen Smiley, the close associate of Benjamin "Bugsy" Siegel.

            Morris Kleinman is the vice president of the Desert Inn, Las Vegas. His residence address is 12701 Shaker Boulevard, Suite 802, Cleveland. Kleinman was once a Cleveland pugilist, and has been associated with Moe Davis for many years. Kleinman was convicted of income tax evasion and was released from the United States Penitentiary, Lewisburg, Pa., in September 1936, after having served 3 years.

            Thomas Jefferson McGinty, from Cleveland, is a stockholder in the Desert Inn. McGinty, together with Moe Davis, alias Moe Dalitz, Morris Kleinman, Lou Rothkopf and others, have long operated one of the most powerful gambling syndicates in the Nation. McGinty is known as the operator of the notorious Mounds Club near Cleveland. His gambling operations have extended to Florida as well as to Ohio and Kentucky.

            Sam Tucker, another member of the Cleveland combination, is a director of the Desert Inn. In recent years he has been in charge of the syndicate's three large gambling casinos in Kentucky across from Cincinnati. In addition to the indictment returned against Tucker, Kleinman and Moe Davis in Buffalo for rum running, he has also been named in a suit filed in 1938 by a teller of the Cleveland Trust Co. who was sentenced to Leavenworth Penitentiary for embezzlement. The suit was filed against the Ohio Villa Club, a notorious gambling place, to recover money lost there. Named as operators of the place were Sam Tucker, Morris Kleinman, and others.

            Tucker has also been engaged in gambling operations in Florida.

            He has listed as his address 1347 Biscaya Drive, Surf Side, Miami Beach, Fla.

            Cornelius J. Jones, 638 Lawson Avenue, Steubenville, Ohio, is a director in the Desert Inn. Jones has been one of the partners in the Mounds Club operated by Thomas J. McGinty and others near Cleveland for many years.

            Lou Rothkopf, alias Lou Rhody, alias John Zarumba, Fenway Hall Hotel, Euclid Avenue and One Hundred and Seventh Street, Cleveland, Ohio, is not officially connected with the Desert Inn. He spends a large amount of time in Las Vegas, however. He has long been an important member of the Moe Davis, Morris Kleinman, and Thomas J. McGinty combination. Rothkopf has connections with some of the most notorious racketeers in America. He was in telephonic commu-


nication with Mickey Cohen, Los Angeles gambling racketeer. He has also been in telephonic communication with Abner "Longie" Zwillman of New Jersey. While Rothkopf was staying in Los Angeles in 1949, he made telephone calls to Jack I. Dragna at the Flamingo Hotel in Las Vegas and to Allen Smiley, who was then called also at the Flamingo.

            Allen Smiley, alias Aaron Smehoff, has remained close to the Las Vegas gambling picture after the murder of his friend, Benjamin "Bugsy" Siegel. Reliable information indicates the strong possibility that he may have a small interest in one of the important gaming houses there. Several months ago, Smiley brought an oil man to the Flamingo Hotel casino where the man lost a small fortune. He also brought the same man to the Beverly Country Club near New Orleans where he also lost heavily. The Beverly Country Club is owned by Frank Costello, Dandy "Phil" Kastel and others. It was also claimed that Smiley brought this man to Moe Davis some place in the Middle West and he again lost heavily. Smiley is undoubtedly close to the Cleveland syndicate----

            The CHAIRMAN. What do you mean by a "small fortune"?

            Mr. PETERSON. To me, $100,000—maybe it wouldn't be a small fortune.

            The CHAIRMAN. Is that the amount he lost?

            Mr. PETERSON. On two occasions he was alleged to have lost $100,000. I say "reliable information." I checked on this story through the police department of the area with reference to the man that he took to those places, and the police department there verified the information that this had happened. I mention it because there are a couple of things that seem rather significant. First, he is taking them to the same places that this New York group with which he has been affiliated are close to. I think Smiley is still--

            The CHAIRMAN. Is the name of the man known publicly?

            Mr. PETERSON. No; but I can give the name of the man to the committee off the record.

            The CHAIRMAN. It should not be made public?

            Mr. PETERSON. I don't think so; no. The man who supposedly lost all the money can afford to lose it; as a matter of fact. He is a very wealthy individual.

            Senator WILEY. What significance do you draw from that?

            Mr. PETERSON. The significance I draw from it is that Allen Smiley is still a representative of the New York gang and takes people—I say "takes them." He is an advance agent, so to speak, who brings people to some of these places, in other words, good customers. He is a good sales representative for these places. That is the significance I place on it. When you consider that he is taking them to the Beverly Country Club in New Orleans, to the Flamingo Club in Nevada and then, before the Davis interests came out there, allegedly to Moe good sales representative for these places. [sic] That is the significance that I place on it.

            Senator WILEY. There is no other implication. You could not infer that he had to pay off something?

            Mr. PETERSON. Oh, no. It was a gambling loss, strictly.

            Senator WILEY. That was strictly a gambling loss?

            Mr. PETERSON. This fellow Smiley has developed a very close association with this man. I will give the committee the name.


            Jack I. Dragna, the Capone of Los Angeles, has operated the Universal Sports News which covered California and also parts of Nevada. For a long time Dragna has been attempting to get a foothold in Las Vegas in gambling activities. Only recently, Dragna did purchase an interest in a Las Vegas establishment which is not primarily a gambling place. It is believed that he now has his foot in the door, and with many friends in that area he at least hopes to get firmly established in that area.

            One of his friends is Lester (Benny) Binion, who has been the king of the rackets in Dallas, Tex. He has been firmly entrenched as a gambling house operator in Las Vegas, Nev., for many years. In recent months, efforts were made to extradite Benny Binion to Texas to stand trial on an indictment returned against him there. These efforts were unsuccessful.

            Binion's development into a big racket boss extends over a period of many years. In the early 1920's, organized gambling in Dallas was controlled by a man by the name of Warren Diamond. Diamond remained the king pin for a period of 10 or 15 years. His principal lieutenant was Ben Whitaker, who became the boss in the 1930's. Under Whitaker, all forms of gambling, including policy, flourished in Dallas. Whitaker's two principal lieutenants were Benny Bickers and Benny Binion.

            Binion came to Dallas as a ranch youth who became a part of the Diamond-Whitaker combination due to his toughness. Binion eventually took over part of the policy racket. Whitaker had a dislike for policy, except for the assessments, because of the frequent violence that was attached to policy operations.

            On September 12, 1936, Ben Freiden, who was a big policy operator, was gunned to death on a downtown Dallas street. Almost immediately Benny Binion became the king of the policy racket, and eventually gained control of about 20 wheels.

            Binion was questioned in connection with the Freiden killing, but was released on December 28, 1936. Binion had previously been charged with carrying concealed weapons on September 30, 1932. He had also received a suspended sentence following a conviction in connection with the killing of a Negro bootlegger on May 25, 1932.

