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82D CONGRESS      :                       :                       :                       :           1ST SESSION

JANUARY 3-OCTOBER 20, 1951

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SENATE REPORTS

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VOL. 6

REPORTS ON CRIME INVESTIGATIONS

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UNITED STATES

GOVERNMENT PRINTING OFFICE

WASHINGTON 1951

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CONTENTS

            Note -The 1st report on crime investigation pursuant to S. Res. 202, 81st Congress, was issued as Senate report 2370, 81st Congress, 2d session, and was bound in volume 5 of Senate reports of that session, serial number 11371.

No.

141. Second interim report of Special Committee to Investigate Organized Crime in Interstate Commerce, pursuant to S. Res. 202, 81st Congress.

307. Third interim report of Special Committee to Investigate Organized Crime in Interstate Commerce, pursuant to S. Res. 202, 81st Congress.

725. Final report of Special Committee to Investigate Organized Crime in Interstate Commerce, pursuant to S. Res. 202, 81st Congress, as amended by. S. Res. 60 and S. Res. 129, 82d Congress.

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82D CONGRESS}                                 SENATE                                            REPORT                

1st Session                                                                                                                                         No. 141

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SECOND INTERIM REPORT

OF THE

SPECIAL COMMITTEE TO INVESTIGATE ORGANIZED

CRIME IN INTERSTATE COMMERCE

PURSUANT TO

S. Res. 202

(81st Congress)

FEBRUARY 28 (legislative day, JANUARY 29), 1951.-Ordered to be printed

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UNITED STATES

GOVERNMENT PRINTING OFFICE

WASHINGTON : 1951

SPECIAL COMMITTEE TO INVESTIGATE ORGANIZED CRIME IN

INTERSTATE COMMERCE

(PURSUANT TO S. RES. 202, 81ST CONG.)

ESTES KEFAUVER, Tennessee, Chairman

HERBERT R. O'CONOR. Maryland   CHARLES W. TOBEY, New Hampshire

LESTER C. HUNT, Wyoming            ALEXANDER WILEY, Wisconsin

RUDOLPH HALLEY, Chief Counsel

JOHN L. BURLING, Associate Counsel

ALFRED M. KLEIN, Associate Counsel

DOWNEY RICE, Associate Counsel

GEORGE S. ROBINSON, Associate Counsel

HAROLD G. ROBINSON, Chief Investigator

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                The committee wishes to express its appreciation to Judge Morris Ploscowe, of New York City, and the Commission on Organized Crime of the American Bar Association for assistance in the preparation of this report.

                II

CONTENTS

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                                                                                                                                                Page

I.  Introduction .............................................................................................................1         

            Organized crime does exist............................................................................... 2

            Connivance of local authorities necessary........................................................   3

            Power and influence of gangs...........................................................................  4

            Gambling now big business..............................................................................  4

            Organization of rime Investigating Committee................................................     5

II. How criminal gangs operate..................................................................................... 7

III. Advantages of gang membership............................................................................. 8

IV. Interstate relationship of leading gangs...................................................................   9

V. Contact and liaison between gangs......................................................................... 10

            Racing wire service controls bookmaking.......................................................  10

            The Mafia-What is it........................................................................................11

VI. How big is the gambling racket.............................................................................  11

            Losers cash millions in cheeks.........................................................................  12

            Twenty billions changes hands yearly..............................................................  13

VII. Bookmaking is an organized industry...................................................................  14

VIII. Wire service essential for monopoly...................................................................  15

IX. Continental Press Service a monopoly................................................................... 16

X. Capone gang controls bookmaking..........................................................................17

            Arthur McBride takes over..............................................................................18

            Capone gang starts muscling in.........................................................................19

            Trans-American expands its activities............................................................... 20

            Trans-American mobsters dodge subpenas........................................................21

            Continental pulls the strings............................................................................... 23

            Facade of legality a sham...................................................................................24

XI. Bookmakers' profits shared by gang........................................................................ 25

XII. Record of official corruption .................................................................................  26

            Gangs seek influence in high places..................................................................   27

            Corruption at lower levels rampant.................................................................... 27

            Law enforcement paralyzed by gangsters..........................................................  28        

XIII. Old methods of enforcement ineffective...............................................................   29         

            Jurisdictional overlappings confusing      .............................................................30

XIV. Government cheated of vast sums......................................................................... 31

            Many tax returns fraudulent................................................................................32

XV. Gangs infiltrating legitimate business.....................................................................    33

XVI. Status of conclusions and recommendations.......................................................... 34

III

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82D CONGRESS                                    SENATE                                               REPORT.

SECOND INTERIM REPORT OF THE SPECIAL SENATE

COMMITTEE TO INVESTIGATE ORGANIZED CRIME IN

INTERSTATE COMMERCE

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FEBRUARY 28 (legislative day, JANUARY 29), 1951.-Ordered to be printed

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

SECOND INTERIM REPORT

[Pursuant to S. Res. 202]

INTRODUCTION 

I

             The Special Committee of the United States Senate To Investigate Organized Crime in Interstate Commerce had its genesis in Senate Resolution 202 of the Eighty-first Congress, second session, filed January 5, 1950, adopted on May 3, 1950.

            Its primary purpose was precisely what is implied by its title.  Before and beyond the date of the adoption of this resolution by the Senate, a considerable segment of the thinking population of the country had come to the inescapable conclusion that organized crime had developed into a serious national problem.

            In the daily press and in countless periodicals appeared numberless indications that organized criminals had achieved such power as to be able to infiltrate into our very Government and to corrupt law enforcement in many local communities.  Into the ears of millions of the population via radio went warnings that well organized mobs engaged in crime were operating from one border of the Nation to the other without regard for State lines and thus were avoiding responsibility for their criminal actions in local jurisdictions.

            In many places it was open and notorious that these things were transpiring.  Efforts to curb them had proved of such little effectiveness that in many places they had been abandoned and, through public apathy, they became accepted as part of the normal way of life.

            In February 1950, under the auspices of the Attorney General of the United States, the American Municipal Association and the American Conference of Mayors, a conference of the mayors of most of

                                                                                                                                    1

2          ORGANIZED CRIME IN INTERSTATE COMMERCE

the large cities of the United States was held in Washington. Some of them like Mayor de Lesseps Morrison of New Orleans, La., and Fletcher Bowron of Los Angeles, Calif., took the lead in stating the situation for the record and admitting frankly that organized crime had become such a serious problem that disparate localities were unable any longer to suppress it.

