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Full text of "Investigation of organized crime in interstate commerce. Hearings before a Special Committee to Investigate Organized Crime in Interstate Commerce, United States Senate, Eighty-first Congress, second session, pursuant to S. Res. 202 .."

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[NVLSTIGATION OF ORGANIZED CRIME 
IN INTERSTATE COMMERCE u ^> l 



HEARINGS 

BEFORE THE 

SPECIAL COMMITTEE TO INVESTIGATE 

ORGANIZED CKIME IN INTERSTATE COMMERCE 

UNITED STATES SENATE 

EIGHTY-FIEST CONGRESS 

SECOND SESSION 
PURSUANT TO 

S. Res. 202 

A RESOLUTION AUTHORIZING AN INVESTIGATION OF 
ORGANIZED CRIME IN INTERSTATE COMMERCE 



PART 2 

JUNE 22, 23, 28; JULY 6, 7; AUGUST 16, 1950 



FEDERAL COMMUNICATIONS COMMISSION 



UNITED STATZS POST OFFICE 



BUREAU OF PRISONS 



UNITED STATES TREASURY 



HON. LUTHER YOUNGDAHL, Governor of Minnesota 



VIRGIL W. PETERSON, Operating Director, 
Chicago Crime Commission 



WARREN OLNEY, Attorney, Former Counsel, State of California 
Special Crime Study Commission on Organized Crime 



Printed for the use of Special Committee To Investigate 
Organized Crime in Interstate Commerce 



UNITED STATES 
GOVERNMENT PRINTING OFFICE 
68958 WASHINGTON : 1950 

P o v.. I ' c 







SPECIAL COMMITTEE TO INVESTIGATE ORGANIZED CRIME IN 
INTERSTATE COMMERCE 

ESTBS KEFAUVER, Tennessee, Chairman 
HERBERT R. O'CONOR, Maryland CHARLES W. TOBEY, New Hampshire 

LESTER C. HUNT, Wyoming ALEXANDER WILEY, Wisconsin 

Rudolph Halle y, Chief Counsel 
II 



CONTENTS 



Testimony of — I'asre 

Anslinger, Harry, Chief, Narcotics Bureau, United States Treasury.- 66, 

88-96, 104-105 
Avis, Dwight E., Assistant Deputy Commissioner, Enforcement, 

Alcohol Tax Unit, United States Treasury 66, 84-88 

Baughman, U. E., Chief, United States Secret Service 66,97-100' 

Bennett, James V., Director, Bureau of Prisons, accompanied by 
H. G. Moeller, Supervisor, Juvenile Branch, Bureau of Prisons, 

Department of Justice 49-64 

Bolich, Daniel A., Assistant Commissioner, Bureau of Internal Reve- 
nue, accompanied by Charles Oliphant, assistant general counsel, 
United States Treasury, and chief counsel, Bureau of Internal 

Revenue 66, 20-83 

Coy, Wavne, Chairman, Federal Communications Commission, 

Washington, D. C 4-31 

Foley, Hon. E. H., Under Secretary of the Treasury, accompanied by 

Thomas J. Lynch, general counsel, United States Treasury 64-70, 

81-83, 88, 97, 104, 107-109 
Garner, Clifton C, Chief Post Office Inspector, accompanied by 

Peter J. Connolly, assistant solicitor, United States Post Office 33-49 

Maloney, James J., Chief Coordinator, United States Treasury Law 

Enforcement Agencies 105-108 

Olney, Warren, attorney, former counsel, State of California Special 

Crime Study Commission on Organized Crime 215-241 

Peterson, Virgil W., operating director, Chicago Crime Commission, 

representing the American Municipal Association 125-213 

Strubinger, David E., Assistant Commissioner of Customs, accompanied 
by Chester A. Emerick, Deputy Commissioner of Enforcement, 

Bureau of Customs 66, 100-104 

Woolf, W. H., Chief, Intelligence Unit, Bureau of Internal Revenue, 

United States Treasury 66, 108-109 

Youngdahl, Hon. Luther W., Governor of the State of Minnesota. 111-125 

Schedule and summary of exhibits iv 

Thursday, June 22, 1950 -._.. i 

Friday, June 23, 1950 32 

Wednesday, June 28, 1950 65 

Thursday, July 6, 1950 111 

Friday, July 7, 1950 157 

Wednesday, August 16, 1950 215 

Appendix 243 



IV 



CONTENTS 
SCHEDULE OF EXHIBITS 



Number and summary of exhibits 



1. Statement of Hon. Wayne Coy, Chairman, Federal 

Communications Commission, before Senate Com- 
mittee on Interstate and Foreign Commerce, Apr. 24, 
1950 

2. Editorial of Apr. 16, 1950, from the Miami Daily News 

3. Names of sponsors of racing newscasts in Washington, 

D. C, furnished by Wayne Coy, FCC 

4. 18 U. S. C, Crimes and Criminal Procedure; eh. 41, 

Extortions and Threats; sees. 871, 876, and 877 

5. 18 TT. S. C, ch. 61, sec. 1301, re mailing of lottery tickets, 

and sec. 1303, re postmaster or employee as lottery 
agent 

6. 18 U. S. C, ch. 63, sec. 1341-42 re mail fraud 

7. 18 U. S. C, ch. 71, sec. 1461, re mailing obscene or crime- 

inciting matter 

8. 18 U. S. C, ch. 71, sec. 1463, re mailing indecent matter 

on wrappers or envelopes 

9. 18 U. S. C, ch. 83, sec. 1716, re sending of dangerous 

substances through the mails 

10. Letter from Clifton C. Garner, Chief Post Office Inspec- 

tor, to committee, dated June 23, 1950 

11. Additional cases furnished by Clifton C. Garner, illus- 

trating Post Office action against violators of postal 
lottery statutes 

12. Chart furnished by James V. Bennett, Director, Bureau 

of Prisons, entitled "All Sentenced Federal Prisoners 
Received From the Courts, bv Offense, Fiscal Years 
Ended June 30, 1937 to 1949" 

13. Chart furnished by James V. Bennett, entitled "Percent- 

age of Repeaters' ' 

14. Chart furnished by James V. Bennett, entitled "Average 

Sentences bv Offense and Judicial Circuit and District, 
of Federal Prisoners received From the Courts, Fiscal 
Year Ended June 30, 1949" ___. 

15. Graph and chart furnished by James V. Bennett, showing 

prisoners in State and Federal prisons and reforma- 
tories, for the United States: 1939 to 1948 

16. Table furnished bv James V. Bennett, entitled "Federal 

Prisoners Received From the Courts for Violation of 
Income Tax Laws, Fiscal Years ended June 30, 1944 to 
1950" . 

17. An act relating to licenses for the carrying on of any 

business, trade, vocation, or commercial enterprise, and 
providing for revocation of licenses by reason of the 
operation of gambling devices, as enacted by the Legis- 
lature of the State of Minnesota 

18. Formal petition filed by the Public Utilities Commission 

of the State of California, before the Federal Communi- 
cations Commission, Washington, D. C, dated October 
4, 1948 



Introduced 
on page 



4 

27 

31 
34 

34 
34 

34 

34 

34 

40 

46 

54 
55 

58 
58 

58 

117 
238 



1 On file with committee. 



INVESTIGATION OF ORGANIZED CRIME IN INTERSTATE 

COMMERCE 



THURSDAY, JUNE 22, 1950 

United States Senate, 
Special Committee to Investigate 
Organized Crime in Interstate Commerce, 

Washington, D. C. 

The committee met, pursuant to call of the chairman, at 10 : 15 a. m., 
in room 457, Senate Office Building, Senator Estes Kefauver, chair- 
man, presiding. 

Present : Senators Kefauver, Hunt, and Wiley. 

Also present : Rudolph Halley, chief counsel ; George S. Robinson, 
associate counsel ; Alfred M. Klein, assistant counsel ; and Harold G. 
Robinson, chief investigator. 

The Chairman. The committee will come to order. 

We do not have a quorum for the purpose of hearing testimony. 
Senator Wiley, the other member of the committee, is in the city and 
will be here shortly. 

I would like at this time to introduce to those here our associate 
counsel, Mr. George Robinson, who has just come with the committee. 
He has very valuable experience which we think will be helpful to the 
committee in its investigation. 

I would also like to introduce Mr. Alfred Klein, of Philadelphia, 
who is an attorney and who is also experienced in press relations. 
He has had an eminent career as a gentleman of the press with the 
Philadelphia Record and has also written extensively. 

We had asked the Attorney General of the United States and the 
head of the Criminal Division, Mr. Mclnerney, and the Director of 
the Federal Bureau of Investigation to start our public hearings. The 
Attorney General, as you may know, has sent out a good many in- 
quiries to district attorneys throughout the country to get informa- 
tion about alleged criminal syndicates in their sections and also in- 
dividuals who are alleged to be engaged in interstate criminal ac- 
tivities. The Attorney General, Mr. Mclnerney, and Mr. Hoover 
felt that inasmuch as all the information has not been received and 
they are still assimilating the data from their inquiries, and also 
since Mr. McGrath testified before the Commerce Committee some 
time back, their testimony would be of more value after the answers 
had been received and classified and assimilated. 

I have a letter from the Attorney General which I wish to put in 
the record at this point, and I will read it for the information of the 
public. It is addressed to me as chairman. 



2 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Office of the Attorney General, 

Washington, D. C, June 20, 1950. 
Hon. Estes Kefauver, 

United States Senate, Washington, D. C. 

My Dear Senator: I appreciate your kind invitation to appear on Wednes- 
day, June 21, 1950, before the special committee, created pursuant to Senate 
Resolution 202, to study and investigate whether organized crime utilizes the 
facilities of interstate commerce or otherwise operates in interstate commerce 
in furtherance of any transactions which are in violation of Federal or State 
law. 

As you know, several weeks ago the Department wrote to the various United 
States attorneys with respect to the possible existence and operations of so- 
called national crime syndicates. Each United States attorney was requested 
to furnish all available information indicating whether or not any such syndi- 
cates were operating in his district, as well as whether any of the persons who 
have been characterized, by one source or another, as large-scale gamblers or 
overlords of the underworld appear to be active in his district. 

From the replies received to date the general theme is beginning to emerge, but 
since they are by no means complete, and as the task of assembling and correlat- 
ing the information in usable form requires considerable time, I am not yet in a 
position to draw any conclusions. The latter, as well as possible suggestions for 
proposed legislation, would still be premature. 

I anticipate that the Department will compile considerable information which 
will be helpful to your committee. The matter, of course, is one of major inter- 
est to the Department and we desire to cooperate to the best of our ability. You 
will appreciate, however, that my testimony at this time could hardly make a 
worth-while contribution to your committee. Needless to say, I will be happy to 
appear at a later date and will look forward to such an opportunity. 
, Sincerely yours, 

J. Howard McGrath, Attorney General. 

Also, Federal Register of Tuesday, June 20, 1950, carries the Presi- 
dent's Executive Order 10132 with reference to permission to the com- 
mittee and its staff to examine certain tax returns, which will be placed 
in the record at this point ; also the President's letter to all executive 
departments and agencies of June 17, 1950, which asks them to cooper- 
ate in every way possible in the work of the committee; as well as 
Treasury Decision 5793 related thereto, 

(The matter referred to follows :) 

TITLE 3— THE PRESIDENT 

Executive Order 10132 

Inspection of Income, Excess-Profits, Declared Value Excess-Profits, Capi- 
tal Stock, Estate, and Gift Tax Returns by the Senate Special Committee 
To Investigate Organized Crime in Interstate Commerce 

By virtue of the authority vested in me by sections 55 (a), 508, G03, 729 (a), 
and 1204 of the Internal Revenue Code (53 Stat. 29, 111, 171 ; 54 Stat. 989. 1008 ; 
55 Stat. 722; 26 U. S. C. 55 (a), 508, 603, 729 (a), and 1204), it is hereby ordered 
that any income, excess-profits, declared value excess-profits, capital stock, estate, 
and gift tax returns for any period to and including 1949 shall be open to in- 
spection by the Special Committee established pursuant to Senate Resolution 
202 (81st Congress, 2d Session), for the purpose of carrying out the provisions 
of the said Senate Resolution, subject to the conditions stated in the Treasury 
decision relating to the inspection of such returns by that Committee, approved 
by me this date. 1 

This Executive order shall be effective upon its filing for publication in tlie 
Federal Register. 