            Beginning in 1936, Benny Binion launched into a program of protection for gamblers. The sale of protection later included hijackers, safe men, and other types of hoodlums. One of the big-time Dallas gamblers who refused to pay off to Binion was Herbert Noble.  He became a bitter enemy of the Binion combination. Seven attempts have been made on Noble's life. On New Year's Eve 1949 Noble was ambushed and shot near his home at 311 Conrad Street, Dallas, Tex. He was taken to the Methodist Hospital, and while he was recovering from his wounds was again shot as he lay in the hospital on February 7, 1950. On Christmas Eve 1949 Hollis Delois Green was blasted at the Sky-Vu Club in Dallas. It was rumored that Green was blasted because he bungled the attempted assassination of Herbert Noble on November 29, 1949. On that date, Mildred Noble, the wife of Herbert Noble, was killed when she stepped on the starter of her husband's automobile in front of their home and it exploded.

            Green had been hard pressed for cash to fight indictments which would have meant life imprisonment if convicted. He had allegedly attempted to obtain cash from Benny Binion and from Sam Maceo,


a big Galveston gambler. Binion was rumored to be looking for Green in order to make him pay back the money he had given him.

            In Dallas, Binion's associates included Ivy Miller and Earn Dalton, who ran a gambling joint known as the Top of the Hill, just outside the city limits of Dallas.

            As previously indicated, Binion has been firmly entrenched in the gambling business in Las Vegas for several years. Approximately 3 years ago, Binion's associate killed a man in Binion's Las Vegas gambling establishment. He was convicted and is now serving a prison sentence. Binion is tied up with Allen Smiley and is, also an important Las Vegas connection for Jack I. Dragna, from Los Angeles.

            In Reno, Nev., Frankie Foster, a Chicago gangster, has operated a horse book for many years. Foster was indicted in connection with the Jake Lingle murder in Chicago many years ago—not in connection with the murder proper, but in connection with the gun used in the Lingle killing. He was not convicted, however. Foster was considered one of Chicago's toughest gangsters in the gang era of the early 1930's.

            Mert Wertheimer presently has the gambling concession in one of the big hotels in Reno. Wertheimer is one of America's biggest gamblers. For a time, as I previously indicated, he was in partnership in Florida with some of the most notorious gangsters of the Nation, including Joe Adonis, alias Joe Doto, Meyer Lansky, Jake Lansky, Vincent (Jimmy Blue Eyes) Alo, and Frank Erickson, of the Frank Costello mob. These men, together with Wertheimer, did operate the Colonial Inn, at that time an elaborate gambling place at Hallandale, Fla. Mert Wertheimer was the head of the Chesterfield syndicate, concentrating its activities in Macomb County. It was once powerful politically in Michigan.

            Lincoln Fitzgerald, next to Wertheimer, was the most powerful member of the Chesterfield syndicate in Michigan. Other members of the syndicate included Lefty Clark, Red Gorman, Mike Brunton, Al Driscoll, and Daniel Sullivan. Lincoln Fitzgerald and Daniel Sullivan became fugitives from Michigan, where they were under indictment. They finally went back to Michigan and paid fines and costs totaling $52,000. While they were fugitives they became the owners and operators of the Nevada Club, one of the most important Reno gambling establishments. About midnight on November 18, 1949, as Lincoln Fitzgerald was leaving his home in Reno for the Nevada Club he was ambushed and shot. At first his condition was thought to be critical. However, he recovered. Following the shooting of Fitzgerald two of the individuals under suspicion by the authorities were members of the old Purple Gang of Detroit.

            Fred Elkins, originally from Portland, Oreg., moved to Reno, Nev., about 3 years ago. Fred Elkins and his brother, James Elkins, are well known to the Federal Narcotics Bureau in Portland, where they are important members of the underworld. Fred Elkins, FBI No. 394908, was received at the McNeil Island Federal Penitentiary on a charge of counterfeiting on October 4, 1943, on a sentence of 8 years and a $100 fine. In 1948 Fred Elkins was appointed receiver for a Lake Tahoe gambling place by a Reno judge. Elkins operated this gambling establishment for about .3 months in 1948.

            For many years two of the most influential men in the Reno gambling set-up have been James C. McKay and William J. Graham. It


was claimed that for years these two men controlled Reno politically and financially.

            After three trials in Federal court in New York City, Graham and McKay were convicted of using the mails to defraud in a $2,500,000 horse race swindle. They were found guilty on February 12, 1938, and were sentenced on February 17, 1938, to serve 9 years in a Federal penitentiary and to pay a fine of $11,000 each. Graham and McKay dangled huge but fictitious race track winnings before their victims and told them the cash was theirs if they put up the necessary "good faith" money. In each case the money was placed and "lost" on the wrong horse on the first bet. The victims were rushed out of Reno after the swindle.

            At the trial, a 70-year-old man from Chicago testified he lost $150,000 ; an 83-year-old man, former United States Commissioner of Caldwell, Idaho, lost $23,600; a Flint, Mich., mechanical engineer, testified he was swindled out of $61,000.

            Graham and McKay were the backers of the ring of swindlers. After their release from Federal prison, they again returned to Reno, Nev., and resumed an important place in gambling operations there. They have operated the Bank Club in Reno and have had another establishment at Lake Tahoe as well.

            Graham and McKay have maintained contact with a number of important underworld characters. This goes back many years, even during the old Dillinger investigation in 1934, or before 1934. Baby Face Nelson, who was one of the most notorious killers of the Dillinger gang, was a friend of theirs.

            In Los Angeles, Jack I. Dragna, alias Jack Rizotto, alias Jack Dania, alias Jack Ignatius Dragna, alias Jack I. Drigna, Los Angeles Police Department No. 98015, is one of the most notorious gangsters on the west coast.. He is frequently referred to as the Capone of Los Angeles. He has been associated with John Rosselli, one of the Capone syndicate members who was convicted in Federal Court in New York City in 1943 for extorting a million dollars from the movie industry.

            Several years ago, Rosselli and Dragna were associated together in connection with the racing news service. They engaged in terroristic methods. Between May 1948 and February 2, 1950, Jack I. Dragna received $500 a week from the Illinois Sports News, 431 South Dearborn, Room 1619, Chicago. The checks were received by Dragna in the name of the Universal Sports News, 3927 Hubert Avenue, Los Angeles, Calif. As a result of the public expose of the connection between Dragna and the Illinois Sports News, Dragna was taken off the payroll of this concern. On June 30, 1950, last Friday, Jack I. Dragna was in Chicago with the avowed intention of getting back on the payroll "or else."

            Dragna has connections with some of the most powerful and notorious gangsters from every section of the Nation. He has been arrested with Charley Fischetti, cousin of Al Capone and one of the leading members of the Capone gang. He is a close friend of Benny Binion, a gambling racketeer who has recently been operating in Las Vegas, Nev., and who has been the king of rackets in Dallas. He is close to Allen Smiley, the close associate of Benjamin "Bugsy" Siegel, of the New York Costello mob and operator of the Flamingo Hotel in Las Vegas before he was murdered. Before Siegel's death, Dragna


was allegedly associated with him as west coast representatives for the Capone syndicate wire service. It is known that Dragna has been close to Murray Humphreys and Tony Accardo of the Capone syndicate as well as with John Rosselli on the west coast. It was also reported that in 1947, Murray Humphreys and Jack Guzik, once the business manager for the Capone organization, were in Los Angeles to see Dragna regarding the wire service.

            Jack I. Dragna has also been reported active in labor rackets along with John Rosselli. Dragna has been identified with the operations of Mickey Cohen and Joe Sica, both powerful west coast racketeers. In fact, it has been reported that the Savoy Shirt Shop, 8470 Melrose, Los Angeles, operated by Joe and Freddie Sica, may be the new headquarters for the Dragna organization.