            On the other hand, there was a body of opinion which expressed doubt that there was any serious organized crime problem in the Nation.  Among those who held this view respected by many, were men charged with the responsibility for suppression of crime.  It found expression by some who were present at the United States Attorney's Conference in Washington, at about the same time as the mayors' conference.

            The conflict of opinion thus was shared not only with the public but manifested itself as well in the Halls of the Congress and for some time it was debated at length whether or not the Congress was warranted in adopting legislation to deal with a condition that might not in reality exist.

            This debate and the attendant public reaction released a flood of opinion and from the accompanying tide of information that poured into the congressional offices more facts began to come to light.  These facts have been amplified by this committee over 10 months of the most intensive investigation of its kind ever attempted.

ORGANIZED CRIME DOES EXIST

            It cannot now be denied, as will appear more fully later in the report, that the doubt which originally existed in the minds of many intelligent and careful persons as to whether crime is organized in the United States was in great measure deliberately planted there.  It was created by criminals who have vast resources and incalculable power.  They have amassed and hoarded tremendous wealth out of the proceeds of their criminal activities and with it they have sought to purchase respectability so that the true nature of their operations would not become known.  They have insidiously cultivated the association of persons whose integrity and character are unquestionable.  They have sought membership in social clubs and other organizations where they might acquire the status of respectability in their respective communities.  They have been lavish in their gifts to charity and they have publicly promoted philanthropies, all in. an effort to hide their crimes behind the shielding cloak of respectability.

            And to carry out this fiction, in many cases they have invested in legitimate businesses so that they could always point to these false fronts and claim that they were no longer engaged in crime in the event that a question might ever be raised as to their former criminal associations.

Nor was this situation confined to any one particular community or State.  It was an open secret in the State of Florida, one of the Nation's best-known playgrounds, where at certain seasons of the year affluent Americans from all parts of the country would gather for their vacations, presumably well provided with money and seeking excitement, that criminals from Chicago had moved in during the early pert of 1949 and were attempting to take control of the largest and most lucrative bookmaking operation in the entire State.

ORGANIZED CRIME IN INTERSTATE COMMERCE            3

            It was no secret in the State of Florida at the same time that a criminal gang basing its operations in New York and northern Now Jersey had taken control of the largest gambling casinos in Florida and New Jersey and were mulcting millions of dollars out of these gambling games from anyone who would play.

CONNIVANCE OF LOCAL AUTHORITIES NECESSARY

            It was no secret that these operations could not continue without the protection of police and with the connivance of local authorities.  Yet when this committee, as one of its first official acts, wrote a letter of inquiry to municipal heads and law-enforcement officers in the States of Florida and Missouri, among others, asking for information on the subject, the reply was virtually unanimous that there was no serious crime problem whatsoever, not even in the Miami-Miami Beach area where gambling was so open and notorious as to be a stench in the public nostrils.

            It was no secret in the State of Missouri, and particularly in Kansas City, that the State government and its administration had narrowly escaped falling under the control of gangsters with criminal affiliations in the election of 1948. These gangsters had for their objective making the State of Missouri, and particularly Kansas City "wide open," and they were willing to spend money on an election campaign for the governorship in order that they might not have to pay for protection thereafter.  The racket contamination in Missouri, festering for a long time, finally erupted in the double murder of Charles Binaggio and Charles Gargotta followed by a full-dress investigation by an aggressive Federal grand jury conducted by Max H. Goldschein, an able prosecutor, who is special assistant to the Attorney General of the United States.

            It was no secret in New York and in the counties of New Jersey directly across the Hudson from America's biggest city that the most notorious hoodlums in Manhattan were operating a chain of gambling houses that showed, conservatively, profits of from five to ten million dollars a year.  There was no secret about this.  For New Yorkers with money in their pockets, transportation in private limousines to the casinos of north Jersey was available.  The customers were told they need not eat their dinners before departure for lavish food was available without cost on the casino premises to those who played.  The district attorney of New York County succeeded in 1949 in convicting the one minor figure in this tremendous gambling ring over whom he had jurisdiction.  This gangster's contribution to the crime set-up consisted of cashing checks for the ring in a New York bank.

            The facts brought to light by this individual's trial goaded the New Jersey authorities into action and as a result of their efforts a minor participant was imprisoned, this time on a plea of guilty.  But no attempt was made to obtain the books or records of the gambling houses so that those who were principally in control and who shared principally in the profits might also be prosecuted.  Although the name of one of the other participants in this operation appeared as endorsee on every one of the checks used to convict the check-casher in New York, no prosecution by the local prosecutor was brought against him. The ''fall guy" pleaded guilty and that was that.       

            It was no secret in. Chicago that the head of a Nation-wide wire service which furnished news of horse racing over leased wires from one

4          ORGANIZED CRIME IN INTERSTATE COMMERCE

corner of the country to the other was ambushed and shot after a lengthy dispute with a gang of criminals who were trying to take over control of this lucrative service.

            It was no secret that this man had been threatened with death if he did not cut the organized mob in.  He died because he fought the gang; after his death the mob took over and again, that was that.

            It was no secret to the newspapers of the United States during the year 1949 that from time to time meetings of notorious characters with police records would be held in various places, preferably resorts like Miami Beach, Hot Springs, Ark., Phoenix, Ariz., and others. Articles to this effect were printed. The comings and goings of crime operators like Frank Costello, Joe Adonis, Meyer Lansky, Willie Moretti and many others were considered as newsworthy as the activities of heads of foreign states and received comparatively as much space in news columns.

            What brought about this public state of mind that approached almost respect for these underworld characters? Why were they permitted to proceed with the organization and integration of their criminal activities throughout the country?

POWER AND INFLUENCE OF THE GANGS

            Prior to the investigation by this committee, which is only now approaching its conclusion, the only reason that could be surmised was that these criminal gangs possess such power and had access to such sources of protection that they constituted a government within a government in this country and that that second government was the government by the underworld.

            This committee at the outset of its investigation found it difficult to accept such a hypothesis. But the mass of detailed testimony that covers thousands of printed pages taken from hundreds of witnesses, a good number of them at the very top of America's criminal hierarchy, has forced this committee to the ineluctable conclusion that there is such an underworld government.

            This phantom government nevertheless enforces its own law, carries out its own executions, and not only ignores but abhors the democratic processes of justice which are held to be the safeguards of the American citizen.

            This secret government of crimesters is a serious menace which could, if not curbed, become the basis for a subversive movement which could wreck the very foundations of this country.  There is no doubt that the confidence of millions of citizens in the protection which their Government should give them has already been undermined by these gangs and to that extent has left many otherwise law-abiding citizens ripe for an approach to do the bidding of anyone willing to pay a price.