Harry S. Truman 

The White House, 

June 17, 1950. 
[F. R. Doc. 50-5371 ; Filed, June 19, 1950 ; 10 : 32 a. m.] 



1 See T. D. 5793, Title 26, Chapter I, injra. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 3 

Letter of June 17, 1950 

[cooperation of departments and agencies with senate special crime 
investigating committee] 

To the Heads of All Executive Departments and Agencies: 

The Senate Special Crime Investigating Committee has been established to 
study and investigate whether organized crime utilizes the facilities of .inter- 
state commerce or otherwise operates in interstate commerce in furtherance of 
any transactions which are in violation of the law of the United States or of 
the State in which the transactions occur. I strongly favor the objectives of the 
Committee and I am hopeful that its work will produce constructive recom- 
mendations and results. 

It is my desire that the Executive branch of the Government cooperate with 
the Committee to the fullest possible extent. I therefore request that all depart- 
ments and agencies give Chairman Kefauver and his committee the fullest co- 
operation and assistance consistent with the orderly performance of the work 
and duties of the departments and agencies and subject only to jurisdictional 
and appropriation limitations. 

Harry S. Truman 

The White House, 

June 11, 1950. 

[F. R. Doc. 50-5370 ; Filed, June 19, 1950 ; 10 : 31 a. m.] 



TITLE 26— INTERNAL REVENUE 

Chapter I — Bureau of Internal Revenue, Department of the Treasury 

Subchapter E — Administrative Provisions Common to Various Taxes (T. D. 5793) 

Part 458 — Inspection of Returns 

INSPECTION OF INCOME, EXCESS-PROFITS, DECLARED VALUE EXCESS-PROFITS, CAPITAL 
STOCK, ESTATE, AND GIFT TAX RETURNS BY THE SENATE SPECIAL COMMITTEE TO 
INVESTIGATE ORGANIZED CRIME IN INTERSTATE COMMERCE. 

458.305 Inspection of returns by Senate Special Committee to investigate or- 
ganized crime in interstate commerce. 

Pursuant to the provisions of sections 55 (a), 508, 603, 729 (a), and 1204 of 
the Internal Revenue Code (53 Stat. 29, 111, 171 ; 54 Stat. 9S9, 1008 ; 55 Stat. 722 ; 
26 U. S. C. 55 (a), 508; 603, 729 (a), and 1204), and of the Executive order 
issued thereunder, any income, excess profits, declared value excess-profits, capi- 
tal stock, estate, and gift tax returns for any period to and including 1949 shall 
be open to inspection by the Special Committee established pursuant to Senate 
Resolution 202 (81st Congress, 2d Session), or any duly authorized subcommittee 
thereof, for the purpose of carrying out the provisions of the said Senate Reso- 
lution. 

The inspection of returns herein authorized may be made by the committee 
or a duly authorized subcommittee thereof, acting directly as a committee or 
as a subcommittee, or by or through such examiners or agents as the committee 
or subcommittee may designate or appoint in its written request hereinafter 
mentioned. Upon written request by the chairman of the committee or of the 
authorized subcommittee to the Secretary of the Treasury, giving the names 
and addresses of the taxpayers whose returns it is necessary to inspect and the 
taxable periods covered by the returns, the Secretary and any officer or employee 
of the Treasury Department shall furnish such committee or subcommittee with 
any data relating to or contained in any such return, or shall make such return 
available for inspection by the committee or subcommittee or by such examiners 
or agents as the committee or subcommittee may designate or appoint, in the 
office of the Commissioner of Internal Revenue. Any information thus obtained 
by the committee or subcommittee thereof shall be held confidential: Provided, 
however, That any portion or portions thereof relevant or pertinent to the pur- 



4 ORGANIZED CRIME IN INTERSTATE COMMERCE; 

pose of the investigation may be submitted by the committee to the United 
States Senate. 

Because of the immediate need of the said Special Committee to inspect the tax 
returns herein mentioned, it is found that it is impracticable and contrary to 
the public interest to issue this Treasury decision with notice and public pro- 
cedure thereon under section 4 (a) of the Administrative Procedure Act, ap- 
proved June 11, 1946, or subject to the effective date limitation of section 4 (c) 
of said act. 

This Treasury decision shall be effective upon its filing for publication in the 
Federal Register. 

(53 Stat. 467 ; 26 U. S. C. 3701.) 

John W. Snyder, 
Secretary of the Treasury. 
Approved : June 17, 1950. 

Harry S. Truman, 

The White House. 

[F R. Doc. 50-5372 : Filed, June 19, 1950 ; 10 : 32 a. m.] 

The Chairman. Tomorrow at 10 o'clock Mr. Garner, the Chief Post 
Office Inspector, will be here to testify. Following him, Mr. James 
V. Bennett, who is the Director of the Bureau of Prisons and also 
chairman of the American Bar Association's committee on organized 
crime, will testify. That will be the schedule of hearings for this 
week. 

Mr. Coy is a little late. He called the chairman and said that due to 
the short time he had to prepare his statement, the last two or three 
pages had not been typed, so he will be here presently. 

(Brief recess.) 

The Chairman. The committee is delighted to have with us this 
morning Mr. Wayne Coy, the Chairman of the Federal Communica- 
tions Commission. Mr. Coy appeared before the Committee on Inter- 
state and Foreign Commerce about 6 weeks ago and his statement be- 
fore that committee will be made exhibit No. 1 to his testimony here. 

(The document referred to is on file with the committee.) 

The Chairman. Mr. Coy, the rules of our committee require that all 
witnesses be sworn. You have no objection. Do you solemnly swear 
that the testimony you give to this committee will be the whole truth 
and nothing but the truth, so help you God? 

Mr. Coy. I do. 

The Chairman. Mr. Coy, you have a prepared statement, which 
you may give at this time. 

TESTIMONY OF WAYNE COY, CHAIRMAN, FEDERAL COMMUNICA- 
TIONS COMMISSION, WASHINGTON, D. C. 

Mr. Coy. Mr. Chairman, before beginning with my statement, I 
would like to offer my apologies to your committee for being late 
this morning. 

The Chairman. Mr. Coy, I had already explained that you were 
very obliging to the committee to come on rather short notice. We 
had you scheduled to come later, but because the Attorney General, 
Mr. Mclnerney, and Mr. Hoover felt that they could be of more service 
if they came later, you were very gracious to fill in at this time and 
come as the first witness, which we appreciate. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 5 

Mr. Coy. Thank you very much. That is the situation that made 
me late. I had to have a little time this morning to type my statement. 

The Chairman. Before you get started, Mr. Coy, on behalf of the 
committee we want to thank you and express our appreciation for 
your cooperation in asking that the telephone companies preserve 
their toll charges and other records which they might ordinarily 
not keep, and also the wire companies, Western Union and others. 

Mr. Coy. I assure you that we are glad to cooperate, and anything 
else that we can do, we shall be very glad to do. 

Mr. Chairman, I have been invited by your committee to open its 
hearings here in Washington with a statement as to my views con- 
cerning the extent to which communication facilities and services 
may be used in the furtherance of transactions which violate Federal 
or State laws. 

I should have said before beginning this statement that I have 
a limited number of copies at the moment. Additional copies, num- 
bering six or seven additional copies, will be here within the next 
10 or 15 minutes, and I hope to have mimeographed copies of my state- 
ment here before concluding this morning's session so that you may 
make them available to the press, if that is your wish. 

The Chairman. I am sure the members of the press understand. 
I am sorry we do not have them now but I think every one will 
understand. 

Air. Coy. Since telephone and telegraph are among the principal 
instrumentalities of interstate commerce, it could be expected that 
they would play a major role in any form of organized crime. One 
aspect of this problem which has been the subject of proposed legisla- 
tion by the Senate relates to the rapid transmission and dissemination 
of gambling information in interstate commerce by communications 
facilities. This activity is not at present a violation of any Federal 
law; however, it is essential to the successful conduct of the illegal 
business known as bookmaking. Although gambling on the outcome 
of horse races is now permitted in 27 States within enclosed race tracks 
upon the payment of an admission fee, 17 of the 48 States make off-the- 
track betting on the same events illegal. It has been estimated that 
the total amount of money bet off the track ranges from $3,000,000,000 
to $10,000,000,00 annually. The very magnitude of these amounts and 
the illegal aspects of the matter would appear to indicate a need for 
your committee to inquire into the methods by which bookmaking is 
enabled to flourish on so large a scale and the extent to which these 
illegal operations may be fostered or nurtured by organized criminal 
activites of concern to this committee. 

The Federal Communications Commission in 1943 conducted an 
investigation into the extent to which communication facilities were 
being utilized in the dissemination of gambling information. I should 
like to emphasize that this investigation was ex parte in nature and 
was conducted primarily to ascertain the impact of such nonessential 
uses upon the Nation's wartime communications requirements. It 
can be assumed, however, that in general the report drafted by the 
investigating staff at that time is indicative of the role being played 
today by communications facilities in such gambling activities. 



6 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Copies of this report are being made available to members of your 
committee. It is entitled "Stall' Report on Extent of Communication 
Facilities Used in Dissemination of Racing Information." 

I have previously handed copies of that report to Mr. Halley. This 
report was likewise made available to the Senate Committee on Inter- 
state and Foreign Commerce, and at that time was made available to 
the press. 

From the information contained in that report and from the hear- 
ings held during the current session of Congress by the Senate Com- 
mittee on Interstate and Foreign Commerce with respect to S. 3358, 
a bill to prohibit the transmission of certain gambling information 
in interstate and foreign commerce by communications facilities, it 
is clear that the principal disseminator of racing information used 
by illegal bookmakers is the Continental Press Service. Continental 
supplies sports information of all kinds but specializes in up-to-the- 
minute racing news. The service operates through the leasing by 
itself and its distributors of 23,000 miles of telegraph circuits from 
the Western Union Telegraph Co. whose income from leases of this 
type is close to $1,000,000 annually. These circuits connect to 24 
primary or regional distributors who in turn connect with about 2,500 
subdistributors, with whom the direct wire service ends. The ultimate 
distribution of the information supplied by Continental is made by 
these subdistributors to the bookmakers by means of telephone or 
other communications facilities. 

As is more fully described in section II, pages 7 to 9, of the Com- 
mission's staff report, Continental collects and disseminates racing 
in formation from the race tracks in one of three ways : ( 1 ) By tele- 
graph over a direct circuit from the track press box to the nearest 
Continental office; (2) by telephoned description of the race as ob- 
served by telescope from a point outside the track, usually transmitted 
by long-distance telephone; or (3) by telephoned description of the 
race as signaled to an observer located at a point outside the track by 
a "wigwag" artist located inside the track. Here again, long-distance 
telephone is usually used to transmit the description to the nearest 
Continental office. The second and third methods are resorted to by 
Continental only when it is unsuccessful in obtaining appropriate 
arrangements with a particular track for direct wire privileges. In 
all three instances, the type of information collected and distributed 
is the same. As soon as the wire opens in the morning, Continental 
transmits a report of jockey weights and assignments, scratches, track 
conditions, and other data which are also obtainable from the early 
editions of most metropolitan newspapers. Subsequently, Continental 
transmits various handicapper selections, changed odds, and so forth. 
Shortly before the first race, Continental reports last-minute scratches, 
jockey changes, and rapidly changing odds on the first race. As the 
race starts, a description thereof is given and then the unofficial results 
are sent, followed by the official results and prices paid. 