            From records seized from members of the Dragna family and his principal lieutenant., Giroloma Adamo, alias Mo Mo Adamo, it is established that Dragna is connected with the following and, of course, many more : Tony Accardo, Murray Humphreys, John Rosselli, and Charles Fischetti of the Capone gang; Pete Licovoli, Joe Zirilli, and William (Black Bill) Tocco, leading numbers racketeers of Detroit ; Joseph Profaci and Joseph Bonanno of Brooklyn; Carl Cascio, Joe Salardino, and Charles Blanda, big-time gambling racketeers of Colorado ; James Lumia (recently killed), and Santo Trafficanti, racketeers of Tampa, Fla. ; Vincent Rao, first cousin of Joie Rao, a notorious gunman and once tied up with the slot-machine racket with the Dutch Schultz mob and with Ciro Terranova in New York; Allen Smiley, confidant of Benjamin (Bugsy) Siegel and big gambling racketeer; Charles "Babe" Baron, former handbook operator in Chicago and a big automobile dealer, and scores of others.

            Dragna is about 59 years of age, brown eyes, black hair, 5 feet 7 inches tall, weighs 200 pounds, and is an Italian. He was arrested for an extortion attempt on July 6, 1915. On January 26, 1916, he received a sentence of 3 years on a felony charge. On May 25, 1917, he was arrested in Los Angeles, and on June 15, 1917, he was delivered to New York officers on a murder charge. On July 29, 1930, he was arrested on a suspicion of robbery and released the next day. On July 25, 1934, there was a "wanted" notice posted with the Los Angles Police Department by the United States Immigration Department. On December 6, 1946, he was arrested on a suspicion of robbery and released on December 9, 1946.

            Mickey Cohen, one of the big gambling racketeers on the west coast, has maintained contact with virtually every hoodlum of consequence throughout the Nation. Telephone surveillance and records definitely have established this fact.

            Joe Sica, originally a New Jersey hoodlum, received his training from William Moretti, and has become one of the big-time racketeers of the west coast. Joe and his brother, Freddie, operate the Savoy Shirt Shop, 8470 Melrose, Los Angeles, which is reportedly a headquarters for the Jack I. Dragna organization. Joe Sica has also been identified with the operations of Mickey Cohen, gambling racketeer of the Los Angeles area. Joe Sica is said to be a former associate of Joseph D. DiGiovanni, alias Joe Chick, of Brooklyn, who is allegedly a source of supply for James LaSala, who in turn is a close associate of Jack I. Dragna and Giroloma Adamo. It is claimed that. Joe Sica has narcotics stored at certain addresses in Los Angeles.


The Sica family own a candy store at 20 Boyden Street, Newark, N. J. Joe Sica is said to have connections with Sam Accardi, a dominant figure in Newark, N. J. Accardi is believed affiliated with William Moretti, Joe Adonis, and Abner Zwillman.

            Anthony Milano, alias Tony Milano, purchased a Hollywood, Calif., home for $56,000 about 5 years ago. He has been connected with Jack I. Dragna. It is claimed that Anthony Milano and Frank Milano are members of the Mayfield Road gang in Cleveland. Anthony Milano is connected with a company in Cleveland at the present time, dealing in Italian foods, and he is also connected with an Italian language newspaper.

            John Patrick Borcia, alias John Borcy, closely allied with the Chicago Capone mob, has been operating the Primrose Bar in Los Angeles. This place has been the hang-out for the gangster element. Borcia has also operated the Primrose Path, 1159 North Clark Street, Chicago. Borcia is a close friend of Tony Accardo, top-ranking member of the Capone syndicate and of Nick Circella, alias Nick Dean, who was convicted in the movie extortion case.

            John Rosselli of Los Angeles was convicted with Paul Ricca, Louis "Little New York" Campagna, Phil D'Andrea, Charles Gioe, Francis Maritote, alias Frank Diamond, and other Capone gang members, in Federal court, New York City, in 1943, for extorting a million dollars from the movie industry. Nick Circella, alias Nick Dean, was also convicted in this case. For many years Rosselli has been associated with Jack I. Dragna. In recent months Rosselli has been in frequent touch with Charles "Babe" Baron, of Chicago. Rosselli is now reportedly connected with a movie studio in California.

            Phil D'Andrea now is on parole from Federal prison after serving time in connection with the movie extortion case. He is now living at Tarzana, Calif. As previously indicated, he was once the body-guard for Al Capone.

            Jasper Matranga, 506 North Laurel Avenue, Upland, Calif., operates a bookmaking establishment near the town of Ontario, in southern California. Matranga is affiliated with Jack I. Dragna. Matranga's name and address was contained in the records seized from Dragna in the early part of 1950.

            One of the biggest gambling operators in the San Francisco area for many years has been Bones Remmer.

            Harry Pelsinger operates the Film Row Club, San Francisco, Calif., where bets were made by the Guarantee Finance Co., a front for huge gambling operations. When Joe Adonis was in San Francisco, it is alleged that the first man he contacted was Harry Pelsinger.

            I have previously given information concerning Irving Burnstein and Izzy Burnstein, who also are operating in the Los Angeles area, and who were previously alleged members of the Purple Gang in Detroit.

            I think from the information I have given—that is just the highlights—I have definitely established, first that the principal mobs have made contacts throughout the entire Nation which form a Nation-wide network of criminal activities; members of the principal mobs frequently work in close collaboration with one another; the principal mobs themselves engage in activities in several States; money obtained through illegal activities is frequently invested in legitimate


business enterprises, which places racketeers in competition with legitimate business and industry, and that racketeering methods are frequently resorted to in connection with the legitimate businesses; tremendous wealth and political power vested in the racketeering element affects the entire law enforcement set-up and contributes very materially to the crime problem of the entire Nation.

            I think that I have exhausted my information.

            The CHAIRMAN. Senator Wiley, do you have any questions?

            Senator WILEY. What is your suggested remedy for the conditions which you have just stated?

            Mr. PETERSON. Of course, as was mentioned here yesterday, when Governor Youngdahl testified, with which I firmly agree, primarily and fundamentally the problem is a local problem. There are certain areas in which the Federal Government can be of great assistance and should be of assistance, but fundamentally the development and growth of an important organized crime group doesn't occur until the local authorities in that particular area permit it to exist. So the first remedy—anything that you may say, I suppose, is in the nature of a truism. I believe it was Channing Pollock who said that all truth is a truism, but the public first must understand the tremendous significance and importance of the organized groups, first as to its effect on government. As I have pointed out before, the significance---

            The CHAIRMAN. If I may suggest, Mr. Peterson, in answer to Senator Wiley's questions and Senator Hunt's, this is very important for the public and the committee because you are one of the Nation's foremost experts on this whole problem.

            Mr. PETERSON. I wouldn't say that.

            The CHAIRMAN. I know you have to catch a plane at 5 : 30, but go into as much detail as you feel you have time because we feel that this is of great importance.

            Mr. PETERSON. What I started to say is that in the first place you have to have a proper public attitude. I mean the general tendency of the public is "After all, these are innocuous things. You are always going to have this." That is the common argument of the man in the street. "You are always going to have prostitution ; you are always going to have gambling. After all, if people want to use narcotics, that is not too important."