GAMBLING NOW BIG BUSINESS

            A preliminary consideration of this menacing situation brought new views on gangs and gangsters.  It was apparent that since the entire approach of the criminal mobs had been revised many of the classic aspects of crime would probably have been abandoned.  The striving for respectability, if only as a false facade, would undoubtedly bring with it many new side ventures and devious paths. The lush traffic

ORGANIZED CRIME IN INTERSTATE COMMERCE            5

in alcohol beverages during the violent years of 1920 to 1933 had laid the base of organization for a number of criminal gangs.  The termination of the ban on liquor deprived these gangs of their most lucrative source of money and they were obliged to turn to some other avenue of activity.  Simultaneously with the advent of repeal came the turning point of the depression.  Money began to become mere plentiful and as the years went on became more and more so.  What could be more desirable for these criminal gangs than a business whose sole commodities consisted of money and information?  The answer was the promotion of gambling in the forms that are now so prevalent.

            Strangely enough, for the last three decades there appears to be a continuity of identity not only in the operating gangs but in the individuals who comprise them.  Reports were current, that for reasons best known to the insiders, some had been eliminated – liquidated - by the secret enforcers of this underworld government, but many of the same names that achieved such notoriety during the frenetic days of prohibition were still foremost in the news when the activities of these mobs were reported.

            One conclusion was inescapable: That somewhere along the line there was a force operating which permitted these lawbreakers not only to shift from one illegal operation to another but to continue in those operations without effective harassment or cessation.

            Because there can be only one paramount government at any time in any one place, it was necessary to determine to what extent law and order were in jeopardy of being completely destroyed by these organized outlaws.  It became manifest that it was also necessary to arouse the public to the threat that was implied by permitting these dangerous and unscrupulous individuals, possessed of neither morals nor conscience, to prey upon the weakness and indifference of the average citizen.  Finally, if any action were to be taken to curb or suppress these activities, it was also apparent because of the complex interstate ramifications that the impetus would have to come from the Federal Government and toward that end information to the fullest extent of the over-all picture was imperatively necessary.

ORGANIZATION OF CRIME INVESTIGATING COMMITTEE

            Out of a distillation of all these considerations came Senate Resolution 202 of the Eighty-first Congress, second session.  The enabling resolution directed the committee to determine whether organized crime operates in and through interstate commerce; to identify the persons or firms so operating; to determine whether organized crime utilizes interstate facilities to develop corrupting influences, and to decide what changes and amendments in Federal laws are necessary so that the various States might more adequately meet the threat of organized crime within their borders.

            To arrive at a thorough, accurate, and over-all picture of the problem of organized crime in interstate commerce, the committee, consisting of Senator Estes Kefauver as chairman; two other Democratic members, Senators Herbert R. O'Conor and Lester C. Hunt: and two Republican members, Senators Charles W. Tobey and Alexander Wiley, has visited and held hearings in many parts of the country. As of the date of this report they have held executive sessions and public hearings in Miami, Kansas City, Washington, Chicago, Phila. 

6          ORGANIZED CRIME IN INTERSTATE COMMERCE

delphia, New York, St. Louis, Las Vegas, San Francisco, Los Angeles; Tampa, New Orleans, Cleveland, and Detroit.  Approximately 500 witnesses have been heard.  The minutes of these hearings constitute the basis of this report.

            Under the pressure of a national emergency, with the Congress in session during most of the life of the committee, and with a strict limitation of time within which to survey the interstate crime situation throughout the Nation, the committee has had to place a great measure of reliance on its staff.

            While due acknowledgment of the splendid manner in which the committee's staff performed this herculean task will be made at length in the final report, the committee believes it would be remiss if it did not, at the outset, express to its able and indefatigable chief counsel, Rudolph Halley, its gratitude and appreciation of his work.

            At the sacrifice of his own lucrative law practice, he has, for the better part of a year devoted himself continuously to this inquiry; assiduously and without regard to his own comfort and convenience. To Mr. Halley and his loyal, hard-working staff, the committee here records its sincere thanks.

            Augmenting the investigative efforts of its own staff, the committee has had the valuable assistance of numerous national, State and local organizations, notably the crime commissions of several States and cities.

            Of particular help have been the activities of the commission on organized crime of the American Bar Association, headed by, former Secretary of War Robert P. Patterson. Indeed, to Hon. Morris Ploscowe, of New York City, the executive director of that commission, the committee is especially indebted for assistance in the preparation of this report.

            During the course of this inquiry a good many material witnesses deliberately dodged service of subpenas issued by the committee.  Some of these elusive witnesses fled beyond the borders of the country' in a willful attempt to sabotage the committee and its purposes.

            Within the past 2 weeks, the Senate has directed that warrants of arrest issue for these missing witnesses.  This step has been followed by the voluntary surrender of a number of these individuals.  Their testimony will be taken before the committee ends its activity.

            As long as this committee retains the authority to do so, it will continue to search for those who have flaunted its process; after the expiration of its authority, the members of the committee hope that the Senate will follow its established procedure for bringing these recreant witnesses to book for their contumacy.

            It should likewise be noted again that the purpose of the committee has been solely to obtain information to be used as a basis for legislation should the need for new law be established.

            It has no prosecutive power; prosecution is a province reserved exclusively for the judicial branch of government.

            Toward the end of acquiring information, the committee has issued many subpenas; some of the witnesses summoned have not, however, been called upon to testify.

            As the committee has taken great pains to make clear at every hearing it has held, no inference of guilt of any offense, or criminal association, should be drawn from the fact that an individual was summoned, whether he testified or not.

ORGANIZED CRIME IN INTERSTATE COMMERCE            7

II

HOW CRIMINAL GANGS OPERATE

            In every large city that it has visited the committee has found similar patterns of organized crime.

            These patterns may be summarized as follows:

            (1) Groups of individuals work together to operate for profit one or many forms of criminal activity.

            (2) These individuals and groups do not hesitate to use murder, bombing, or any other form of violence to eliminate competition, silence informers, persuade potential victims, or to enforce gang edicts. They frequently import associates from other areas of the country to perform these tasks in order to make detection more difficult.

            (3) They use bribery or some other form of corruption to secure the noninterference by law-enforcement agencies with gang activities.

            (4) They maintain profitable arrangements and relationships with like-minded criminal groups and individuals in other cities and in other areas of the country.

            (5) They employ the gains and profits from these illegal activities to infiltrate into legitimate enterprises, to which they bring the operational methods of their criminal business, i. e., monopoly, enforced by intimidation and strong-armed violence.