It appears from the data developed at the afore-mentioned Senate 
hearings that currently Continental's major circuits are located in some 
40 cities and feed directly into Continental's 24 primary distributors 
who in turn connect with about 2,500 subdistributors. These subdis- 
tributors, in general, use one of three following methods of redistribu- 
tion to the ultimate users of the news: (a) High-speed ticker circuits 



ORGANIZED CRIME IN INTERSTATE COMMERCE 7 

leased from Western Union; (b) voice circuits leased from either 
Western Union or a local telephone company; or (c) ordinary local 
and long-distance telephone service. It appears that in most cases 
at least two of these methods are employed by the same distributor 
or subdistributor and that in 1949 Western Union leased 14 high-speed 
ticker circuits to distributors and subdistributors. A detailed descrip- 
tion of the manner in which such retailing activities are conducted 
is set forth in the Commission's staff report at pages 14 to 23 thereof. 

From the standpoint of the bookmaker, the rapid-results service pro- 
vided by Continental and its distributors enable him to expand his 
play, because if the bettor who has wagered on the first race knows the 
amount of his earnings on a first race before the second race, he is in a 
position to continue his wagering on the second race, upon an enlarged 
basis, or if the bettor has lost his wager on the first race, he will wish 
to recoup his losses by betting on the second race. Thus the rapid- 
results service stimulates further betting. In addition, the probable 
odds and periodic run-downs up to the time the race begins, which are 
carried on the Continental circuit are also of great importance to the 
bookmaker because they permit him to estimate his possible loss on 
each race should a particular horse win and to decide what hedges, if 
any, are necessary in the light of the changing odds. 

At this point I should like to stress that while the Nation-wide wire 
service of Continental plays a most important part in the bookmaking 
business, telephonic communication between the bettor and bookmaker, 
and between bookmakers in effecting hedging arrangements, may be 
just as necessary as the rapid dissemination of pertinent track infor- 
mation. As pointed out in the Senate committee's report on S. 3358, 
so long as newspapers, other publications, and radio stations carry 
prerace and postrace information, the bookmaker can carry on his 
trade. 

Western Union furnishes services to the Continental Press Service 
under provisions of its Tariff, FCC No. 219, which covers leased 
facilities. This tariff contains the following regulation which has 
been in effect since January 11, 1943 — the first clause of the regulation 
has been in effect since February 1, 1938. I quote the regulations : 

Facilities furnished under this tariff shall not he used for any purpose or in 
any manner directly or indirectly in violation of any Federal law or the laws of 
any of the States through which the circuits pass or the equipment is located, and 
the Telegraph Company reserves the right to discontinue the service to any drop 
or connection or to all drops and connections when it receives notice from Federal 
or State law-enforcing agencies that the service is being supplied contrary to law. 

Western Union's Tariff FCC No. 176 — domestic telegraph service — 
includes the following provision — in effect since July 27, 1948: 

Messages for the purpose of placing wagers of the kinds which are forbidden 
in. certain States as indicated below will not be accepted or delivered in those 
States : 

States and kind of wagers forbidden : 
Alabama : All wagers. 
Florida: Wagers on games or contests of skill or endurance of man or 

beast. 
Montana : Wagers on games or contests of skill or endurance of man or 

beast. 
Oklahoma : Wagers on games or contents of skill or endurance of man 

or beast. 
Texas : Wagers on horseracing only. 



8 ORGANIZED CRIME IN INTERSTATE COMMERCE 

In early January 1949 the Federal Communications Commission 
wrote a letter to the American Telephone & Telegraph Co. — January 
6, 1949— stating that— 

It is the Commission's understanding that with respect to interstate and for- 
eign communication service the Bell system companies, as a matter of policy, 
have instructed their personnel not to furnish such service to persons using 
the same for unlawful purposes. 

This letter requested that the Bell system companies file, in accord- 
ance with section 203 of the Communications Act, appropriate tariff 
regulations with this Commission reflecting their policies and prac- 
tices concerning this matter insofar as interstate and foreign com- 
munication service is involved. Pursuant to this request of the Com- 
mission, the Bell system companies hied several regulations with the 
Commission reflecting their stated practice in this regard. One such 
regulation is that of the Southwestern Bell Telephone Co., which 
reads as follows : 

Use of service for unlawful purposes : The service is furnished subject to 
the condition that it will not be used for an unlawful purpose. Service will not 
be furnished if any law-enforcement agency, acting within its jurisdiction, ad- 
vises that such service is being used or will be used in violation of law, or if the 
Telephone Company receives other evidence that such service is being or will 
be so used. 

Tariff regulations filed with the Commission by the other Bell sys- 
tem companies are substantially the same. It is our understanding 
that similar tariff regulations applicable to local or intrastate services 
are on file with the various State regulatory commissions. 

The tariff regulations of the Western Union Telegraph Co. and the 
various Bell system companies above referred to are now and have 
been in effect since they were hied with the Commission. The Com- 
mission has never had occasion to pass upon the reasonableness or 
lawfulness of these regulations. 

Under section 203 of the Communications Act of 1934, as amended, 
tariff provisions hied with the Commission generally have the force 
and effect of law until the Commission sets them aside as unlawful. 
The carriers have in numerous instances denied services to those 
desiring information for gambling purposes and in such cases have 
been sustained in their refusal of service by the Federal courts and 
by a great majority of the State courts. These decisions sustaining 
the carriers' refusal to carry services for gambling services have 
usually been reached on the basis of the close connection between dis- 
seminators- activities and the illegal activities of the recipients of the 
disseminators' information. 

It seems important here to point out the sharp distinction drawn 
by the courts in dealing with (a) the situation where it is sought to 
convict the disseirinator of a violation of the criminal law because he 
has furnished information to a bookmaker for uses in the conduct of 
an admittedly illegal business, in which case the courts will not punish 
the disseminator; and (b) the situation where the dissemi lator seeks 
by civil action to require a communications company to furnish him 
with telephone or telegraph service, in which case the courts will not 
aid the disseminator. 

This matter is discussed rather fully in section IV, paragraph B, 
pages 37 to 42, inclusive, of the staff report which you have. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 9 

Decisions of the courts would appear to indicate that while the dis- 
seminator of racing information is not subject to criminal prosecution 
in the conduct of his business, he cannot compel a communications 
company to furnish him service nor can he prevent the company from 
terminating his service pursuant to the tariff regulations to which I 
have previously referred. 

Generally speaking, the Western Union Telegraph Co. has fur- 
nished leased-wire service to disseminators of racing information and 
other information useful in the conduct of gambling enterprises unless 
law-enforcement officers have complained to them that the information 
thus transmitted over their communications facilities is being used for 
illegal purposes. A recent case in point is that of Edward J. Mc- 
Bride, doing business as Continental Press Service v. The Western 
Union Telegraph Company (171 Fed. 2d 1) which involved Conti- 
nental's operations in the State of California. 

Generally speaking, the American Telephone & Telegraph Co. fur- 
nishes leased facilities for the transmission of gambling information 
on a more limited scale. There is no doubt, however, as to the fact 
that A. T. & T. and its associated companies derive substantial reve- 
nues from the transmission of racing information by intrastate and 
interstate message toll telephone service as well as by local service. 

A full description of the practices of the communications com- 
panies with respect to the dissemination of racing information as of 
1!>43 are set forth in the staff report. It will be found in section V, 
pages 43 to 48, inclusive. 

In order to evaluate more clearly the part played by Continental in 
the field of rapid dissemination of racing information and, particu- 
larly, its possible relationship to the ultimate distributors and recipi- 
ents of its product, I should like to quote from- the Senate committee's 
report on S. 3858 (S. Kept. No. 1752). At pages 15 and 16 of the 
report the committee stated : 

Continental Press Service is a supplier of sports information of all kinds, but 
specializes in the rapid transmission of race-track information. It is the suc- 
cessor organization to the Nation-Wide News Service, a similar news service 
which was abandoned by the INI. L. Annenberg interests in 1939. Annenberg's 
employees were Arthur McBride of Cleveland and James Ragen of Chicago, and 
they took over the news-distributing wire service in 1939 when the Annenberg 
family voluntarily gave up their interests but retained ownership of the publi- 
cation of certain racing papers. Subsequently, Ragen was shot and seriously 
wounded, and thereafter poisoned while recuperating in a Chicago hospital, the 
reports being that he refused to \ ermit certain Chicago gangsters to "muscle" into 
the race-wire business. Ragen's share in the business was purchased by McBride, 
except for a small share hetd in trust for Ragen's widow, and McBride later pre- 
sented tie business to his 21-year-old son, Edward McBride, a law-school student. 

The principal office of the firm is in Cleveland, although its network of wire 
service is controlled from Chicago, where Thomas J. Kelly, its general manager 
is located. Kelly is a brother-in-law of the elder McBride and uncle of the pres- 
ent owner. He has been connected with the business for many years. It may 
be interesting to point out that the late M. L. Annenberg, the elder McBride, 
Kelly, and several of tl e present-day principal Continental distributors were all 
former newspaper circulation "hustlers'' and were employed by a number of 
newspapers in former years when bitter circulation wars were carried on and 
tough, bully boys were necessary to convince newsstand owners which newspapers 
should appear on the stands. The friendships made then were carried through 
to business associations later on as the race-wire service was built up. 

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 the size and amount of 



10 ORGANIZED CRIME IN" INTERSTATE COMMERCE, 

business done in such territory. It is also true that some, perhaps many, of its 
distributors are not without blemishes in character. The evidence showed, for 
example, that one spent a year in jail for income-tax evasion ; many have had 
brushes with the law for bookmaking and other violations. It is obvious that in 
this business it has been found desirable to have men who do not shrink from 
enforcing their will outside of the law. Moreover, the distributors, in turn, ap- 
parently are not particularly choosy with whom they do business ; in the main 
their customers are men who have had long experience with the use of racing 
information and perforce have been in difficulty with the law. It is also obvious 
that in many cases both distributors and subdistributors are not always the free 
choice of Continental ; it does business with those who want the racing wire and 
have the political connections with which to operate. 

Thus, in scores of cases, those who handle the racing news or use it as book- 
makers may be well known local hoodlums or gangsters who are the subject of 
much notoriety. Moreover, such individuals frequently have business connections 
or associations with others of their ilk in other parts of the country ; they loan 
money to one another ; and not infrequently the wealthier have interests in numer- 
ous local gambling enterprises, including bookmaking. There is evidence which 
supports the thesis that in some States or regions a few closely knit groups, 
generally dominated by one or two men, maintain control of gambling and fre- 
quently associate this with interests in other enterprises, both legitimate and 
illegitimate. Such local groups fiercely resist invasions by others and this fact 
lies behind many gangster killings. 

The committee believes it important to emphasize that the legislation here 
recommended was designed and drafted to curb the operations of any national 
racing betting syndicate. The evidence before us clearly proved that the prob- 
lem was the same, whether the betting is conducted by a national syndicate, or 
in specific districts or areas, or is purely local in character. 

That bookmaking is a dirty business ; that it is a field which attracts ques- 
tionable characters with bad reputations, that such illegal operations breed other 
crime is all too true. It does not require the embellishment of dime-novel fiction 
writers with tales of national crime syndicates or national gambling syndicates 
to make it any worse than it is. 