            On narcotics they can get more incensed. But, after all, these are the things that furnish the lifeblood for your organized criminal groups. The organized criminal groups can become entrenched only through making alliances with officials in power. When they make those alliances with officials in power, then that means that the underworld has just got to be in a position to dictate law enforcement policies or to control law enforcement agencies.

            I only mention one incident here, for example, in one city where they said, "We will make a big political contribution if we can name the chief of police."

            You remember the old Wickersham Commission which made its investigation years ago. In Los Angeles, San Francisco, Detroit, and in a number of other cities—that is going back 20 years, but the problem is the same—they found that prior to that time those organized criminal groups then wanted the one office, the chief of police, for example, because they could control law enforcement policy.


            When that happens it isn't limited just to these activities that the general public say are innocuous because the man, for example, who is the gambling king or boss in a particular ward in a large city or in a rural area doesn't just confine his activities to protecting the fellow who wants protection for gambling. The other hot individuals—I mean your burglars and safe blowers and other individuals—contact the same man. For example, in the kidnaping cases in the early 1930's, why was it that in so many instances the principal contacts for the Karpis-Barker gang were some of the very big gambling operators in the country? Because they had the connections which would enable them for a big price to offer protection.

            So, as I said before, you get the law violators in a position of controlling the law enforcers. Very frequently individuals who are not at heart venal—I mean they are well-intentioned individuals and wouldn't think outwardly of affording any protection to a no-good hoodlum; but there have been instances where those individuals give big political contributions which are available. They will give those political contributions. After all, the underworld is not making a contribution in the sense that the individual is thinking of it. They are making an investment, an investment in future law enforcement policies. We are all prone to rationalize. It is very easy for those individuals to say "We don't want this man as chief of police. We want somebody else as chief of police." Or "We want somebody who isn't to be too tough on this, that, and the other things."

            Then they start rationalizing, "After all, these things are kind of innocuous," and you have a big problem. I have seen those things happen.

            So the first thing, the public has got to have a real understanding of the true significance of the organized criminal groups.

            The attack primarily has got to be made on the local level. The local authorities cannot dodge their individual responsibility for conditions within their own area.

            Then there are certain areas of activity in which the Federal Government can be and should be helpful. I am sure you can't correct everything by laws, but I am in favor of the two laws that have been introduced at this session. The prohibition of the interstate transportation of slot machines isn't anything new. You had a law similar to that prior to prohibition. I forget what it was called, not the Wilson package law, but you know the law that I have in mind which prohibited the transportation from one State to a dry State. That was prior to prohibition. It had nothing to do with prohibition. As a precedent you have the interstate lottery laws. What the public doesn't understand sometimes is the fact that those laws were brought about because of a grave necessity. Take our old lottery laws. The President of the United States in 1829, I believe, sent a special message to Congress on the grave necessity for a law then to cope with the old Louisiana lottery which was degrading and corrupting government all over the country. They were having a big problem right here in the District of Columbia. So you have a precedent there for the laws that you have suggested.

            Laws themselves aren't going to correct anything. There isn't anything to be used as a panacea that is going to correct.


            Senator WILEY. To what extent would you say are the political organizations or units in the State of Illinois infested with racketeering elements?

            Mr. PETERSON. Wherever you have a bad ward in the city of Chicago, you have a tie-in between the ward committeeman, for example, the political set-up there, and the racketeering element. It has to be that way. On top of that, in Illinois one of the difficulties the present Governor has had with reference to the enactment of good legislation, one of the difficulties that the crime commission has had in trying to get certain laws to correct certain defects in the criminal laws of the State, has been the fact that they have been fought by the group of what is called by the press in Chicago the West Side bloc. Who are those individuals? It isn't a partisan matter. There are both Republicans and Democrats. James Adduci, for example, happens to be a Republican. He has been arrested with a lot of these people. Robert Petrone in the legislature. Senator Libonati is a Democrat and he has been pictured with Al Capone and with "Machine Gun" Jack McGurn and was picked up after an election raid one day by the police around 1930 and I think Paul Ricca was in there, Ralph Pierce and a number of others. I am not saying that they are members of the syndicate. I am saying that they are friendly with a number of individuals. So you have it going all the way, not only as far as law enforcement officers but lawmakers are concerned. They are affected by this particular influence.

            Senator WILEY. You mentioned contributions. To what extent has the Chicago Crime Commission evidence of political contributions?

            Mr. PETERSON. You can't get evidence on that. They are not made in that way. There is no record of it.

            Senator WILEY. Have you any further evidence to give to show to what extent investments made by gangsters and gamblers have infiltrated into legitimate business?

            Mr. PETERSON. Yes, I have a considerable amount of information in our files in Chicago, and I will try to dig up some more for you. Did I give you that list I had the other day on legitimate business, Mr. Halley

            The CHAIRMAN. Let us see if he can find that list.

            Mr. PETERSON. This is a very incomplete list. It is one that, as I was going through the files, I jotted down on a card a reference. Then I had the girl type it up afterward.

            The CHAIRMAN. Mr. Peterson, could you give us a more complete list, say by the middle of next week?

            Mr. PETERSON. I will try to. I think there are about 80 companies there, Senator.

            The CHAIRMAN. Is that confidential?

            Mr. PETERSON. Yes, that is definitely confidential because there are a number of legitimate businesses, and our information is that they have interests in there. In other words, I don't want to do any damage or harm to any legitimate business unless it is capable of proof. You have to prove it through records, and we do not have access to the records to prove it.

            (Discussion off the record.)

            The CHAIRMAN. The committee has received a list of so-called legitimate businesses in which gangsters and racketeers are alleged to have interest or ownership. This, for the time being, will have to be kept.


secret because some of it is on allegations and we don't want to do anybody any harm if it is not true. This list, together with other information the committee has, will be studied. We are making a study in that direction. We would appreciate it if you would go over your records, Mr. Peterson, and give us any further information you have concerning these and any others.

            Mr. PETERSON. I will try to do that. I will have to do that by checking through my files. I don't have it listed as businesses. I will just have to pick it up.

            Senator WILEY. In that connection I would like to ask whether you have any suggestions for the committee whereby through the light of publicity we can curb this infiltration of organized crime into legitimate business ?  This list now is not public and probably will not be, but I wonder if you have some suggestion on that. We think that probably gambling is one of the developed instincts of the race and probably everybody may indulge in some game of chance at times, but when it becomes as you said, an influence to control politics, business, and to cause murder and major crimes, then you have a problem which calls for solution. I am asking whether you feel that you have any suggestion.

            Mr. PETERSON. My suggestion there would be that you do this by any means, and I think it can be done : I have in mind, for example, one industry which, although it is kind of on the border line, is a legitimate business, there is no question about that, but what I had in mind was that on certain industries or big businesses that are controlled, you could prove through your investigations, through records, through subpenas, that the hoodlum element is in control of those particular businesses, and then show, if you can, to the man on the street that he is paying a higher price.

            I am speaking from the standpoint of the consumers because it does affect them, because the legitimate businessman cannot compete with a racketeer or racketeering methods. If you can show the man on the street that he is paying higher prices, that his living costs are increased because of the fact of the hoodlum control of legitimate business, then I think you can do a great service because you have to have the first fundamental thing in the entire approach, to get public support, public opinion. If the public opinion is not interested, if they say, "What difference does it make ?" Then it doesn't make any difference what laws you try to pass or anything else, you will fail. I do not mean you are going to fail. I mean we are going to fail.