            Evidence of widespread organized criminal activity has been found by the committee particularly in connection with various forms of gambling such as bookmaking, slot machines, the numbers or policy game, punchboards, gambling casinos, and in connection with the sale and distribution of narcotics. The committee has also heard testimony in many communities concerning organized criminal activity in connection with the violation of the liquor and prostitution laws, business and labor rackets, and extortion and blackhand shake-downs.

            Conditions similar to those spread upon the record by the committee have from time to time been uncovered by legislative investigations, grand jury inquiries, or exposes by daily newspapers and crime surveys on a local, isolated, sporadic basis.  Many of the individuals who appeared before the committee have been the targets of these investigations, inquiries, exposes, and surveys.  However, previous revelations of organized crime have normally been limited to occurrences in a single community or State.  What is startling about the present evidence is that it demonstrates quite clearly that organized crime today is not limited to any single community or to any single State, but occurs all over the country.  Conditions in Tampa or Miami may be duplicated in Philadelphia, or in Bergen County, N. J.  Conditions in Kansas City have their counterpart in Los Angeles and New York.  The leading figures active in one section are either active themselves or have been shown to have working arrangements with the leading figures in another.  Whether out of ignorance or indolence is not clear, but some local authorities insisted, orally and in writing, that there was no organized crime in their jurisdictions, although the subsequent testimony proved them pathetically in error.

8          ORGANIZED CRIME IN INTERSTATE COMMERCE

III

 ADVANTAGES OF GANG MEMBERSHIP

            Organized criminal activities are run in our big cities by professional criminals with long arrest records and with well-documented criminal reputations but who remain immune from prosecution and punishment.

            Many large metropolitan centers can match Chicago's Tony Accardo, Jake Guzik, Charles Fischetti, and Murray Humphreys; persons known to be engaged in illegal activities, the top racketeers of the community, whom the law rarely touches.  There are basic similarities in the past history of these big-time racketeers.  They have usually had a long apprenticeship in the cruder forms of criminal activity - ranging from petty larceny to armed robbery and murder.  In this period of their lives, they are arrested frequently and are occasionally imprisoned in State and Federal prisons and local jails.  However, their arrests, convictions, and prison sentences scarcely interrupt their criminal careers.

            Membership in a gang brings advantages.  The gang has means of protecting its members.  A bondsman is ever ready to "spring" them from jail.  Expensive and able counsel is provided.  One of the peculiar coincidences that occurred time after time was the revelation that the identical lawyer appeared for many of the bookmakers working for the same major outfit.  In Miami, Ben Cohen, brother of one of the members of the S. & G. Syndicate, turned up as counsel for many of the bookmakers who were arrested there.  To St. Louis, Morris Shenker appeared to have a substantial portion of the legal trade involving bookmakers who had fallen into the clutches of the law.  It is noteworthy that Shenker appeared before the committee as counsel for William Molasky, one of the owners of Pioneer News Service, the racing wire news distributor in that city.  He also appeared as counsel for Joe Uvanni, race-track "comeback money" agent for John Mooney, of St. Louis.  According to testimony before the committee, Molasky contributed $2,000 to the gubernatorial campaign fund of Forrest Smith on condition that Smith would name Shenker to the police board (of control) of St. Louis if elected.  The case is dragged out as long as possible with a view to obtaining eventual dismissal. Even where a conviction is ultimately obtained, an effort is made to keep the sentence as light as possible or to obtain an early release on parole.

            One example of many in the minutes of this committee is the prosecution of Charles Gargotta for the murder of a deputy sheriff in Kansas City.  There were 29 continuances before the case finally came to trial.  It is alleged that the gun with which the deputy sheriff was killed was switched by Kansas City police officers, so that ballistics tests were made on the wrong gun. Gargotta was acquitted of the homicide charge although he had been practically caught in the act.  However, he was convicted - of the illegal possession of a gun, sentenced to a minimum term, and released promptly.  Eventually, over the protest of the police department, he was pardoned by the Governor.

ORGANIZED CRIME IN INTERSTATE COMMERCE            9

            About 20 years ago a noted authority on criminology, after a survey of organized crime in Chicago, concluded:

            The leading criminal profiteers in bootlegging, gambling, vice, and labor and merchant racketeering run little risk of prosecution and conviction in conducting these illegal operations. Underlings occasionally receive punishment, almost without exception, of a minor kind.

            The data of the Senate Crime Investigating Committee on the careers of top criminals and racketeers indicates that this conclusion is still true today, not alone for Chicago, but for every metropolitan center in which we have held hearings.  In Miami, for example, the sheriff of Dade County, James A. Sullivan, presented considerable information on the careers of the big-time racketeers and gamblers who infest the Miami area.  Florida has a statute requiring persons with a felony record to register.  But Sheriff Sullivan, though he admitted familiarity with the criminal records of police characters like Joe Adonis, said he did not know whether the latter and others like him had complied with that statute.  Sheriff Sullivan boasted of the gambling arrests by his office, but he admitted that the men taken in were the bookies, the "leg men," never the operators  and owners of the local gambling syndicate.

IV

INTERSTATE RELATIONSHIP OF LEADING GANGS

            The evidence before the committee indicates that the top racketeers do not restrict their criminal operations to one section of the country.  They are frequently found operating in entirely different geographic areas.  Moreover, individual gangsters and gangs from different parts of the country frequently enter into profitable working relationships with each other.

            The grand jury of Dade County, Fla., complained that—

our community is fast becoming the national capital wherein the so-called leaders of the criminal element of numerous communities throughout the land are congregating.

Recreation was not the only interest of the mobsters in the Miami area.  Such gambling operations as the Colonial Inn, Greenacres, and the Club Boheme were run by such leading mobsters as the two Lanskys, Joe Adonis, Frank Erickson, William Bischoff, Joe Massei, and others.  This is apparent from the chart introduced as an exhibit from the Florida report which was substantiated in the testimony.

            Harry Anslinger, United States Commissioner of Narcotics, who has had considerable experience in dealing with organized crime, supported the notion that the leading figures in organized crime know each other, do business with each other, get together in places like Miami and Hot Springs, and on occasion do each other's dirty work when a competitor must be eliminated, an informer silenced, or a victim persuaded.  He summarized the situation as follows:

I would say that all of the members of this combine are very well acquainted with everybody else throughout the country.  The fellows in New York, Florida, California all know each other.  Seizing their telephone lists, they are all on there, you find.  It is interlaced and intertwined.