There is one distinction between the methods followed by Continental today 
and Annenberg's Nationwide in the past. Nationwide, when it was operating, 
controlled not only the collection and dissemination of race news but also the 
distribution and use right down to the bookmaker. The lengthy investigation 
carried out fry the Treasury Department of Annenberg's operations indicated that 
the price charged a bookie for the wire service depended directly on the amount 
of business done by the bookie; in short, Annenberg was in effect a partner < f 
every bookie in the country. Continental, on the other hand, not only disclaims 
any interest or connection with the ultimate user of the race news it transmits 
and sells but has set up what appears to be an effective legal bar against connect- 
ing it with such ultimate users. Continental alleges that it does not determine 
who shall be the local recipients of its news; in fact, it asserts that it does not 
even know who are the ultimate users. Continental merely sells the news to 
some 24 regional distributors, who in turn sell to sectional, area, State, or even 
local distributors. The practical, if not legal, flaw in Continental's contention, 
however, is the wide difference in the prices it charges various purchasers for 
the news. For example, the New York Daily News pays $20 a week and the 
Associated Press pays $85 a week for the same news that one of Continental's 
major distributors pays more than $6,000 a week plus an 8-percent wire-equip- 
ment tax. It is the committee's belief that this sharp variance in price, depend- 
ing on the user, has more than a remote connection with who the purchaser is 
and what use he makes of the news he receives. 

Accordingly, it would appear that two approaches may be taken by 
this committee in its consideration of this subject. If it should deter- 
mine from the facts disclosed by its investigation that bookmaking 
taken in conjunction with its present sources of gambling information 
constitutes a threat to our national welfare, one approach may be to 
make illegal the transmission in interstate and foreign communication 
of gambling information. To accomplish this purpose S. 3358, con- 
sisting of legislation proposed by the Attorney General, to make un- 
lawful the interstate transmission of certain gambling information, 



ORGANIZED CRIME IN INTERSTATE COMMERCE H 

has been the subject, as previously indicated, of hearing by the Senate 
Committee on Interstate and Foreign Commerce which has reported 
out the bill with certain amendments. The FCC submitted a sub- 
stitute legislative proposal for the consideration of that committee. I 
have distributed for the use of this committee a copy of my statement 
made at the hearings with respect to the Attorney General's proposal 
and the Commission's substitute proposal. In brief, the Commission's 
proposal would prohibit the transmission of gambling information 
consisting of bets or wagers, betting odds and prices paid and would 
make the transmission of such information a crime punishable by fine 
and/or imprisonment. The proposal would also require the filing of 
information by persons leasing communications facilities and by com- 
munication companies serving subscribers in order to assist law-en- 
forcement agencies in determining whether there has been a violation 
of the State or Federal laws. 

Senator Wiley. How many States would you say permitted gam- 
bling at this time? 

Mr. Coy. Of f-the-track betting? 

Senator Wiley. Yes. 

Mr. Coy. One State, the State of Nevada. They license bookmak- 
ing in that State. In all the other States betting on horse racing off 
the track is illegal. 

A second approach is suggested by the strong probability that 
through the device of Continental selecting its distributors and these 
distributors in turn selecting subdistributors, and in each case a defi- 
nite geographic area being defined, there is maintained an effective 
monopoly. This monopoly no doubt contributes materially to a sit- 
uation which permits the collection of what the traffic will bear, 
charges which probably bear little if any relation to the cost of render- 
ing the service and a reasonable profit. In view of the lucrative char- 
acter of the business engaged in by Continental and its distributors it 
would, in fact, appear reasonable to expect comparable services to be 
competing with Continental. The fact that such competition in no 
wise exists strongly suggests that such monopoly may be maintained 
by agreement to avoid jurisdictional warfare, that it, in fact, may be 
controlled by some central authority through agreements in writing 
or otherwise. 

I am sure that Department of Justice attorneys can better advise 
you concerning possible violations of the antitrust laws than I. How- 
ever, I suggest the possibility that there are criminal violations of the 
antitrust laws involved here. 

The Chairman. Thank you, Mr. Coy. 

Senator Wiley, do you have any questions ? 
. Senator Wiley. My information on this subject, Mr. Coy, is so 
tremendously small that I doubt whether my questions would bring 
out anything of great value, but I have a few ideas after listening to 
your remarks here that I want to inquire about. 

You referred first to ofT-the-track betting. 1 was informed by my 
learned counselor to my right that that meant in poolrooms and so 
forth. How many States in this Union permit gambling on the 
track, if that is the phrase? I believe you told us once before. 

Mr. Coy. Twenty-seven States. 

Senator Wiley. For the record will you define that? When you 
say "on the track," what area is included in which that is permitted? 



12 ORGANIZED CRIME EST INTERSTATE COMMERCE, 

What do you mean? Do you mean the fairgrounds or just what do 
you mean ? 

Mr. Coy. The usual definition in the law is that the tracks shall 
be enclosed, that the betting shall take place inside the enclosure, 
that the betting is under the supervision of the governmental officials 
having jurisdiction in the area, usually the State, and that all betting 
must take place through those channels. 

Senator Wiley. What I am getting at now is that 27 States permit 
gambling of this character, and only one permits the off the track. 
What is the difference in gambling on the track or off the track from 
the standpoint of morality? Is it simply a matter of State regula- 
tion or is there some evil influence in one that there isn't in the 
other ? 

Mr. Coy. I would be unable to distinguish any difference between 
them, unless in connection with the so-called off-the-track betting 
there is a corruption of local, State, or Federal officials in the main- 
tenance of the organizational structure which fosters this off-the- 
track betting which might endanger the national welfare. 

Senator Wiley. Now we are getting somewhere. That element 
would add a reason for differentiation by law between on the track 
and off the track, or whatever you want to call it. Did you in your 
statement particularize on the last factor that you mentioned, to wit, 
that off-the-track betting of this characer has a disintegrating in- 
fluence on morals, that is, the corruption in the picture, and so forth? 
That is what I personally am interested in because I do not know, 
if a fellow chews gum in one room, why it is wrong to chew it in 
another. If you are going to permit it in one way, there must be 
some reason for its not being permitted in another. You stated that 
reason, but can you give us any particulars? 

Mr. Coy. Senator, I am in no position to tell you, by way of evi- 
dence to support it, that there is organized crime of the character that 
is undermining the morals of State, local, or Federal officials which 
endangers the public welfare. On the other hand, there seems to be a 
body of common knowledge indicating that there is some kind of sore 
here, and that common knowledge is the background, I think, of the 
action of the Senate in establishing this committee. We have read 
for a period of years of gang warfare in connection with gambling 
activities of this sort. We have seen a sudden cessation of those gang 
warfares; if not a complete cessation, at least warfare in this regard 
has diminished to the point where it has become noticeable. It seems 
to me that reasonable men wonder by what means these monopolistic 
activities can be permitted without the corrupting of public officials 
to aid them in the perpetuation of this monopoly in the dissemination 
of information and the resulting gambling through illegal book- 
making. 

More than that, Senator, I find it rather difficult to have to justify 
the actions of the various States of the country that have declared 
it to be illegal. They apparently have found sufficient grounds to de- 
clare bookmaking illegal. 

Senator Wiley. You used the phrase "on the track." Is that a li- 
censed business? 

Mr. Coy. On the track I should think that the States themselves 

Senator Wiley. Do the States get a rake-off of it? 



ORGANIZED CRIME IN INTERSTATE, COMMERCE 13 

Mr. Coy. They do, they get a part of it. I think in many cases 
they operate it, and in others they may have operators who are in effect 
licensed operators. 

Senator Wiley. You mentioned in your statement an estimate as to 
the amount of money that was involved. I think you said somewhere 
between — what was it? 

Mr. Coy. Three to ten billion. 

Senator Wiley. How did you arrive at those figures ? 
Mr. Coy. It is from the Senate Interstate and Foreign Commerce 
Committee report. 

Senator Wiley. Is it your opinion from the information sources 
that you have that this off-the-track business covers a greater pro- 
portion of this 3 to 10 billion than the on the track ? 
Mr. Coy. I don't know. 

Senator Wiley. Have you any information as to whether or not 
the gang that controls on-the-track betting is connected up with the 
gang that controls betting off the track ? 

Mr. Coy. I do not, but I doubt that the so-called legalized betting 
Or on-the-track betting is in the hands of any of the people who are in- 
volved in the activities that are referred to here as off-the-track bet- 
ting. I have no information on it, but I doubt that it is in the hands 
of those people. 

Senator Wiley. Is it your information that this source of income on 
the track is the basis for legitimate income taxation by local govern- 
ments and States and that that source does not escape? 
Mr. Coy. I am not sure that I understand you. 
Senator Wiley. In other words, on the track you have books, have 
you not, and you have records ? Whoever makes anything off that I 
presume has to return it as a matter of income, does he not? 
Mr. Coy. I have no information on that. 

Senator Wiley. Do you have any information as to the amount of 
revenue that escapes detection by the Government as a source of income 
taxation on the off the track? 

Mr. Coy. I have not, but perhaps the Treasury people would have 
some estimates on that. Probably it is much less than it was a few 
years ago after the prosecution of some of these fellows engaged in 
illegal activities for failure to pay their income tax. They seem to be 
very careful in that regard. 

Senator Wiley. You intimated that the off-the-track betting was a 
sort of web organization, utilizing the information of distributors like 
Western Union, and so forth, that extends throughout the width and 
depth and height of this country. That I think also is common 
knowledge, is it not? 

You made two suggestions as to remedies. Will you repeat those 
suggestions ? 

Mr. Coy. One of those is the approach that resulted in the Attorney 
General's conference and the resulting legislation proposed by the 
Attorney General on behalf of that conference, which would restrict 
or prohibit the transmission in interstate commerce of gambling in- 
formation that could be used in gambling, which would restrict its 
transmission in interstate commerce. That alternative is reflected in 
S. 3358 as reported to the Senate in its amended form. 

The second suggestion which I made is that there is evident here a 
monopoly of racing information which begins with the Continental 

6895S— 50— pt. 2 2 



14 ORGANIZED CRIME LN INTERSTATE COMMERCE, 

Press Service being the distributor on a Nation-wide basis of this 
information, and in turn selling it to 24 distributors throughout the 
country, so-called regional distributors, in that case defining the area 
which those regional distributors will serve, they in turn selling the 
product which they receive from Continental Press to 2,500 sub- 
distributors and in turn describing the regional territory, the geo- 
graphic area which they can serve. It seems quite clear that in this 
controlled distribution of this racing information, competition is not 
permitted, and I suggest the possibility that there is a criminal viola- 
tion of the Antitrust Act, because it seems reasonable to expect that 
there would be competition in a field as lucrative as this, where the 
take is as large as it is. 

I might go one step beyond that and suggest a parallel. The Asso- 
ciated Press has been engaged for many years in the dissemination of 
news. The contractual arrangements between the Associated Press 
on the one hand and newspapers in various cities on the other restricted 
the use of Associated Press to competitors to the local subscriber. 
They could not get it. Suit was filed under the Antitrust Act, and the 
decision of the Supreme Court was that the Associated Press was 
violating the Antitrust Act, and they were ordered to make available 
their news reports or to eliminate the restrictive agreements with their 
subscribers which kept them from having competition, and there is 
now competition in the use of the Associated Press reports. 

There is a case of an enterprise on which there is no shadow of 
illegality at any point in it, either in the collection of the news or 
in the dissemination of the news or in the use of the news. 

Contrast that with the situation where you have racing news col- 
lected and disseminated through a monopolistic organization and put 
to an illegal use, and it would seem strange to me that they should 
be insulated from the antitrust laws and, I suggest, even the criminal 
violation of those laws for what I believe to be willful violation of 
them. 

Senator Wiley. That suggestion which you have made is of course 
more or less a matter or illegalistic approach. I want to get down 
to something else. I want to find out how this monopoly or this 
web, whatever you want to call it, keeps feeding in to the minds of 
each generation that gambling desire, because, after all, that is their 
market. They have to sell to those folks who come in on the idea 
that they can put $2 or $1 on something, and there is the possibility 
of winning. 