            Senator WILEY. Is there any evidence that you have at hand to show to what extent organized crime in Illinois has tentacles, you might say, in Wisconsin ?

            Mr. PETERSON. Wisconsin has been a pretty clean State. The only connections that we have had at all with reference to the Capone gang in Wisconsin is the home that the Capone gang has had up near Eagle River, Wis.

            Senator WILEY. A summer resort.

            Mr. PETERSON. A summer resort. I have said this time and time again. I am not saying it for your benefit.

            Senator WILEY. Why not for my benefit?

            Mr. PETERSON. What I mean is that I am not saying it because I know you are from Wisconsin. If you could get the same tradition of law enforcement that Milwaukee, for instance, has, if you could get


the same tradition of law enforcement on the part of the people that they have had in Milwaukee and maintain the same standards of police efficiency, this whole problem would disappear. You don't have any problem. I say that having been head of the FBI in Milwaukee for 2 years—years ago, of course. I remember having a conference after they changed the chief of police up there one time, which is very significant, because this is to me the answer to the whole thing. I said, "I don't remember this man who is the new chief of police." I was talking to the old chief, who was a very good friend of mine, Joseph Kluchesky, one of the outstanding police administrators of the country. I said, "What kind of a job will he do ?"

            He said, "He will do a good job. You know the people of Milwaukee take a great pride in their police department. They insist on good law enforcement up there. And he will do a good job."

That is the answer to the thing. If the people actually want it, want it sincerely instead of lip service, they will get it on the local level.

            You have the problem today, the thing I have pointed out, of this network of criminals operating all over the country. Perhaps your study will show you certain legislation that may be helpful to the local authorities. You do have this problem. We get letters from all over the country asking for help, from duly constituted officials. I got a letter from a very fine district attorney in one of the Eastern States not very long ago, and he said, "Do you have any information concerning this particular group ?" It was some of the group that I have mentioned in this testimony that I have given.

            He said, "The representative of this syndicate was informed by some other people that the district attorney won't tolerate this sort of thing in this area. The head of the syndicate replied 'What the hell do we care about a district attorney? We control States.'"

            That, of course, was an exaggeration. Here was a district attorney, honest, conscientious, who wanted to do the right thing and apparently didn't even know who these people were. Very frequently the criminal population today is very mobile, moving from one area to the other, with connections all over the country. Certainly, in many instances, the local authorities do need help. I mean conscientious local authorities that want to do something about it.

            Senator WILEY. Is not one of the answers that in any city of any size you should have what you have in Chicago, a crime commission, to start with, made up of citizens who are publicly minded and who feel that because of the set-up, economical and political, they have to make some personal contribution toward trying to straighten up the morals and the conditions in the community. Then they have to go to work.

            Mr. PETERSON. 'I think that the idea certainly has a place. We say that in a democracy vigilance is the price of democracy. In many of your larger cities the people cannot be intimately or accurately informed concerning the law enforcement machinery or the law enforcement set-up except through more or less independent sources such as a crime commission.

            Senator WILEY. I would like to ask you again about Chicago, and perhaps it applies to other cities. How many of the ward committeemen or precinct captains or block workers engaged in politics have actual criminal records?


            Mr. PETERSON. Actual criminal records? I would have to check my records on that. I would question whether there would be very many who have actual criminal records as such. There are quite a number of them who do have connections with some of the racketeering elements. I can't think of anybody right offhand that has an actual criminal record. I can check that.

            Senator WILEY. The Nation, you know, Mr. Peterson, has been very much interested in what we call the cooperative arrangements made by leading newspapers throughout the country in reporting organized crime, reporting leads that interlock in various cities. This seems to be a splendid contribution toward meeting the problem of interstate crime. I wonder if you have any comments on this cooperative newspaper arrangement.

            Mr. PETERSON. I think that is an excellent idea. After all, as I said before, the public has to be adequately informed and properly informed. I mean so that the stories in the press report the significance of some of these problems.

            I might add also that one of the things that we have recommended on the local police level, which is highly important to my way of thinking, is the creation within the larger departments of intelligence units so they know what the situation is with reference to their own locality and elsewhere. Los Angeles, for example. Their intelligence unit has done a very good job. Al Sutton in Cleveland I am sure is doing a good job. There are many others. I do not want to limit it to that. I am sure that is a very important factor. In some of the departments it is amazing. They do not have intelligence sections as such, and they are not familiar with the organized crime set-up except a haphazard way, and you can't combat an organized offensive, so to speak, with a disorganized or haphazard defense. You cannot do that in any kind of warfare, and it is warfare.

            Senator WILEY. Have you found anywhere that what you call organized crime has any connection with communism

            Mr. PETERSON. No. I don't recall any. I would question that you would find too much of that. You might. We have not run across that.

            Senator WILEY. In your experience in so-called labor rackets, I think you testified the other day that one of the moves that was made by organized crime was the attempt to take over the treasury of several of the labor unions, and they raped that.

            Mr. PETERSON. Yes.

            Senator WILEY. That is apparently a material gain. Have you found any indication by organized crime that they would take over or attempt to take over a group for the purpose of utilizing the power that they would get by controlling groups of men so they could be used politically?

            Mr. PETERSON. We have not conducted any investigation in that field. Of course, the labor-racket situation in Chicago I think is greatly improved over, say, in the 1920's, and that sort of thing. We still have certain hoodlum elements in some of the labor organizations, but I think the authorities have done a pretty good job in recent years on the labor angle. I don't have any information along that line, but I would like to make this comment, which is not exactly responsive to your question. The intelligent labor leaders will not tolerate the racketeering element to get a firm foothold within


their own organization. Take Walter Reuther. He has fought the racketeering elements. Too frequently

            Senator WILEY. He got shot twice.

            Mr. PETERSON. Yes.

            The CHAIRMAN. He got shot, and his brother got shot, both of them.

            Mr. PETERSON. Take England in the early part of this century. Prime Minister—he wasn't Prime Minister then but he later became Prime Minister—Ramsay MacDonald, fought, for example, against a gambling racket because it meant a poor wage standard, poor living standard from the standpoint of the workingman himself, not from any moralistic standpoint but from the practical standpoint. He also made the comment that a strong labor movement can't exist if the gambling racket flourishes. He did not use exactly those words. In some of our plants—this is a serious thing from the standpoint of the laboring man—where these racketeers have been able to get into industrial plants, some of them take out enormous sums of money. The racketeering element benefits, and the wage earner's take-home pay is much less than it would be if those racketeers weren't permitted to operate.

            What I am driving at is that the intelligent labor leaders ought to be just as much interested in fighting that sort of thing as those who are interested in law enforcement, too, from the standpoint of the worker.

            Senator WILEY. We are hopeful that they are all intelligent, but we have known lately that there has been some relations to communism. Be that as it may, is it your conclusion that these murders that you have spoken of resulted simply because of the take there is in the rackets, so to speak? In other words, if somebody won't divvy up or somebody who is in control will not share his control of the take, they just kill him off ?