S. Repts., 82-1, vol. 6---2

10        ORGANIZED CRIME IN INTERSTATE COMMERCE

He did not think that the activities in one part of the country occur as a result of instructions given in other parts of the country, as a general rule.  In some sections, he said, "it is pretty well organized in that particular way, but I wouldn't say that one section of the country controls another section."  What happens, Mr. Anslinger testified, is that "they confer together, or talk to each other, deal with each other."  He agreed with the characterization of Rudolph Halley, chief counsel to the committee, that "they confine their dealings pretty well to the family."  "That," he said, "has been our experience.  They have offshoots.  They have associates in other rackets.  They make connections for persons outside of their own combine."   

V

 CONTACT AND LIAISON BETWEEN GANGS

            There is no doubt in the minds of the members of the committee that there do exist at least two major crime syndicates.  There is one with an axis between Miami and the Capone Syndicate now headed by Tony Accardo, the Fischetti brothers, and Jake Guzik.  There is another with an axis between New York and Miami headed by Frank Costello and Joe Adonis. These axes have branch lines that extend into many cities and areas and there is apparently a gentleman's agreement, if the operators of these mobs can truthfully be called gentlemen, not to infringe on the activities of each other.  Between them there are contact and liaison carried on by individuals known to and trusted by both, and if there can be said to be one head who sits as an arbiter of any disputes between the two, it is Charles "Lucky" Luciano, who is now in Italy, but who maintains associations with both groups through his former racketeer affiliates.

            About 20 years ago, a study of the situation in Chicago by the Illinois Crime Survey concluded:

There exists in Chicago today an underworld system of control which enforces its decrees by bombs and murder. Its history, traced for 25 years in this study, discloses its various interlocking manifestations in commercialized vice, gambling, bootlegging, and gang crimes.

            Today the major criminal organization in Chicago still is the Capone syndicate which is active in various forms of gambling, in prostitution, in the distribution of narcotics, and in various legitimate and quasi-legitimate activities such as the sale and distribution of beer and liquor, the operation of dog tracks, the control of various union activities, and the control of the wire services which transmit gambling information.

            The evidence shows that the Chicago crime syndicate has extended its operations to other cities beyond the borders of the Chicago metropolitan area.

RACING WIRE SERVICE CONTROLS BOOKMAKING

            In Miami, Harry Russell, a representative of the Chicago mob, muscled his way into a one-sixth partnership in the S. & G. Syndicate, a $26,000,000-a-year bookmaking operation, for a nominal consideration of $20,000, which was probably never actually paid in the real sense of the word.  Accardo's and Guzik's partnership income tax

ORGANIZED CRIME IN INTERSTATE COMMERCE            11

returns showed that they, and not Russell, took the deduction for 1949 for losses sustained in the S. & G. operation.

            The principal evidence of nation-wide operation by members of the Chicago crime syndicate is tied up with the apparent control by the Capone mob of the wire services to bookmakers.  As we shall see presently, the control of the wire services provides a stranglehold over large bookmaking operations.  To the extent that the Capone crime syndicate controls the wire service, it is in that proportionate measure a partner of every bookmaker of any consequence in the country.  These matters will be developed subsequently in greater detail since the committee's inquiry into all these matters is still proceeding.

THE MAFIA - WHAT IS IT?

            One of the persistent matters that has received intensive attention from the committee has been the repeated statement that there exists in the United States a crime syndicate known as the Mafia, operating Nation-wide under centralized direction and control.

            Many of the witnesses who were heard by the committee were individuals suspected of membership in this shadowy organization.  They were virtually unanimous in their complete ignorance of the existence of such a group, or, if they admitted they had heard of it, knew nothing about it beyond hearsay of its existence.  Yet their very denials had a hollow ring.

            There is a great deal of testimony in the committee records that would indicate beyond peradventure that such an organization exists; that its members have inter-related ties in various unlawful activities and that these are so coordinated that the Mafia is the adhesive between the major crime syndicates. All this is too coincidental to be merely accidental.

            The investigation into the existence and organization of the Mafia is still under way, and the results of this investigation and the conclusion of the committee with respect to the Mafia will be reported to the Senate by this committee in its final summation.

VI

HOW BIG IS THE GAMBLING RACKET?

            Gambling is the principal source of income for organized criminal gangs in this country.

            The "take" from such forms of gambling as bookmaking, policy or numbers, slot machines, punchboards, and gambling casinos is fantastic in amount.  Gambling has supplanted prostitution and bootlegging as the chief source of revenue for organized crime.  Before the First World War, the major profits of organized criminal gangs were obtained from prostitution.  The passage of the Mann White Slave Act, the changing sexual mores, and public opinion, combined to make commercialized prostitution a less profitable and more hazardous enterprise.  After World War I, prohibition and the illicit-liquor traffic provided golden opportunities for organized crime.  Since prohibition has been repealed, organized criminal gangs have found a new bonanza in the conduct of various forms of gambling.

12        ORGANIZED CRIME IN INTERSTATE COMMERCE

            Testimony before the committee indicates that in every community, a tremendous amount of the effort and attention of organized gangsters goes into gambling operations.  No form of gambling is overlooked.  The slot machine, the punchboard, the gambling casino, the policy or numbers game in all its variations, and above all, bookmaking on horse races and other sporting events are all exploited to the limit by organized mobsters.

            The moneys derived from these sources are positively staggering.  For example, Theodore Roe had a one-fifth interest in two policy operations on the South Side of Chicago, called the Maine-Idaho, and the Ohio policy wheels.  According to him there are eight operations of similar size in Chicago, and some seven or eight smaller ones.  His policy wheel had a drawing which averaged $25,000 a day.  He had a one-fifth interest in the wheel.  This netted him approximately $200,000 a year.  The committee estimates that $150,000,000 has been played on numbers in 5 years in Chicago on the basis of figures obtained from the files of the operators of a number of wheels in that city.

            The committee has considerable data on the take from slot machines.  From this data the committee estimates that the average take from a slot machine is $50 per week per machine.  For the fiscal year June 30, 1949, the $100 coin-operated Federal tax was paid by approximately 70,000 premises.  Since only one tax receipt is issued to each location regardless of the number of machines, the number of machines in operation is far greater than this.  It is estimated that each location has an average of three machines.  This would make an average of $50 per week from 210,000 machines at premises that paid the Federal tax, or a take of approximately $540,000,000 in a year.  It is impossible to estimate the number of machines to be found in premises which have not paid the Federal tax.  Profits from the machine are usually split on a 50-50 basis between location owner and the operator.  A mobster who places 200 slot machines, which is a comparatively small operation, can reasonably assure himself approximately $5,000 a week.