What I am getting at is that it is like developing, I suppose, a 
taste for liquor. Somebody has to get the liquor to the guy; some- 
body has to get him interested. What is there in that side of the 
picture on which you have a suggestion to make? You said this 
report of the news is a monopoly controlled by this one crowd, and 
then it goes out to the various district heads who take over and feed 
out the results. What agencies are there that go out and constantly 
egg on the buying public to buy the product? What can be done 
in that direction if the gambling instinct is ever going to be stopped? 
We have television coming on the horizon. I suppose there is a matter 
of interstate commerce in television. You see the races right over your 
set in Washington. I suppose they announce it easily enough that 
way. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 15 

What I am fundamentally interested in is this disintegrating influ- 
ence, whatever it is, that gets men and women into this gambling 
business, a fellow in the street or any one else, a dollar or $2 or what 
not, and gets him to the point where he gets drunk over this idea of 
the chance of winning. 

Mr. Coy. Senator, I do not know what devices the bookmakers use 
to increase their volume of business. I suspect that they are very 
skillful at capturing the instincts of most of us to get something for 
nothing. 

Senator Wiley. Of course, you and I have both made out a case 
now on how ignorant we are on the subject. 

Mr. Coy. Perhaps we have not gambled through a bookie. 

Senator Wiley. All life is a gamble, brother. 

I would like to direct my attention to the chairman on that one 
subject. We are going into it, I presume. We will get the FCC to 
give us advice as to the status of the present law and why prosecution 
can or cannot be made. To me the thing to do is to start with the 
generation that comes up so that they are not constantly penetrated 
by a lot of rot that makes them feel that this makes life worth while 
and they constantly take a chance. In that direction I suggest there 
might be some hope of curing the disease, not a mere restriction, as 
we did with booze during prohibition a few years ago, which did not 
restrict. Probably the right kind of education might be effective. 
I do not know. I thank the chairman. 

Mr. Coy. Senator, may I address myself for just a moment to your 
last statement directed to your chairman? On that approach, which 
1 construe to be one of raising the question of whether or not gambling 
of this kind has reached the point where it is endangering the national 
welfare, one approach has been taken where you are unable to get 
the enforcement of the law in the 47 States where it is illegal, enforce- 
ment of the kind which stops this thing or retards it to the point 
where it no longer would be a menace. The suggestion has been ad- 
vanced in the legislation before the Senate to prohibit the transmission 
of the information on which these bookmakers feed, and you would 
greatly diminish gambling because of the inability of bookmakers 
to be sure that they are making a profit and therefore reduce their 
willingness to accept bets without the information which lets them 
balance their book and take a 10- or 15-percent take as a certainty. 
If they attempted to make book on the lack of this information where 
they were taking such a great risk of losing their own money, there 
might be some loss of confidence in books made without this informa- 
tion. The general public might be somewhat less willing than they 
are today to gamble with the bookmaker if he is making book without 
adequate information. 

Senator Wiley. You mean to prohibit the press from reporting 
which horse won the race today at 2 o'clock ? 

Mr. Coy. No ; I do not mean to curtail the press in reporting these 
events. The press does not lend itself to this process of bookmaking 
because of the timing of their various editions. 

Senator Wiley. Then let us take the radio. A race comes off at 2 
o'clock. Horse X wins. Do you think you can stop that information ? 

Mr. Coy. No ; I do not think you can and I do not think you should, 
but I do think you ought to stop the kind of information which feeds 



16 ORGANIZED CRIME IN INTERSTATE COMMERCE. 

the bookmakers, and that would be the kind of information on what 
the odds are before the race is run, the last-minute scratches, the 
changes in jockeys, information which lets the bookmaker have in- 
formation on which he can set his books up, and to prohibit putting 
on the radio the prices paid after the event has been finished, but not 
restrict them in reporting the winners, the second-place winner, and 
the third-place winner; in the case of television, not to permit them 
to show on the television screen the pari-mutuel boards at the tracks, 
which have all this information on it. 

Senator Wiley. That is the approach that is in the Senate bill. 
Have you any thought that the cure might be worse than the disease 
in restricting men deliberately? I might be a Kentucky owner of 
horses and I might wish to express my opinion that my horse X will 
win the race, and that goes out. I am just thinking in terms of con- 
stantly trying to cure the disease from without, when we have to cure 
it from within. 

Mr. Coy. If there is one. I would quite agree, there is always the 
very difficult problem of deciding what kind of restriction you put 
on when the freedom of people and freedom of information is involved. 
Senator Wiley. You said that on the track the Government was not 
losing any money to speak of, you thought, but off the track the Gov- 
ernment was losing a lot of money. You could make the thing so 
costly that it does not pay to operate a business. You can do that. 
One of our problems in this country is developing new businesses. We 
have already come to that point. If you have a business which is dis- 
integrating in its influence on morals and the health of the community, 
you certainly have the right of taxation, you certainly have the right 
of license, you certainly have the right to regulate men who are en- 
gaged in various activities which are crooked. There is no question 
about that. Again if you consider putting a stop to the matter of 
information over television, over radio or telegram, through the pa- 
pers, you had better watch your step. That is the way I feel about 
that. 

Thank you, Mr. Chairman. 

The Chairman. Thank you very much, Senator Wiley. 
Senator Hunt, do you have any questions you wish to ask at this 
time ? 

Senator Hunt. No, Mr. Chairman. 
The Chairman. Mr. Coy, I had one or two questions. 
First in regard to the matter of a possible monopoly action against 
Continental Press, is it the duty of the Federal Communications Com- 
mission to suggest or do you have any power to initiate such a mo- 
nopoly action or must that be instituted by the Antitrust Division of 
the Department of Justice? 

Mr. Coy. The latter, Senator. The enforcement of the Antitrust 
Act is not within our jurisdiction. However, the Commission is not 
without some interest in the Antitrust Act in the field of communica- 
tions. In this case you do not have communications services being 
rendered by companies under the jurisdiction of the Commission. 
Continental Press and the regional distributors and the subdistribu- 
tors are leasing facilities from common carriers who are under the 
jurisdiction of the Federal Communications Commission so that 
clearly, so far as violation of the Sherman Act is concerned, they are 



ORGANIZED CRIME IN INTERSTATE COMMERCE 17 

not within the jurisdiction of the Commission and we would be in no 
position to take any action against them. I suggest that it is within 
the jurisdiction of the Department of Justice if there is a violation here. 
The Chairman. Of course within your jurisdiction and duties you 
can make recommendations concerning possible violations of the an- 
titrust laws in the communications fields; can you not, Mr. Coy? 
Mr. Coy. That is correct. 

The Chairman. You are at this time at least calling attention to 
the matter so that it may be looked into by the antitrust division of 
the Department of Justice? 
Mr. Coy. That is correct. 

The Chairman. The case that you cited in which the Associated 
Press was involved was one that arose in connection with the Chicago 
newspapers; is that not right? 

Mr. Coy. I believe it involved Chicago and Washington, D. C. 
The Chairman. Mr. Coy, at the beginning of your testimony you 
outlined the three ways in which Continental secured information to 
put on its wires, at the end of page 2. First, by telegraph over a direct 
circuit from the track press box to the nearest Continental office. I 
think most of the States in which horse racing has been legalized pro- 
hibit the immediate giving out of information from the tracks, do they 
not? 

Mr. Coy. Some of them do, and some of them do not. Where it is 
not prohibited, they have a direct wire to the track press box, and they 
pay a fee of so much per day to the track owners for the privilege of 
sending out the information on the results of the races. 

The Chairman. Then in those States where it is prohibited the 
second method of securing information is by telephone description of 
the race as observed by the telescope from outside the track, usually 
transmitted by long distance or telephone to Continental's nearest 
office; and the third method is by telephoned description of the race 
as signaled to an observer located at a point outside the track by a 
"wigwag" artist. 

Does Continental still carry on those practices? 
Mr. Coy. I understand they do. 

The Chairman* What evidence do you have that they do? 
Mr. Coy. The evidence in 1948 is set forth in our report, and I 
believe we list the tracks where they operate by these three different 
methods. I do not believe there is any current information after 
1943 on the basis of our report. 

The Chairman. I take it, though, that if it cannot be gotten out 
legally, you could deduce from the fact that it- does get out that it 
must be through one or the other of these methods. Would that be 
correct? 

Mr. Coy. That is correct, 

The Chairman. Mr. Coy, you were talking about bookmaking in 
connection with the immediate transmission of news by Continental 
and its distributors and subdistributors, where they give the last 
scratches, the condition of the track, change of jockeys, and what not. 
Then you said also, however, that the bookies could not be completely 
put out of existence as long as radio and newspapers and television 
carry the information. Is that what you said? 

Mr. Coy. Yes; he would be reduced to operating at a much greater 
risk than he does when he has this information immediately. In other 



18 ORGANIZED CRIME IN INTERSTATE COMMERCE. 

words, he would not be able to know the changing odds right up to 
the start of the race, which enables him to lay off or hedge his bets. 
He would be gambling much more himself than he is today. It is 
difficult to say that a bookmaker is gambling. He almost has a cinch 
in the way he operates. 

The Chairman. Then insofar as bookmaking shops are concerned 
or parlors where people go and sit in the afternoon and bet on one 
race after another, I suppose they carry on by virtue of being able 
to get their money immediately following the race in order to be able 
to bet on the next race. Is that correct? Or if they have lost on 
the previous race, as you say in your statement, there is a natural desire 
to try to recoup on the following race. Unless they got the news 
immediately, that kind of transaction would not be possible. 

Mr. Cot. That is my belief. I haA'e only one question, as to whether 
there are immedate pay-offs in all of these cases. I suspect that a 
number of people who bet with bookmakers have a reasonable line 
of credit and that it is conducted by credit arrangements over tele- 
phone, even credit arrangements when they are sitting in bookie 
rooms in some of the large resort hotels. 

The Chairman. You discussed the matter of the difference between 
pari-mutuels, legalized on-the-track betting and bookmaking. You 
spoke of the fact that in all but one State off-the-track betting would 
be in violation of the law of the particular State, and you noted also 
the necessity of having at least some kind of protection or at least 
of winking at the operation by the law-enforcement officials. It is 
also true that everybody who has made a study of the matter says 
that with the horse parlors and the gambling institutions, illegal ones, 
go other kinds of crime and corruption as a necessary part of the 
gambling operation or at least as an incident to it. Is that your 
feeling about the matter ? 

Mr. Coy. That is my belief, Senator, but as I indicated I do not 
have evidence to support that, except such information as is of common 
knowledge. 

The Chairman. Mr. Coy, you testified about the provisions of Tariff 
FCC 219 which covers leased facilities, that in January 1943 the 
Federal Communications Commission put into effect a regulation that 
facilities furnished under this power should not be used directly or 
indirectly in violation of the law. That is the provision you referred 
to, is it? 

Mr. Cot. Yes; that was the provision of the tariff filed by Western 
Union. 

The Chairman. Then it is your duty as the Federal Communica- 
tions Commission at least to have some supervision of whether West- 
ern Union is complying with that regulation. 

Mr. Coy. Yes; and so far as we know, Western Union has discon- 
tinued service in all cases where there has been complaint filed with 
them by law-enforcement officials of proper jurisdiction. 

The Chairman. Do you have a staff on the Federal Communica- 
tions Commission which makes an investigation of Western Union's 
activities in connection with whether the company violates this pro- 
vision or not ? 

Mr. Coy. Yes, we have a staff; but we do not have people assigned 
to this particular thing. As complaints would come to us about the 
matter, we would look into it. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 19 

The Chairman. Do you have any investigators out determining 
whether they have violated or are violating this tariff provision? 

Mr. Coy. We do not. This regulation says that they will not fur- 
nish service to people who are using for unlawful purposes, the infor- 
mation transmitted and that they will discontinue the service upon 
complaint of law-enforcement officials. On the affirmative side, we do 
not investigate whether they are furnishing service to people who are 
using it unlawfully. 

The Chairman. For that reason you have never had a decision as 
to the legality of this tariff provision. 

Mr. Coy. No. That decision would come about upon the complaint 
of someone who had been denied service by the telephone company and 
who filed a proceeding before the Commission asserting that the regu- 
lation under which service had been denied was unlawful. 