            Mr. PETERSON. Surely. In other words, the underworld is interested in one thing. They are interested in easy money. The means of obtaining it they are not interested in. What I mean is, if they have to kill somebody to make certain that their territory remains intact or to maintain their supremacy in that area, they are going to kill somebody. That is the basis for most of your gang murders. It is usually a fight over territory, a fight, for the easy money in that particular area. One individual wants to be the top man in that place.

            Senator WILEY. How extended in your opinion is the racketeer control in politics in these big cities? For instance, we have read of a number of instances and you have read a number of instances yourself, where they are tied up with murder or tied up with crimes. They get in prison, and out they come. Do you think that is a result of a payoff on the part of political leaders for political support and contributions that have been made?

            Mr. PETERSON. Let me answer in this fashion : You have a big organized crime problem. Organized crime cannot exist without the alliance between those in control of rackets and those in political authority. It cannot exist without that.

            Senator WILEY. Politics and crime go together, then.

            Mr. PETERSON. Surely, organized crime—definitely. How long could wide-open rackets exist in a particular area where the man who.


is in political authority says he does not want it to exist? There are exceptions, but generally speaking, in a big city like Chicago, the ward committeeman is the king pin. If he does not want any rackets there, there are no rackets there. If he wants them, he makes alliances with the group that is interested in easy money. You see, unfortunately there is a vicious circle here occasionally in which people from the standpoint of expediency—as I mentioned a while ago, it is not the fact that a man may be necessarily personally venal, but for example the average man on the street who says he is interested in principle, how deeply is he interested in this principle of government to the extent that he will divvy up out of his own pocket to support this principle, to go out and work for the individual that he thinks is upholding that principle. I mean we are all—and I put myself in that same category—we are all rather weak along that line. But you have this one group here, those that are interested in easy money. They are willing in return for protection to pay large sums of money and to furnish large numbers of workers in political campaigns in order to make certain that the law-enforcement policy is in accord with what they desire.

            Senator WILEY. Take as an illustration these recent murders in Kansas City. With the FBI on the job and with apparent police cooperation, why haven't they been solved?

            Mr. PETERSON. I do not know why they have not been solved. Of course a lot of those killings are paid killers, and they are not so easy to solve. The main thing is that those conditions that give rise to the murders in the first place should not be allowed to exist. You are speaking of Kansas City. If Charlie Binaggio had not had tremendous political power as well as with reference to the rackets themselves, there would have been no occasion ; there would not have been other people vying with him to bump him off, or kill him.

            Senator WILEY. Is the answer to that the same answer you had when the Federal Government got interested in the question of elections when ballots were stolen, and that has not been solved?

            Mr. PETERSON. That is possible. I do not pretend to know why the cases were not solved. I know in Kansas City they had a Federal grand jury investigation on the ballot thefts. I do not know why they have not been solved. Unfortunately the pattern of the thing that you mention in Kansas City has been all too prevalent, all too commonplace in our big city municipal government.

We speak of the Capone gang. As I said in my testimony here, that began in a sense with the killing of Big Jim Colosimo. Actually the Capone gang did not begin with Big Jim Colosimo. You could go back further than that perhaps, but the Capone gang really began when Mike Donald, the king of the underworld and the big-shot gambler in Chicago following the great fire in 1871, organized the commercialized prostitution elements, the gambling elements, the liquor elements, and that sort of thing into a compact political organization which made it virtually invulnerable for that period of 20 years. Then you follow with things after that until you lead up to the Capone gang. Sure the Capone gang did not start back there, but the pattern started there. Go to New York—you speak of the Costello gang, Rothstein and that sort of thing. Go back to Fernando Wood,

08958-50—pt. 2-14


in 1855, and perhaps earlier, in Tammany Hall, you had the same thing. He organized through John Morrissey and Isaiah Reinders.

            What I am driving at is that this developed over a period of almost a century, and not just in those two cities.

            James Bryce when he wrote his monumental American Commonwealth, in the late 1800's, pointed out that the one significant failure in the United States was municipal government. He pointed to ruling classes in the various cities. That is our principal crime problem.

            The reason we have that crime problem—I say the reason but there is no single reason. One of the greatest weaknesses of the human mind is the attempt at oversimplification, but one of the reasons is the fact that the general public does not see the significance; and on top of that, the general public frequently wants law enforcement for the other fellow. He wants the laws enforced for example on traffic. He is disgusted with this terrific death toll and that sort of thing. He wants the traffic laws enforced—not for himself, though—for the other party. So the public cannot escape its share of responsibility on your organized crime problem.

            Senator WILEY. In Europe do they have this same gambling and crime element?

            Mr. PETERSON. I guess after the last war you have had a lot in continental Europe. In England there has not been the same problem that we have had here, although I think historically, if you go back a couple of centuries or so, you will find the situation is at least comparable.

            Senator WILEY. What I am getting at is that has been suggested that one possible remedy is what is done in some States, for instance, in Europe and certain places, that the State itself conducts the place and gets the take.

            Mr. PETERSON. That is not going to correct anything. The commercialized gambling racket as such is an inherently illegitimate business. You cannot make it legitimate by law. We do not have the same situation. Of course in England they have most of the same laws that we have. Most of the laws that we have against gambling are true over there. They have the football pools, which have become big business, as a matter of fact, over there. You have a different situation. You cannot compare them. The laws are about the same in England and this country, but you have a different situation there with reference to your political set-up. Take for example our efforts to control liquor. Things that have worked over there have not worked here because of the difference in the political set-up. I could go into detail on that, but there is no purpose in it. You cannot compare the two. The gambling racket as such is an illegitimate business and you cannot make it legitimate by law any more than perhaps you can stamp it out by law. The great difficulty is that when you legalize it, history shows in every country that you increase mass gambling and that the poor man on the street is the man who pays the bills. That is historically correct. We have had experiments in this country. We have had the old Louisiana lottery and other lotteries in this country for almost a hundred years. They got into the hands of the racketeers. The poor man was paying the bill. If you read some of the histories of the lotteries, some of the committees in Pennsylvania going to 1700, and in Rhode Island, you will find that was no solution


to the problem at all. It aggravated the problem. That is what gave rise to some of our laws, as a matter of fact.

            Senator WILEY. Primarily it is a question of curing the instinct in the human mind so that it will not indulge in gambling. You cannot do that by law.

            Mr. PETERSON. No.

            Senator WILEY. The next alternative is to give publicity so that the people themselves will become aroused to the evils resulting therefrom.

            Mr. PETERSON. From organized commercialized gambling. The trouble of it is, usually the approach to the whole problem is along moralistic lines. It is either moral to gamble or it is immoral to gamble. So the argument wages along that line. That has nothing to do with it. It is primarily an economic and a social and political problem, but primarily economic and social. As far as individual gambling is concerned, our laws generally do not prohibit it. If you and I wanted to play cards and gamble in our own home, most of the State statutes do not prohibit that. There is plenty of room for people to gamble if they want to gamble, but to permit individuals to engage in a business which exists solely to exploit a human weakness, the concept of all of our social legislation is against that. We do not permit any kind—I say we don't permit. Our laws constantly are being devised to prohibit legitimate business, for example, from exploiting the poor man. For example, we would not say it is all right if a person wants to go into business and sell a bottle of water with a label on there and saying that this has a good chance of curing cancer. I could become a millionaire selling something like that, probably, but we do not permit that because that is exploiting a human weakness. That is the reason our State laws that prohibit gambling are consistent with other social legislation that we have on the books.