LOSERS CASH MILLIONS IN CHECKS

            The returns from the gambling casinos are equally fantastic.  One Max Stark was the check cashier for the mob operating the gambling casinos in north Jersey.  He would bring into the Merchants Bank of New York City, a small private bank in which he was a shareholder, 60 to 70 checks daily; resulting from this gambling operation.  These were checks cashed at the gambling casino and most of the money was undoubtedly used for gambling.  Over a space of about 6 months, these checks totaled $5,000.000.  Admitted gambling house operators testified that a player seldom cashed a check in a gambling house unless he had lost and was trying for a "came-back."

            Some confirmation of the large sums wagered and won or lost in these establishments is had from the testimony of one witness who said he lost about $14,000 on four occasions.  He stated that from 200 to 300 people were present on these occasions and there might be as much as $2,000 on the crap table at any one time.          

            The amounts reported to the income tax authorities for these gambling casinos are, of course, considerably less than what might be expected from these figures.  Nevertheless, they are still substantial.

ORGANIZED CRIME IN INTERSTATE COMMERCE            13

            For example, the G. & R. Trading Corp. ran a gambling operation in northern New Jersey in the year 1945-46.  Gross receipts were shown on the tax return of this corporation of $488,698 and a net of $255,271 which was divided between the following underworld characters as follows:

              James Rutkin................................................................................................$51,054

            Anthony Guarini............................................................................................. $38,200

            Joe Adonis......................................................................................................$76,581

            Jerry Catena.................................................................................................. $51,054

            Salvatore Moretti............................................................................................ $38, 290

            Similar sums are reported from the operation of other gambling casinos. For example, the Club Boheme in Broward County, Fla., in 1947 paid $205,470 to its owners, among whom was Meyer Lansky, according to the tax returns.  The Greenacres Club paid $133,233 to W. H. Bischoff in 1948 for a 40-percent interest.   Some idea of what the returns from a gambling casino may be when it is operated in a legalized setting is had from testimony of Clifford Jones, Lieutenant Governor of Nevada, who testified that his 1-percent interest in the Golden Nugget at Las Vegas netted him $12,000 a year.

            The returns from bookmaking are astronomical.  The report of the McFarland Committee on the Transmission of Gambling Information points out that estimates made by law-enforcement authorities have put the total amount bet off-track at figures ranging from $3,000,000,000 to $10,000,000,000 annually.  Best informed guesses are that the total is somewhere between $3,000,000,000 and $5,000,000,000 annually, based primarily on the $2,000,000,000 that is bet legally at the tracks every year.  On the basis of a $3,000,000,000, off-track operation, and estimating the net profit to the bookmaker to be 20 percent of the amount bet, the net profit to the bookmakers would be approximately $600,000,000 in a year.

TWENTY BILLIONS CHANGES HANDS YEARLY

            The figures obtained on specific illegal bookmaking operations by this committee, indicate that the McFarland estimates have a close relation to reality.  The S. & G. Syndicate, which dominated book-making operations in Miami grosses upward of $26,000,000 a year.

The Guarantee Finance Co. bookmaking operation in Los Angeles County admitted grossing upward of $7,000,000 a year.  Tony Gizzo, a Kansas City mobster who was a member of Binaggio's gang, admitted that his bookmaking operation at the newsstand of the Coates House, netted him upward of $100,000 in a year.  Charles Gioe, a Capone syndicate mobster was a partner in a bookmaking operation which took in bets approximating $20,000 a week.

            The Carroll-Mooney bookmaking operation which had been going in wide-open fashion for years in East St. Louis, Ill., took bets of approximately $16,000 a day; according to one of its employees.  The prosecuting attorney of St. Louis County, Mo., testified before the committee that the E. J. Rich Co., which used over 100 Western Union agents to solicit bets on a 25 percent commission basis took in between $150,000 and $300,000 a month in this operation.

            It is apparent from these figures how rich a prize the control of book-making operations represents.

            In all, the committee figures conservatively that $20,000,000,000 changes bands every year in the United States as a result of organ-

14        ORGANIZED CRIME IN INTERSTATE COMMERCE

ized illegal gambling, a not inconsiderable portion of which stays with the promoters and operators of this illicit activity.  Millions of dollars, it is safe to say, are paid out of this "take" as "ice," or protection money, in various forms.

VII

BOOKMAKING IS AN ORGANIZED INDUSTRY

            Of all the forms of gambling, the one showing the greatest degree of organization and syndication, the one which depends most on interstate commerce and interstate communications, is bookmaking.

            From the Senate investigation of wire services in 1909 to the current committee hearings, there have been many explorations of the operations of bookmakers in the United States.  The McFarland committee report of last year gives a detailed explanation of its operations and ramifications.

            While race-track betting is legal within the enclosures of race tracks in 27 States, off-track betting is illegal everywhere except in Nevada.  But the McFarland report estimates that the number of bookmakers today far exceeds the estimate of 15,000 individual bookmakers made 10 years ago by the Internal Revenue Department in connection with the inquiry into the M. L. Annenberg tax returns.  The California Crime Commission asserted that bookmaking reached into every community in the State, and the present testimony - such as that in Miami for example, where one syndicate controlled some 150 to 200 bookmakers - indicates that these estimates and assertions have basis in fact, and that bookmaking is as widely prevalent as is commonly believed:

            It is apparent from the record that there are various levels of book-making.  There is first the individual independent bookmaker who operates out of his pocket, on a capital of about $1,000, taking bets ranging from $2 to $10.  When he contacts his clients, they have usually already made their selections from newspaper or scratch sheet information.  The following day, he checks the papers for results and the odds paid, makes his rounds, and settles his accounts.  He rarely lays off bets with a larger operator and he has little use for the wire service.

            The second type of bookmaker, who probably handles the largest volume of bets, accepting wagers up to $100 a horse, maintains an office either in his own home or behind some innocent-looking front such as a newsstand of cigar store.  He has from 2 to 15 telephones to receive incoming bets from clients.  He has agents who work industrial plants, office buildings, and the like, possibly as adjuncts of their own employment, and turn the bets over to him on a commission basis.  He gets up-to-the-minute race-track information from a still larger operator who is a direct subscriber to a wire service.  He must have this information because he accepts bets from his agents and individual clients over the phone up to the very last minute before the race begins and must maintain a balanced book by constant cheek on all bets made and by laying off any excess bets on one horse.