The Chairman. What penalty is possible under the Federal Com- 
munications Act or tariff No. 219 ? 

Mr. Coy. The general provisions of the Communications Act with 
respect to forfeitures. There is a penalty or a fine in the Communica- 
tions Act for violation of their tariff regulations. I would like to point 
out that the only penalty involved here under the present Communica- 
tions Act would run against the communications carrier, not against 
any one getting service and using it for illegal purposes. 

The Chairman. Not against Western Union or Continental itself? 

Mr. Coy. It could not run against Continental. 

The Chairman. You of course have read in the paper, Mr. Coy, I 
assume, that in the State of Maine and in the State of New Jersey 
Western Union operators in various towns and cities have accepted 
bets or at least have accepted money for transmission to some bookie 
or to some lay-off person. So actually betting on horse races has taken 
place in those cases through Western Union facilities. 

Mr. Coy. Yes, T have read it in the paper; and I am somewhat 
familiar with the matter because the matter was reported to the Fed- 
eral Communications Commission. We did not investigate the matter 
because the local district attorney, that is, the State's attorney in the 
State of Maine, working in conjunction with the United States district 
attorney, was trying to gather evidence and prepare a case to take to 
the grand jury in the Maine jurisdiction, that is, the State grand jury. 

The Chairman. You are now going into those matters ? 

Mr. Coy. Yes. 

The Chairman. How about New Jersey ? 

Mr. Coy. I am not familiar with New jersey myself. I cannot an- 
swer on the State of New Jersey at the moment. 

The Chairman. You, of course, have read in the paper and are 
aware of the fact that in St. Louis a substantial number of records 
have been seized, which at least indicates that there is a very substan- 
tial bet-making or bookmaking operation prttty closely connected 
with some of the Western Union managers and officials. You saw that 
in the paper ? 

Mr. Coy. I did. 

The Chairman. J. C. Rich Co., I believe, is the name of it. I as- 
sume that you will go into that matter to see whether there has been 
a violation. 

Mr. Coy. Yes, sir. I think, however, Senator, the question of the 
betting in that case is a matter of local jurisdiction because it does 



20 ORGANIZED CRIME IN INTERSTATE COMMERCE. 

not violate any Federal law. The question for us it whether or not it 
violates the tariff regulations filed by the Western Union and whether 
Western Union itself had knowledge of it. 

The Chairman. On page 5 of your statement the provision reads : 

Facilities furnished under this tariff shall not be used for any purpose or in 
any manner directly or indirectly in violation of any Federal law or the laws of 
any of the States through which the circuits pass or the equipment 
is located * * *. 

So you would not have to find a violation of the Federal law in order 
to impose a penalty on Western Union. 

Mr. Coy. We would find a violation of the tariff regulation, Sena- 
tor, in that case, using their facilities for transmission of bets or 
wagers. 

The Chairman. The point is that if it is in violation of the law of 
the State in which the equipment is located or through which the cir- 
cuits passed, then you would be in position to impose a penalty if it 
was in violation of the FCC Act. Is that not correct? 

Mr. Coy. I think there would be that question which we would have 
to determine, certainly. 

The Chairman. In that connection, Mr. Coy, this committee will 
be delighted to cooperate and assist in uncovering any evidence that 
we might gather on the matter. 

Mr. Coy, on page 6 on the matter of use of services for unlawful 
purposes under section 203 of the Communications Act, places some 
burden on the company to see that their service is not being used for 
illegal purposes in violation of the law. It first specifies that if a 
complaint is made, and then the last clause is, "or if the telephone 
company receives other evidence that such service is being or will be 
so used." 

I understand from all of your testimony that where a complaint 
has been made to the telephone company that theif facilities are being 
used for illegal purposes, they have withdrawn the service, is that 
correct ? 

Mr. Coy. I believe that to be generally true. I do not know of 
anything to the contrary. 

The Chairman. But now, Mr. Coy, as a matter of fact, while that 
may be true, do you have evidence that they have been rather blind 
in looking out for violations of the last clause of this provision? 

Mr. Coy. I do not know that I would say they have been blinded to 
it, but I would say they have not been aggressive in determining 
whether the user of the telephone was going to use it for legal or illegal 
purposes. 

The Chairman. Yes ; that is right, Mr. Coy. You set out in your 
report — and I want to compliment the Federal Communications Com- 
mission upon this study. It is, of course, a little outdated now, 
but it is very thorough and excellent and detailed, and you performed 
a splendid public service in making this staff report. You report sit- 
uations in the report where there are great concentrations of tele- 
phones in unusual places, in such a peculiar place, maybe several up 
a tree near a race track or many of them in a betting parlor where it is 
known that gambling was taking place. Those matters would have 
to be known by the telephone company and what the phones were 
being used for, if they made any sort of effort at all, sir. 

Mr. Coy. I believe that is self-evident. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 21 

The Chairman. It must be self-evident, if you have several tele- 
phones in a room next to a race track, what they are being used for. 

Mr. Coy. I think that is self-evident. 

The Chairman. Or in a book-making joint where they receive in- 
formation from one of the subsidiaries of Continental Press and then 
have several telephones to call it out. That would be self-evident, 
would it not ? 

Mr. Coy. I think so. 

The Chairman. Is it possible that these telephones could be there 
without the telephone company knowing it ? 

Mr. Coy. It is possible but highly improbable. 

The Chairman. Highly unlikely, is it not 1 ? 

Mr. Coy. They would have to be installed by other people than the 
telephone company. 

The Chairman. Also, Mr. Coy, if their toll charges, which you have 
been so kind as to order them to retain, show from a certain telephone 
long-distance calls to a certain place immediately after the race time 
of different races, it would be evident to the telephone company what 
it was being used for, would it not ? 

Mr. Coy. I think that is correct. I would like to correct one thing, 
Senator. I am told that the telephone company has testified that many 
of these telephones have been installed by people other than the tele- 
phone company's employees, that they have procured instruments of 
their own and have installed them, which would be an illegal instal- 
lation. 

The Chairman. That is, that they have gone around and paid some- 
body something for the use of their telephone and the gambler or 
the person using them themselves have put in the wires? 

Mr. Coy. Or they have bought the instruments themselves without 
borrowing somebody else's. 

The Chairman. Of course, that is their testimony and undoubtedly 
that is true in many cases, but putting it all together, Mr. Coy — the 
toll charges, the inspections they make from time to time of their 
facilities, where the calls go to — are you not convinced that if the 
telephone company really wanted to stop the use of its facilities for 
these illegal purposes, in the main they could do so ? 

Mr. Coy. Senator, I think that is right, but I would like to qualify 
it a bit, if I may. The telephone company, following out the letter 
of its own regulation here, would have to make a determination that 
telephones were being used for unlawful purposes. The telephone 
company is hardly the agency to make such a determination that it 
is their belief that telephones are being used for unlawful purposes. 
The telephone company in making such a determination would be 
subject to civil suit for damages, and unless their action is buttressed 
by the actions of local law-enforcement officials stating that these 
people are engaged in unlawful purposes, the telephone company is 
put in a very peculiar position, and the result of that, because of this 
jeopardy of civil action, is that they have in the main relied entirely 
upon complaints from local law-enforcement officers that telephones 
were being used for unlawful purposes. 

I think they could say to you, and I think they would have to admit 
that they know that a number of these telephones, at least in their 
opinion, are being used for unlawful purposes, but without the support 



22 ORGANIZED CRIME IN INTERSTATE COMMERCE 

of these local law-enforcement officers saying that it is used for 
unlawful purposes, the damage possibilities through civil action are 
pretty great for them. 

The Chairman. I grant, Mr. Coy, that this whole matter to a very 
considerable extent goes back to the interest of the local people and 
local law-enforcement officers. You have that to start on, and any- 
thing you may build on it is very, very difficult. 

Mr. Coy, what if it should be pointed out to the Federal Communi- 
cations Commission that the telephone company, upon a showing to 
it of illegal use of its facilities in violation of the law and bookmaking 
operations, had refused to remove its facilities. Do you have any 
power to fine it or to suspend its services? 

Mr. Coy. We could fine it under the forfeiture section of the statute, 
the Communications Act. 

The Chairman. What is the fine that is possible under that section? 

Mr. Cot. $500 for each offense. Mr. Chairman, if they willfully 
violate that section, they are also subject to criminal prosecution under 
the act. 

The Chairman. Mr. Coy, in connection with Continental's oper- 
ations where they apparently have divided the country into 25 regions, 
has your staff made a recent investigation of the operations of 
Continental ? 

Mr. Coy. We have not. 

The Chairman. With some additional appropriation, you might be 
able to do so, might you not ? 

Mr. Coy. Yes, if we had the staff to do it; I think we could bring 
our 1943 report up to date. It is not something, however, that you 
can do overnight. 

The Chairman. Yes ; I appreciate that. 

Mr. Coy, what evidence does the Commission have on whether the 
wire services are served by or connected with organized criminal 
syndicates? 

Mr. Coy. I do not believe we have any additional evidence. 

The Chairman. Other than the conclusions that may be drawn from 
what you have in your 1943 report ? 

Mr. Coy. That is correct. 

The Chairman. Mr. Coy, I think you previously identified before 
the Interstate and Foreign Commerce Committee the Continental and 
subsidiaries, which first distribute and then redistribute racing news. 
Do you have that list for the committee that we can have ? 

Mr. Coy. I do not have the list. I have only the list of the regional 
distributors as they existed in 1943. We can procure that, and I be- 
lieve it is a matter of record before the Senate Interstate and Foreign 
Commerce Committee. 

The Chairman. I will ask the staff of the committee in conjunction 
with Mr. Coy's staff to prepare that. 

Mr. Coy, has the Commission made a study of the stock ownership 
of Continental and of the distributing companies and of Western 
Union? 

Mr. Coy. Of Western Union? Of Continental we have not, nor 
have we made a study of the regional distributors or the subdistribu- 
tors. They are customers of communications companies under the 



ORGANIZED CRIME IN INTERSTATE COMMERCE 23 

jurisdiction of the Communications Act, but they themselves are not 
under our jurisdiction. Therefore we have made no study of their 
ownership except as is set out in this report, which shows the owner- 
ship of Continental. 

Ihe Chairman. You mean a subdistributor like Pioneer News 
Service is not subject to the jurisdiction of the Federal Communica- 
tions Commission ? 

Mr. Coy. It is not. 

The Chairman. Why is it not ? It operates in interstate commerce. 

Mr. Coy. They do, but they are operating under a lease arrangement 
with a common carrier under our jurisdiction, like hundreds of busi- 
ness enterprises in the country. For example, the Associated Press 
operates in the same way by leasing facilities from Western Union and 
A. T. & T. That does not bring the Associated Press under the juris- 
diction of the Federal Communications Commission. 

The Chairman. But Western Union and Continental are under 
the jurisdiction of the Federal Communications Commission. 

Mr. Coy. Continental is not. They lease facilities from Western 
Union. Western Union is under the jurisdiction of the Commission. 

The Chairman. Have you made a study of who the stockholders of 
Western Union are? 

Mr. Coy. The last study of the stockholders of Western Union I 
believe was made at the time of the merger of Western Union with the 
Postal Telegraph Co. 

The Chairman. Do you have in your files a list of the stockholders 
of those two companies as of that time, which I believe was in 1946, 
w?is it not? 

Mr. Coy. It was in 1943, but we do have that list. I do not know 
whether it is in our files at the Commission or whether it is in the 
Archives. It can be procured. 

The Chairman. I would appreciate it if you would submit it to the 
committee. 

What inference would you draw if it were shown, Mr. Coy, that 
people who are interested in bookmaking have been buying very heav- 
ily in Western Union stock? 

Mr. Coy. I think our only information on that came from the pro- 
ceedings of this committee, indicating 

The Chairman. Western Union has not been a very successful 
financial venture for prospective stockholders, has it ? 