            The CHAIRMAN. Senator Hunt ?

            Senator HUNT. Mr. Chairman, I have just a couple of questions.

            You handed to the chairman a while ago a list of various legitimate businesses which you had some reason to believe these crime syndicates were muscling in.

            Mr. PETERSON. Yes.

            Senator HUNT. There has been mentioned here several times the fine support that these programs against crime have all over the United States from the press. In that list do you know of situations where these gangsters are attempting to get into the press and buy newspaper stock and ownership ?

            Mr. PETERSON. Have I heard of that happening? I have heard of that, yes. I was told, for example, by one reporter, one time that he had been offered the editorship of a paper. He had been hitting pretty hard against one particular group, and I was told he had been offered by an individual pretty closely identified with the organized criminal element that he would make him the editor of this paper. The purpose there was strictly a pay-off. So in that instance this man must have owned a newspaper. I don't know whether that is true or not, but I was told that by a reporter, a highly reputable reporter.

            Senator HUNT. Your crime commission in Chicago generally speaking is considered to have done very fine work. I wonder if you could tell us specifically of situations in various parts of Chicago that you have cleaned up, where you have caused the resignation or defeat


at election of any officials, any police officers you have caused to resign. Could you give us a general statement on it ?

            Mr. PETERSON. I might mention that our general approach has been this : We have first through our own investigative staff, which includes men with former FBI experience or men with Army and Navy intelligence, gathered the facts. Our first approach is usually to go to the officials responsible for those particular conditions. Generally speaking, your officials when it is brought to their attention, sometimes it is just oversight. Sometimes they may know it already. But when they know we have these facts and we bring it to their attention, very frequently the condition is improved. If we cannot get any action from that standpoint, then our next and final approach is to go to the public with the facts. Generally speaking, when the public is apprised of the facts, there is a tremendous amount of activity on the part of the officials, at least temporarily, to clean up certain conditions.

            Our activities are along several different lines. For example, in an area where the incidence of crime may be high, we may conduct an undercover investigation in that area for a long period of time to determine the true conditions there, that is, with reference not just to crime conditions but also activities of the officials in that area. That is one approach. Another approach is that we get specific complaints with reference to cases where they believe there is a miscarriage of justice, or we get information concerning conditions in courts.

            For example, in one specific case we got information out on the South Side that there was somewhat a racket in this court, that there were poor people in that area who would come in the court and be fined $100 or $200, and the record would show the fine was suspended. In other words, they were not supposed to have paid any money, but they actually had paid the money, and somebody was pocketing the money. We conducted a very detailed investigation of that situation over a period of a couple of months and got the facts and the figures. We showed that in 1 month there were 40 cases in which the fines were suspended, and we located the men who were supposed not to have paid any fines, but actually had. We got statements from those individuals. We went then to the chief justice of the court. We then went to the bar association. In that kind of case while you always have difficulty of witnesses standing up, the chief justice took immediate action, revamped the procedure in that particular court, put one of his strongest judges out in that court, and completely eliminated the racket.

            In another case where we had information, for example, of bribery in a particular office, we went to the elected official. We told him what we had found. He was very cooperative. He fired, I think, three members of that office, and he placed two others in other work where they would no longer be in contact with the temptation.

            It is a constant proposition. You never clean up a city permanently. You have to keep at it all the time. I think I am justified in saying that we have accomplished a considerable amount of good. We certainly have not accomplished anything like what we would like to accomplish.

            Senator HUNT. I have one more question, if you can answer it just "yes" or "no," please. Do you think that conditions throughout the


United States today are worse, better or as good as they were in the twenties ?

            Mr. PETERSON. I would say one of our worst eras was during the twenties.

            Senator HUNT. In other words, you think there has been some improvement.

            Mr. PETERSON. I think there has been some improvement. However, I do not think the organized criminal element is any weaker today than it was during that period. They have changed their techniques. There are not as many gang killings. I still think that one of the No. 1 problems of the Nation is the organized crime problem and its effect on government. That is my personal opinion.

            Senator HUNT. That is all the questions I have, Mr. Chairman.

            The CHAIRMAN. Mr. Peterson, various estimates of the take from gambling and illegal businesses have been made, and most of them are attributed back to you. I know this is a very indefinite subject and it is impossible to give an exact figure, but what is your best estimate of the size of the so-called gambling take?

            Mr. PETERSON. The gambling take throughout the entire Nation?

            The CHAIRMAN. Yes.

            Mr. PETERSON. Any figures that I could give you on that would be strictly an estimate, strictly guesswork.

            The CHAIRMAN. I appreciate that.

            Mr. PETERSON. The figure that probably would come as close as any would be in the neighborhood of around $15,000,000,000. That is a figure that is very frequently used. P. Hal Sims, a number of years ago, about 3 or 4 years ago, made the statement that there was at that time around $28,000,000,000 that was not accounted for in safety deposits or bank deposits, securities, and that sort of thing, and he estimated that the greater portion of that probably went into something similar to the gambling rackets or allied rackets. As I said, I have no way of making any kind of estimate on that.

            The CHAIRMAN. Anyway, this $15,000,000,000 is about $2,000,000,000 more than the appropriation for our Military Establishment during the last year, is it not? It is about equal to our own appropriation this year.

            Mr. Peterson, you have done a great .service to the public and to this committee in the tremendous amount of effort you have put forward in compiling this record and story of what is happening in various parts of the United States.

            As I get the picture, there were these gangs back in the prohibition days, and the source of money at that time was bootlegging and rum running and activities of that sort. Then after that time they moved considerably into gambling activities, narcotics, which of course has gone on, and some amount of prostitution, but the large source of money at the present time is gambling activities.

            Mr. PETERSON. I think that is correct. However, it would be a mistake, I think, to assume that after prohibition all of these people then went into the gambling racket. The same gangs were in the big gambling money at that particular time. Take for example in Chicago during the height of the Capone syndicate, it is estimated—it has to be an estimate—that their take from gambling during that same period, at the height of the prohibition era, was around $25,000,000, something like that. When they took over Cicero and Chicago, you


had wider-open gambling during that period than you have in Chicago now; just as wide, at any rate. In fact, in recent years in Chicago I think they have done a pretty good job in eliminating the wide-open gambling. We do not have the room play that we used to have. That is the big money, where they can go in and listen to the loudspeaker and have the roulette wheels and everything .else in conjunction with it. In recent years under the present administration of Mayor Kennelly I think they have done a pretty good job in eliminating the wide-open sort of thing. There are plenty of places that you can make a bet, but---

            The CHAIRMAN. Is it not true, Mr. Peterson, that with technological improvements in transportation, radio, telephone, airplane, wire service, and what not, it makes it more of an interlocking and interwoven national problem than we ever had before in the Nation?

            Mr. PETERSON. I don't think there is any question about that. I think that is definitely true.

            The CHAIRMAN. As I get it, the picture you paint is that there are a good many rather distinct gangs now operating these various illegitimate places, but there is a common acquaintance and understanding among the leaders of the various gangs as to where they are going to operate and what they are going to do.

            Mr. PETERSON. That is true.

            The CHAIRMAN. They have an allocation of territory.