            On the third level are the large operators.  They subscribe directly to the news service coming in usually over the ticker.  Where law enforcement is especially lax, this type of bookmaker might have quarters roughly resembling those of a prosperous stockbroker where race information and changing odds are posted and can be watched by

ORGANIZED CRIME IN INTERSTATE COMMERCE            15

large crowds who place their bets just as clients of stockbrokers watch changing stock prices on the board and place their orders.  These bookmakers may own an interest in smaller bookie establishments which place part of the bets with them and all their lay-off bets.  To service the smaller bookies they have a battery of telephones kept open for the relay of the race-wire news service.  The Mooney-Carroll bookmaking operation in East St. Louis, the Guaranty Finance Co. operation in Los Angeles, and the S. & G. Syndicate operation in Miami, all described in detail in the committee minutes are of this general character.

VIII

WIRE SERVICE ESSENTIAL FOR MONOPOLY

            Big-time bookmaking operations largely monopolized by the big mobsters with their rich returns cannot be carried on without the rapid transmission of racing information and information about other sporting events.

            We find—

stated the California Commission on Organized Crime--

that to conduct successful bookmaking, the operators must have information in excess of that which can be obtained through regular news and radio channels. Accordingly, there has grown up a specialized wire service which has for its principal purpose the dissemination of detailed racing information within a matter of minutes after the occurrence of actual events. This information includes details of track conditions, betting odds, jockey changes, and other facts occurring immediately prior to the running of the race and the results thereof.  These wire services sell this information to bookmakers who in turn use it in conducting their business.

            The bookmaker who has the wire service has a considerable advantage over one who does not have the service. He can book his bets with a far greater degree of certainty and in far greater volume if the necessary information about horse races and sporting events comes to him promptly.  No bookmaker who does not have the wire service can hope to compete with one who does, any more than a stockbroker who hasn't got a ticker service could hope to compete with one who has it.  This was confirmed by several professional bookmakers in their testimony before us.

            The bookmakers themselves recognize the great value of the wire services in the prices they pay, to distributors and subdistributors of the news service.  It is apparent from the testimony before this committee that the price normally is what the traffic will bear.  There is pressure to obtain as large a proportion of the bookmaker's profits as possible.  One distributor testified that the bookmakers in his area paid anywhere from $40 to $350 a week for the news service and that there was no difference between the type of service offered to customers who paid $40 a week and the type offered to customers who paid $350 a week.  Since the entire business is done in cash without records it is impossible to verify these statements.  The amounts paid by the bookmakers may be compared with the $20 a week which the New York Daily News pays to the Continental Press Service for the same news.  Actually, there is little doubt that, in many localities, the distributor makes arrangements with the bookmaker to supply service not for a fixed price, but for a fixed percentage of the bookmaking profits.  This makes the distributor a partner in the bookmaking operation.

16        ORGANIZED CRIME IN INTERSTATE COMMERCE

IX

CONTINENTAL PRESS SERVICE A MONOPOLY

            The wire service today, insofar as purveying information to book-makers is concerned, is a monopoly throughout the country.

            On the surface, the Continental Press Service, the central distributor of racing news, is a sports news distributing company which is wholly owned by Edward McBride, Jr., a young law student at Miami University, who takes no part at all in its management.  It is run by Tom Kelly, McBride's uncle, who is the general manager.  Technically the Continental Press Service has nothing to do with bookmakers.  It does not sell directly to them.  It sells news to from 20 to 24 supposedly independent regional distributors who in turn deal either with subdistributors or with bookmakers.  One finds, however, the most extraordinary business arrangements between the Continental Press Service and its distributors, which indicate quite clearly that the latter are nearly all dummies, set up to insulate the Continental Press Service against the charge that it deals directly with persons engaged in illegal occupations.  For example, the Illinois Sports News is one of the top distributors of Continental Press Service.   Its ownership consists of Tom Kelly's brother and his son.  It has no written contract with Continental Press Service, but news is provided to the Illinois Sports News on an oral agreement to pay as much of the profits as possible.  "I told my. brother," testified Tom Kelly before this committee, "to pay Continental Press as much as he possibly could and don't short them.  I told him to send Continental whatever he could afford and to make sure it was a good substantial amount of what his profits was."  This varied from $2,000 to $10,000 a week.

            Another distributor paying what he thinks he should is Ed McGoldrick, who, according to his testimony, was permitted to buy a business that averaged $2,800 to $3,000 a week, for a. total purchase price of $3,000, which he conveniently borrowed from Henry M. Hilton, the attorney for Continental Press Service.  According to his testimony, he pays Continental a fluctuating rate which varies from $500 to $2,000 a week.  A third illustration of how Continental Press Service operates through dummies is the Howard Sports News, a Baltimore distributor.  This is a corporation consisting of three individuals who pay all the operating expenses and pay themselves salaries and then remit all the profits to the Continental Press Service. It is obvious that these three individuals are merely acting as employees of the Continental.

            It is apparent from the testimony before the committee that Continental controls its distributors, and that it can determine who in the last analysis will get betting news.  The monopolistic character of Continental News Service was previously recognized by the McFarland committee report when it stated:

            The facts support the thesis that Continental today has a near monopoly in the transmission of racing news which ultimately reaches the bookmakers in the country. Continental does choose its distributors, assigns them exclusive territory, and charges them for service on the basis of size and amount of business done in such territory.

ORGANIZED CRIME IN INTERSTATE COMMERCE            17

CAPONE GANG CONTROLS BOOKMAKING

            From the preponderance of evidence before the committee a conclusion is warranted that the Continental Press Service is controlled not by Edward McBride or Thomas Kelly but by the gangsters who constitute the Capone syndicate.

            The Senate Crime Investigating Committee has elicited considerable testimony which supports this conclusion as to the ownership of the wire service.  As a corollary it must follow that since the Capone syndicate controls the wire service it likewise controls the resultant power over bookmaking operations of any size in the United States.

            The racing wire news service is such a phenomenon and of such great importance in the scheme of interstate criminal operations that a discussion of its development is appropriate at this point.  It first assumed importance under the ownership of M. L. Annenberg some 30 years ago.  Annenberg had been circulation manager for several large metropolitan newspapers and had likewise interested himself in the distribution of racing news publications known as scratch sheets.  These scratch sheets contained information with respect to various aspects of horse racing which was intended to guide prospective bettors.

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

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

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

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

18        ORGANIZED CRIME IN INTERSTATE COMMERCE

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

            The testimony shows that Annenberg, Ragen, and one Al Kruse of Chicago owned 50 percent of the stock of Pioneer News Co. when the latter was an affiliate of Nationwide.