Mr. Coy. Not very, but their stock has gone up on the market within 
the past year in a rather striking manner. 

The Chairman. The only time they made a dividend was when there 
was a telephone strike some time, I believe. 

Mr. Coy. I do not believe they paid a dividend then, Senator. 

The Chairman. I thought they paid a dividend then. 

Mr. Coy. There was quite a windfall, however, in the telephone 
strike. 

The Chairman. What inference would draw if a person engaged in 
bookmaking and the redissemination of news, one of the subdistribu- 
tors of Continental, should put practically his whole fortune in West- 
ern Union stock ? 

Mr. Coy. I would draw the inference that it would bear very close 
scrutiny. 



24 ORGANIZED CRIME IN INTERSTATE COMMERCE 

The Chairman. Certainly in an ordinarily widely held company 
like Western Union, whose stock is sold on the big board, if you could 
get control of a relatively small block of that stock, you would have 
great power in a meeting of the board of directors, would you not? 

Mr. Coy. You certainly could at any time there became a fight as 
against the management of the company and there was a proxy fight 
on. 

The Chairman. The fact that somebody might be in position to put 
on a proxy fight, even though they did not do so, certainly would be 
looked upon with very sympathetic consideration by the operating 
heads of a company like Western Union, would he not? 

Mr. Coy. Senator, that I can't say because I do not know what the 
management of Western Union would think about Mr. Molasky's 
owning 18,000 shares of stock. 

The Chairman. . Of course it should be pointed out in this connec- 
tion that the local manager in St. Louis of course knows about it. 

Mr. Coy. I have read about that. 

The Chairman. Is shortwave radio a factor in the distribution ? 

Mr. Coy. Yes; I would say it is, but a very minor factor. Those 
operators, men who are licensed operators, would hesitate to engage 
in such activity. 

The Chairman. Do AM and FM play a big part in bookmaking 
up to date ? 

Mr. Coy. Before I answer that may I expand on my answer about 
shortwave for just a little bit. We have had a few cases of licensed 
operators operating shortwave radio transmitters at tracks furnish- 
ing information to bookies. We have apprehended them, and they 
have been prosecuted. We have facilities in our field organization 
for locating illegal radio transmission. Most of those who would 
engage in such activities are not even licensed operators, but they 
have the qualifications of being licensed, perhaps as many as five or 
six cases in the last 2 years, indicating that it is a rather small factor. 
There may be many that we have not yet apprehended. 

On the question about FM and AM, I think that the oral radio 
broadcasting is much more of a factor than the shortwave problem 
because many radio stations, small in comparison to the total number 
but still in quite a few places, have over the past several years engaged 
in the immediate broadcasts of the kinds of information that is made 
available through the Continental Press Service, both before and after 
the race. Over the past 10 years we have had a number of such cases. 
The question which the Commission has to face is, are these radio 
stations operating in the public interest when they devote a very large 
portion of an afternoon to racing information and particularly in a 
May in which it would be of aid to illegal bookmaking in the 47 States 
where it is illegal. We have a current case before us right now. Wil- 
mington, Del., WTUX, the Port Frere Broadcasting Co., which was 
originated by complaint by the chief of police in Wilmington that this 
station was' broadcasting information of the kind that facilitated book- 
making in Wilmington. The case was set down for hearing on re- 
newal of license. Through the chief of police some bookmakers who 
were witnesses testified that they did use this information. At the 
inception of the hearing or thereabouts the station changed its method 
of operation, and the case is now pending before the Commission on 
whether or not its license should be renewed. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 25 

Senator Hunt. Mr. Coy, we were given information in another 
hearing that the bookmaker in Los Angeles, who more or less controls 
bookmaking in Los Angeles, receives all of his racing information by 
shortwave radio from Tijuana, Mexico. I suppose in that situation 
you would be helpless. 

Mr. Coy. Yes ; I think we would. The transmission, if it originated 
in Mexico, would be outside of our jurisdiction. There is no license 
of receivers in this country, thank God, even though it might enable 
us to apprehend this particular fellow. 

Senator Hunt. I want to ask you a question along the line we have 
just been discussing, this ever-constant reporting by local stations of 
racing news. I pick it up as I play across the dial going home from 
work in the evening. It seems that every station I get hold of is telling 
what horse just finished first, second, and third, giving the bets. It is so 
quick that they will say, "Hold on just a minute now until we get the 
official," and within seconds after the race is finished I am getting 
it on my way home. Naturally I do not linger on that station, but do 
you not have jurisdiction over filling up the air with that kind of stuff ? 

Mr. Coy. We do, and the question is whether they are serving the 
public interest by operating in that way and particularly if they are 
furnishing the information of the kind and timely to assist book- 
making operations. 

Senator Hunt. Who pays them for doing that broadcasting? 

Mr. Coy. There are various ways that that occurs. Sometimes the 
information is furnished to them by one of these publications in the 
field of racing news. I believe Armstrong is one of them. Some- 
times a station accepts that service from Armstrong free and broad- 
casts it and gets the money out of selling spot announcements to vari- 
ous advertisers during the afternoon while racing news is on. In 
other cases Armstrong has paid the stations for the broadcast of such 
news or for the time that is consumed in identifying the source of 
news as being Armstrong, because that assists in the sale of Arm- 
strong's publications. Those payments sometimes are nominal, and 
in other cases they have been quite substantial. 

Senator Hunt. Do not your requirements or rules and regulations 
definitely set out that the station must designate the sponsor of any 
program ? 

Mr. Coy. Yes, it does; and in the cases where it is identified as 
Armstrong, my understanding is that the station is either furnishing 
the service free or making a payment to the station, depending on 
how good a deal he can make with the station. 

Senator Hunt. Mr. Coy, is it the duty of your organization to go 
into that matter on your own or do you wait for a complaint? 

Mr. Coy. It is impossible for us to monitor all the radio stations in 
the country, so we are dependent to some extent upon complaints 
about the service of the radio station. Again in that regard the best 
source of information to us would be local law-enforcement officials 
who would tell us that such and such radio station is broadcasting 
information in a manner to facilitate illegal bookmaking in that 
community. 

Senator Hunt. You do not feel it your duty to initiate the case 
yourself? 

Mr. Coy. It is if we have knowledge of it, certainly. 



26 ORGANIZED CRIME IN INTERSTATE COMMERCE; 

Senator Hunt. I just suggest you listen in any afternoon from 
about 3 until 6. 

Mr. Coy. Senator, if you would permit me to say so, I do not go 
home as early as you do. [Laughter.] 

Senator Hunt. I get to work at 9 o'clock in the morning, and the 
Commission convenes at 10. 

Mr. Coy. I am not trying to imply you don't work, because I know 
you do, but what I mean to say is that my job doesn't permit me to 
listen to radio during the daytime. I am busy with a lot of other 
things, and I just wish that I could do what you suggest. I will be- 
very glad to ask somebody to listen to the stations in the Washington 
metropolitan area and hear what you do and see if we should not do 
something about it. 

Senator Hunt. Thank you, sir. 

The Chairman. Mr. Coy, do the same rules apply with reference 
to the renewal of applications as to the granting of an original 
application ? 

Mr. Coy. Yes, sir. 

The Chairman. The Wilmington matter is the renewal of a pend- 
ing permit, is it not? 

Mr. Coy. Yes, it is. 

The Chairman. Then you do have some applications pending, 
which might indicate that they expect to use them for horse-racing 
information, do you not ? 

Mr. Coy. Applications for new stations or applications for 
renewals ? 

The Chairman. Applications for new stations. 

Mr. Coy. Not to my knowledge, but that does not mean that we do 
not have, because I would not see those applications until they come 
before the Commission for action. There may be some on file. We 
keep them in the file at least 30 days before we consider them. 

The Chairman. Not commenting on the worthiness of the applica- 
tion one way or the other particularly, but do you know this fellow 
McBride? 

Mr. Coy. Yes, I do ; WMIE, Miami, Fla. 

The Chairman. What is the situation with reference to his applica- 
tion for service ? 

Mr. Coy. It is in hearing. We had a portion of the hearing in 
Florida. I believe we have resumed the hearing here. 

Mr. Harry A. Becker (Chief, Administration, Office of General 
Counsel, FCC). The record is still open for depositions to be taken in 
Cleveland next week. 

Mr. Coy. The record in the case is still open for some depositions in 
Cleveland, and while I am speaking about that case I refer back to a 
question you asked me a moment ago. We do have in this particular 
case information about the ownership of Continental Press because 
of McBride's relationship to it. 

The Chairman. Most of the stock of Mr. McBride has been turned 
over and given to his son. 

Mr. Coy. I believe that that is correct. He has transferred 100- 
percent ownership of that to his son, who is a student in a law school. 

The Chairman. I think it might be pertinent, anyway, for con- 
sideration by the committee if there were included in the record an 
editorial of April 16, 1950, in the Miami Daily News. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 27 

(The editorial referred to was identified as exhibit No. 2, and ap- 
pears in the appendix on p. 243.) 

Mr. Coy. Senator, we would be glad to furnish you with a tran- 
script of that hearing if you wish. 

The Chairman. Mr. Halley, do you have any questions? 

Mr. Halley. Mr. Coy, earlier this morning you were talking about 
the difference between on-the-track betting and off-the-track betting 
and the possibilities that the evil in the one might be greater than in 
the other. They are both monopolies, are they not ? 

Mr. Coy. The}^ are both monopolies, but one of them has been legal- 
ized by action of the State and the other one has no legal sanction that 
I know of. 

Mr. Halley. Betting on the track is a regulated monopoly, in other 
words. 

Mr. Coy. That is correct. 

Mr. Halley. Much like a lot of our public utilities. In the betting 
off the track you have evidence that a monopoly controls the dis- 
semination of the information, is that correct ? 

Mr. Coy. The very circumstance of the manner in which Continental 
furnishes its information through regional distributors and subdis- 
tributors is the kind of evidence on which I base my statement that it 
is a monopoly. I do not say that there is a monopoly of the final use of 
the information because I believe that the subdistributor will make it 
available to as many bookmakers as there are who want to pay the fee. 

Mr. Halley. In addition to being a monopoly, does not the off the 
track furnishing of information have other evils attached to it ? Have 
you found any evidence, for instance, of discrimination among cus- 
tomers in terms of price or availability of the information? 

Mr. Coy. We know that in 1943 the information collected and trans- 
mitted by Continental over these leased circuits was furnished to news- 
papers for as low as $65 a week, to pregs associations for $75 a week, 
and I believe that the figure charged to one of the regional distributors 
was as high as $5,500 or $6,000 per week, a wide difference in the 
charge made for the service. 

Mr. Halley. They both get the same service ? 

Mr. Coy. They both get identical service. 

Mr. Halley. And, of course, among the regional distributors there 
is clearly discrimination as to who may or may not have the service. 
If you or I applied for a regional distributorship, we would not be 
able to get it, would we? 

Mr. Coy. I do not know, and I haven't contemplated applying, but 
it does seem to be quite clear that a regional distributor gets a very 
definite area and that Continental will not supply service to anyone 
else. At least there is no one competing with the regional distributor. 

Mr. H alley. The territory is cut up. 

Mr. Coy. The territory is cut up, and the same applies to the sub- 
distributors so far as we were able to determine in 1943. I wondered 
about the question of places like New York City, Chicago, and our 
large cities, if they restrict their subdistributors to certain blocks, or 
if there is a certain amount of competition between subdistributors. 

Mr. Halley. Are you familiar with the events that transpired in 
Nevada a couple of years ago where, as you have mentioned, off-the- 
track betting is legal, with reference to discrimination ? 