            Mr. PETERSON. It forms almost a Nation-wide network, in other words. The way it has developed, an important problem becomes deeply entrenched locally. It starts to spread out. It makes alliances with other gangs in other parts of the country. The first thing you know some of the gangs begin operating almost on a Nation-wide basis. The facts and figures establish that. You have gangs that operate from the east coast to the west coast. That is positive.

            The CHAIRMAN. Another very definite problem is the fact that these people make tremendous amounts of money and put that money into legitimate businesses. You have given us a list of them and we will enlarge upon that. That enables them through these apparently legitimate businesses to exercise influence in that way, does it not?

            Mr. PETERSON. That is right.

            The CHAIRMAN. In other words, if a person in some high-sounding business, apparently a legitimate business, asks that something be done, the politician might not know that the inspiration of it comes from some gang ownership that he does not know about.

            Mr. PETERSON. That is right. This happens also : For example, from all the information we can gather on legitimate businesses in which they have made an infiltration, there are hundreds of places that you never would dream of, perhaps. For example, a man that I have had contact with prior to this time in a legitimate business in Chicago, came in to my office one day and said, "I have been offered a very attractive position." He is a very high grade man. He said that this job would mean to him around $25,000 a year. "I am to head this corporation that has been formed. It is right in my field and it is such an attractive offer that I can't afford to turn it down. The only thing that disturbs me is that somebody told me that the person who had contacted him might have some undesirable connections."

            He wanted to know if I knew anything about him. The fellow who had contacted him was part and parcel of the Capone syndicate.


            In fact, I mentioned his name during the course of my testimony. We didn't have any intimation that he was going into that particular field. I would not have known it then except that this man came to me for advice. When he found out who it was he said, "I don't want any part of it," because his reputation meant more to him than getting mixed up in something like that.

There are a lot of people who would have accepted that kind of job.

            The CHAIRMAN. I take it that there is no particular kind of legitimate business in which they engage, and they are in all kinds of businesses—hotels, beverages companies, cab companies, garages.

            Mr. PETERSON. That is right, they are in everything. However, of course they are always going to concentrate in those activities which are lucrative. That is the field that attracts the criminal element—easy money, in other words, where they feel that they have made a lot of money, they may want to invest in a hotel or some other legitimate business and live off their investments. In fact, I mentioned almost every kind of business, I believe, during the course of my testimony.

            The CHAIRMAN. Mr. Peterson, you have had a great deal to say, naturally, about Chicago, as you have about other areas. You have talked about some of the officials, both Democratic and Republican. What sort of cooperation have you been getting out of the Governor of Illinois ?

            Mr. PETERSON. Very excellent. Governor Stevenson, I think, has been trying to do a very, very good job. Our relations with his office have been very, very fine. In fact, Governor Stevenson at the last session of the legislature, which was perhaps against his political interest, backed the bills that we were trying to get through the legislature. He worked for them.

            The CHAIRMAN. But you did not get your bills through the legislature, did you?

            Mr. PETERSON. No, because of this West Side block which was the spearhead of the attack against them. They also sabotaged a lot of his other legislation. But Stevenson, I think, has been trying to do a very conscientious and sincere job in the State of Illinois.

            The CHAIRMAN. Of course we are going into the matters in Chicago in more detail later on, but is one of the matters that you have trouble with that you have grand juries that stay in session only 30 days so they do not have time to complete a case?

            Mr. PETERSON. That is right; particularly on an organized crime case or one involving official corruption. The grand jury may get the case during the middle of its session, and then adjourn in 15 days. Of course the whole term is 30 days. It is mandatory upon it then to go out of business and a new grand jury is appointed. Our bill was designed so that the State's attorney or the judge or the grand jury could itself of its own motion prolong the session of the grand jury up to but not exceeding 3 months.

            The CHAIRMAN. Has Mayor Kennelly been making some efforts to try to clean up these problems in Chicago?

            Mr. PETERSON. Yes, Mayor Kennelly is a very high grade and sincere man of high integrity. There is no question about that. We do not always see eye to eye in connection with police problems.

            The CHAIRMAN. You sometimes differ as to methods, but he does make an honest effort


            Mr. PETERSON. That is right. Nobody could question his honesty, sincerity, and integrity.

            The CHAIRMAN. Mr. Peterson, you discussed to some extent the advisability of a law against interstate transportation of one-arm bandits, slot machines. Is it not true that actually the communications over the wires or the communications systems plus the mails furnish the backbone for a great many of the gambling operations that we have?

            Mr. PETERSON. There is no question about it. In other words, to me it is an anomalous situation whereby a centralized service can distribute a service, so to speak, furnish service to illegal operations. In other words, I think that bill is definitely sound, the one that prohibits the interstate transportation of racing news to States where it is illegal.

            The CHAIRMAN. Of course you would have the difficulty of giving the people the news they want to have and at the same time trying to prevent that news from being used for illegal gambling purposes?

            Mr. PETERSON. That is right. As far as I can see, most of the information that is given as a service is not what the average person is interested in in the news. He doesn't have to have it within a matter of seconds after the race is run. He doesn't have to have the morning line-up and all of the information that you have to have to operate a handbook operation or a gambling operation.

            The CHAIRMAN. You mean the changes in jockeys, how weather conditions are, how wet the track is, and things of that sort.

            Mr. PETERSON. Yes. He does not have to have it up to the minute, in a matter of seconds, and all that sort of thing, which you have to have in a gambling operation.

            You were speaking of slot machines.

            The CHAIRMAN. Would you say that the greatest gambling racket today is in connection with horse racing and dog racing?

            Mr. PETERSON. One of the biggest; yes.

            The CHAIRMAN. So you think a bill could be drafted so as to give the public the reasonable information if they wanted it.

            Mr. PETERSON. That is right.

            The CHAIRMAN. And at the same time do away with most of the gambling operations by virtue of the limitation of communications.

            Mr. PETERSON. I see no reason why a bill could not be drafted which would not infringe upon the liberty of the press. For example, under the old lottery laws it has been illegal to advertise through the mail on lottery drawings and that sort of thing. Nobody has suffered as far as the freedom of the press is concerned by such a law.

            Getting back to the slot machines, just as a matter of interest, of course, virtually all the slot machines are manufactured in Chicago. It has been estimated that about 75 percent of the slot machines have been manufactured by—it used to be the Mills Novelty Co., but it is now known as the Belomatic Corp. Approximately 10 to 15 percent of the balance are manufactured by the O. D. Jennings Co., and then the balance are manufactured by six or seven other companies. I think virtually every slot machine in the country is manufactured in Chicago. We have certain State legislation on our books which it is claimed is not applicable to the manufacture of the machines. I think that bill that was introduced is a good bill.


            The CHAIRMAN. Mr. Peterson, I believe that is all at this time and again on behalf of the committee we want to thank you and the American Municipal Association for the very splendid statement which you have given us and for the work you have done in preparing it. We want also to ask you for your future cooperation, which will be very, very valuable.

            Mr. PETERSON. I want to thank the committee and its counsel for the very fine and courteous treatment that you have given me here, and I want to assure you that in any manner that you feel we can be of assistance to you we are only too glad to do so.

            (Whereupon, at 4: 45 p. m., the committee adjourned subject to the call of the chair.)

Part 1; Part 2