            Their participation in the business was not active but another Nationwide associate, William Molasky, who then lived and still lives in St. Louis, was their representative on the spot. There came a time in 1939 when Annenberg divested himself of all his interest in the racing wire news service, at about the time when the Internal Revenue Bureau opened an investigation into his income tax returns.  Molasky purchased the entire Annenberg interest in Pioneer News Co. for $1; its actual value had no relation to the nominal purchase price.

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

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

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

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

ARTHUR M'BRIDE TAKES OVER

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

            From McBride's testimony, the committee finds it hard to discern just how his person was indispensable to the conduct of the racing wire service.  McBride said that it was necessary for him to provide the original working capital of $20,000 but this does not appear to be convincing because $20,000 in the operation of the new racing wire service which was given the appellation Continental Press Service appears to have been small money.  As a matter of fact, McBride got

ORGANIZED CRIME IN INTERSTATE COMMERCE            19

his $20,000 back out of net profits before 2 weeks had elapsed.  It was also apparent that Ragen could have put that amount up out of his own pocket or could have borrowed it without any difficulty whatsoever.

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

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

            The story continues with Ragen and Kelly operating Nationwide until 1943 when McBride says Ragen came to him and said that he simply had to have McBride or a member of McBride's family in the organization.  Nobody has given a clear reason for this because McBride, in his testimony before the committee, said that he had not learned anything further about the business up to that time and he had neither the energy nor available time to give to it.

McBride had a son, Edward, who at that time was overseas with the Armed Forces.  Obviously Edward could net give any attention to the business.  But for him McBride purchased a one-third interest for $50,000.  Why McBride had to be brought into a business which was operating successfully and did not need capital is obscure unless it was to make available to the business such advantages as might result from McBride's powerful connections with John Angersola (King) and the important leaders of the Mafia in Cleveland.

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

CAPONE GANG STARTS MUSCLING IN

            It was in 1946 that trouble began.

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

20        ORGANIZED CRIME IN INTERSTATE COMMERCE

was operated by Hymie Levin, Phil Katz, and Ray Jones was actually controlled by Tony Accardo and the Chicago syndicate.

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

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

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

            One of Trans-American's first customers was R & H which withdrew from the Continental Press set-up.  Heading Trans-American were three nonentities, not one of whom had any address or stature in gangdom.  Two of them were former employees of Continental who had been lured away by Trans-American for the new set-up.  One of the three was Ralph O'Hara, a minor gangster of Chicago.  O'Hara was a witness before the committee in Chicago.  The books and records of Trans-American were supposed to be in his custody, but many of them proved to be missing.  But from those that were available it would appear that in its first year's operation Trans-American lost about $200,000, most of which was put up by R & H Publishing Co.

            In addition to the huge "loans" from R & H, Trans-American received a "loan" of $12,000 from Benjamin (Bugsy) Siegel, who at that time had a monopoly of the bookmaking and wire-news service in Las Vegas.  Carlos Marcello, the reputed Mafia leader of Louisiana, also provided funds for Trans-American's operation, and still additional money was provided by William (Butsy) O'Brien, who had formerly controlled the racing-news service for Continental in the State of Florida and who continued throughout Trans-American’s operations to give support to Continental, thus playing both ends against the middle.

TRANS-AMERICAN EXPANDS ITS ACTIVITIES

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

            Police officials in the cities involved confidently anticipated that there would be considerable violence but the outburst did not reach 

ORGANIZED CRIME IN INTERSTATE COMMERCE            21

the height which they expected.  It is possible that the reason for this is that before local violence became too acute Ragen, the head of Continental Press Service, was assassinated in Chicago in a fashion typical of gangland.

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

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

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

TRANS-AMERICAN MOBSTERS DODGE SUBPENAS

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

            After Trans-American folded, Continental took back into its employ one Pat Burns and his sister, both of whom had walked out on Conti-

22        ORGANIZED CRIME IN INTERSTATE COMMERCE

nental to take jobs with Trans-American. Why Continental gave reemployment to these persons and others who had left to go into the employ of its competitor has not been satisfactorily answered.  Nor has any convincing explanation been given as to why Continental than gave racing wire service in Kansas City to the same group who in effect had stolen the local outlets of Continental for Trans-American.  In fact, the Mafia operators who took over the Reliable News Service in Kansas City received much better terms than the old wire service in that city had received from Continental before the fight and certainly got better terms than other distributors in various cities who had not fought Continental but who are not connected with the Mafia or the Capone gang.  R & H in Chicago continued to receive service from Continental on terms far more profitable than those given to another racing service distributor in Chicago who had no connection with either Mafia or the Caponites.  R & H paid $750 a week for its service, whereas its competitor, for precisely the same service, paid between $4,000 and $5,000 a week.  In New Orleans, Continental made Marcello its distributor; on the west coast, Dragna was rewarded for his part in the fight with Continental by being given a contract at $25,000 a year to steal news from the race tracks and send it into Continental's headquarters for interstate distribution.

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

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

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

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

            Continental Press is said to be owned by Edward McBride, a young man in his early twenties studying law in Miami, Fla.  He knows nothing of its operations.  Continental Press is operated by young McBride's uncle, Tom Kelly, who says he simply sells a "news service to Illinois Sports News, Inc., and be does not know, he says, what Illinois Sports News does with it thereafter.  It is significant that Illinois Sports News hired Pat Burns and the other dissident Continental employees back after Trans-American went out of business.  It was Illinois Sports News that resumed business with R & H after

ORGANIZED CRIME IN INTERSTATE COMMERCE            23

Ragen was shot.  Strangely enough, Illinois Sports News is operated by two other Kellys, the brother and son of Tom Kelly of Continental.

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

CONTINENTAL PULLS THE STRINGS

            Illinois Sports News is a dummy. It is a typical dummy, but it is not the only one of its kind.  Everywhere this committee looked among the subdistributors of Continental it found other dummies which are captained and manned by former long-time affiliates of the wire service chiefs and the Capone mob.  They go through the fiction of stockholders' meetings; of meetings of board of directors, of voting themselves salaries which, in terms of the huge returns that roll in from the wire service, are picayune - they pay themselves $90 or $100 a week sometimes - and each year, by a solemn vote of the board of directors, arrange to pay into either Illinois Sports News or Continental Press everything that has come in over and above their actual operating expenses and these peanut salaries so that the sub-distributors make no profit and pay no dividends. There is nothing left, after Continental Press gets its share, from which to pay any dividends.

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

            In fact, the testimony is uncontroverted that Continental deliberately set out to erect a business structure of such a kind that if its activities were ever questioned it would be able to defend itself with the half-truth that its news is sold only for a legitimate purpose. This fictional attempt at legality was attempted to be supported by distributors at the second level of the Cont