28 ORGANIZED CRIME IX INTERSTATE COMMERCE: 

Mr. Coy. I was not familiar with it, but Mr. Becker tells me that 
in the State of Nevada a number of years ago we had a case of some 
unlicensed radio operators who broke into the office of one of these 
subdistributors and set up an arrangement whereby they could get 
the information coining in over the Continental wire to this distribu- 
tor and distributed it by means of an unlicensed radio to their own 
subscribers out there, their own customers. I believe at about the 
same time there was what you might call an invasion of that territory 
by a fellow from some place over in California, I think, southern 
California, Los Angeles, Siegel. 

Mr. Halley. Bugsy Siegel. 

Mr. Coy. And it seemed that as a result of the gang warfare that 
ensued resulting in his death, there was a hearing in the State of 
Nevada on the question of the licensed bookmaking out there. 
Whether or not that was directed at the invasion of Siegel there to set 
up competition or whether it was directed at these fellows who under- 
took to steal the service from Continental and spread it to their cus- 
tomers by means of unlicensed radio, or whether Siegel had any con- 
nection with these fellows who stole it from Continental, I do not 
know. At any rate, there were those circumstances that existed there. 

Mr. Halley. Isn't it a fact that after the murder of Bugsy Siegel 
following the events you have just described, there was a fear in the 
State of Nevada that open warfare would break out as a result of the 
discrimination among customers for the wire service ? 

Mr. Coy. Mr. Halley, I don't know of my own knowledge. 

Mr. Halley. But you do know that shortly thereafter the State 
instituted a series of hearings. 

Mr. Coy. Yes ; I know that. 

Mr. Halley. Do you know that shortly after the hearings and as a 
result of the hearings the State of Nevada passed a law making it nec- 
essary for any distributor of racing information available to all cus- 
tomers without discrimination as to .prices ? 

Mr. Coy. No ; I didn't know that. 

Mr. Halley. In that way, by eliminating that element of discrimi- 
nation and monopoly, the State of Nevada ended the warfare. Has 
that been brought to your attention? 

Mr. Coy. Peace has come to Nevada, I understand. 

Mr. Halley. Did you know that shortly before the hearings, right 
after the death of Bugsy Siegel, a man appeared from New York who, 
without any investment whatsoever or any previous residence or 
knowledge of events in the State of Nevada, took over all of Bugsy 
Siegel's interests in the racing book ? 

Mr. Coy. No; my interests didn't run to following it so intimately 
as that. 

Mr. Halley. Would it indicate to you, if that were so,- that there is 
some connection between this discrimination in the use of the mo- 
nopoly and some over-all or Nation-wide gang control of this mo- 
nopolistic distribution? 

Air. Coy. That, plus the fact that there is no competition in an area 
where many men who have been engaged in a lot of gangster activities 
are participating, indicates to me that they maintain their own kind 
of law and order in this business in some way. Those things just don't 
happen where as much money is at stake as there is in this sort of busi- 



ORGANIZED CRIME IN INTERSTATE COMMERCE 29 

ness. While I could not prove it to satisfy a court, in my mind I am 
convinced that through this device of selecting the regional distribu- 
tors and the subdistributors and giving them what amounts to ex- 
clusive territory, there is some single person or some single organiza- 
tion located in New York City, Cleveland, Chicago, Miami, Fla., Los 
Angeles, or a combination of those places, who exercises this kind of 
control and maintains peace among the people who are not given to 
peaceful pursuits. 

Mr. Halley. In fact, Mr. Coy, you mentioned in your statement, 
at least you referred to the report of the Commerce Committee that 
a Mr. Ragen, who was one of the partners in Continental, was mur- 
dered and that the reason he was believed to have been murdered was 
that he refused to allow certain Chicago gangsters to have a part of 
Continental Press, is that right ? 

Mr. Coy. That was the report that was common at the time of his 
murder. It took a couple of efforts to get him dead. 

Mr. Halley. Has there been reported to you or brought to your 
attention the fact that Mr. Ragen, immediately before his murder, 
went to the local police department and warned them that he expected 
to be murdered and asked protection and disclosed fully the names 
of the gangsters he thought would murder him ? 

Mr. Coy. I recall that. 

Mr. Halley. That would also indicate that this monopoly is en- 
forced by illegal and violent means, would it not ? 

Mr. Coy. It certainly would indicate that the pursuit of that line 
of questioning is a very important one. I feel that that is true. I 
think the pursuit of that line of questioning at places where it is cal- 
culated to get such information would bear results. Between the per- 
jury statutes on the one hand and the antitrust law on the other, I 
believe you can get such information. 

Mr. Halley. Did you have knowledge of the fact that wire service 
was and is furnished throughout the State of Florida to a syndicate 
which operates on Miami Beach under the name of S. & G. Syndicate ? 

Mr. Coy. I am told it is in the record of the WMIE case we referred 
to a moment ago. 

Mr. Halley. I was wondering whether there would be within your 
jurisdiction the question of whether a public utility furnishing such 
service could summarily cut it off over a period of time that negotia- 
tions might be pending on a change of management from local in- 
terests to Chicago interests. Would that be a matter that the Federal 
Communications Commission would look into? 

Mr. Coy. I think we could look into it, but I just do not know now 
what violation there would be. 

Mr. Halley. If it were brought to your attention that 2 years ago 
the S. & G. Syndicate was owned and operated by people then local 
residents of Miami and that certain people in Chicago, known to be 
connected with the various syndicates in the racing business there, 
sought to purchase a part of S. & G.'s syndicate, and that for a period 
of 10 days the wire service just went dead until the negotiations were 
completed, would such cessation of wire service be within your juris- 
diction ? 

68958— 50— pt. 2 3 



30 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Mr. Coy. I doubt that because I suspect, without knowing the facts, 
that this syndicate you referred to as S. & G. operated by means of 
leased facilities over Western Union or A. T. & T. lines, and this 
question of whether or not a leased facility was in continuous opera- 
tion would not seem to be within our jurisdiction. 

Mr. Halley. Even if the leased service were arbitrarily discon- 
tinued ? 

Mr. Coy. If the operators of S. & G., who had been getting service 
for a period of time, wanted to continue to use the service, I think there 
would be a question as to whether Western Union was furnishing 
service in accordance with the regulations of the Commission. In 
other words, they could not cut it off to a subscriber arbitrarily. But 
if S. & G. was going out of business and there were negotiations on as 
to who its successor was to be, and they were not offering to use those 
facilities, I don't believe the Commission would have any jurisdiction 
over whether there was a continuous use of those facilities. 

Mr. Halley. Going on with the nature of this off-the-track monop- 
oly in the dissemination of betting information, we have covered the 
elements of discrimination and violence which enter into this monop- 
oly. I believe you have mentioned a third element, the element of 
corruption of law-enforcement officers. Is that right ? 

Mr. Coy. I have mentioned that. Again I do not know that to be 
a fact except as you hear complaints about the lack of law enforce- 
ment, There are all kinds of ways in which corruption of local law- 
enforcement officials might contribute to the maintenance of the 
monopoly. 

Mr. Halley. For instance, it is notorious that in many States, in- 
cluding, I believe, the State of Florida, betting off the track is illegal ,- 
is that right ? 

Mr. Coy. Yes. 

Mr. Halley. And it is also open and notorious information that in 
the State of Florida in almost every hotel during the winter season 
bets are openly and notoriously accepted. Is that not right ( 

Mr. Coy. That I am told. I haven't been in Florida, but I am told 
that is true. 

Mr. Halley. Isn't the conclusion inescapable, as the third element 
of this monopoly, that law-enforcement officers are at least failing to 
do their duty in allowing monopoly to exist in this item, which is a 
bet on a horse race ? 

Mr. Coy. If any illegal operation exists with common knowledge 
about it, you are almost forced to the conclusion that it is tolerated 
by local law-enforcement officials. It is just inescapable, it seems to 
me, and in the cases where illegal betting takes place in semipublic 
rooms, like hotels or poolrooms or rooms in office buildings, it just seems 
inescapable that it can't be outside the knowledge of local law-enforce- 
ment officials, and if there is a law that says that it is illegal, they have 
the burden of enforcing such law. 

Mr. Halley. That would be true, you believe, in at least a substan- 
tial number of States? 

Mr. Coy. I should think it is very apt to be true in 47 of 48. 

Mr. Halley. Thank you. 

The Chairman. Senator Hunt has another matter. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 31 

Senator Hunt. Mr. Coy, could you get for this committee the 
names of the sponsors of the racing newscasts locally here in the city 
of Washington and what the sponsors pay for that time, and make 
it available to the committee ? 

Mr. Cot. Yes; we can make it available. It will take us a little 
while to get it. 

(The information referred to was later furnished to the committee, 
and is on file as exhibit No. 3.) 

The Chairman. Mr. Robinson, do you have any questions? 

The committee greatly appreciates the contribution you have made 
to our inquiry. It has been frankly and fully done. You have a 
very able staff, and I think you are a capable Chairman. It occurs to 
us preliminarily, at least to the chairman of the committee, that in 
connection with operations like those of Continental and some of 
the distributors and subdistributors, if they are under State regula- 
tion, they are not being effectively regulated. 

Mr. Coy. I don't believe they are under State regulation. 

The Chairman. Of course, we do not want the Federal Government 
to assume jurisdiction in any matters where there is effective regula- 
tion and where it is not necessary, but these organizations do operate 
in interstate commerce, and I think it might be a very interesting study 
for your staff to look into the matter of whether there is effective regu- 
lation and whether it is necessary as an integral part of the whole com- 
munications system or whether it should be stopped, with particular 
application to these companies like Continental, Pioneer, and others 
that we know about. 

We are very grateful to you and the members of your staff for com- 
ing up and giving us the benefit of the information which you have 
and for your opinion about matters affecting communications in inter- 
state commerce. 

Mr. Cot. Thank you, Senator. 

The Chairman. The committee is in recess until 10 o'clock tomor- 
row morning. 

(Whereupon, at 12: 30 p. m., the committee recessed until 10 a. m., 
Friday, June 23, 1950.) 



INVESTIGATION OF ORGANIZED CRIME IN INTERSTATE 

COMMERCE 



FRIDAY, JUNE 23, 1950 

United States Senate, 
Special Committee to Investigate 
Organized Crime in Interstate Commerce, 

Washington, D. C. 

The comittee met, pursuant to recess, at 10 : 15 a. m., in room 457 
Senate Office Building, Senator Estes Kefauver (chairman) presiding. 

Present : Senators Kefauver, Hunt, and Wiley. 

Also present : Rudolph Halley, chief counsel ; George S. Robinson, 
associate counsel ; Alfred M. Klein, assistant counsel, and Harold G. 
Robinson, chief investigator. 

The Chairman. The committee will come to order. The committee 
is glad to have with us this morning Mr. Clifton C. Garner, Chief 
Post Office Inspector, and with him is Mr. Peter J. Connolly, of the 
Solicitor's Office. 

Mr. Garner and Mr. Connolly, we appreciate your appearance here, 
and we thank you for cooperating with the committee and for your 
description of the work that you do which may relate to matters that 
we are interested in. 

Mr. Garner, we have a general rule of the committee that we swear 
all of our witnesses. Do you solemnly swear the testimony you will 
give will be the whole truth and nothing but the truth, so help you 
God? 

Mr. Garner. I do. 

TESTIMONY OF CLIFTON C. GARNER, CHIEF POST OFFICE INSPEC- 
TOR, ACCOMPANIED BY PETER J. CONNOLLY, ASSISTANT 
SOLICITOR, POST OFFICE DEPARTMENT 

The Chairman. All right, Mr. Garner. You do not have a prepared 
statement, I believe. 

Mr. Garner. No, I have not, Mr. Chairman. I have notes to which 
I would like to make reference from time to time. 

If I understood } r our question correctly, you would like to have me 
state first some of the functions of the Inspection Service. 

The Chairman. That is right. First, Mr. Garner, how long have 
3'ou been the Chief Post Office Inspector? 

Mr. Garner. Since July 19 of last year, 1949. 

The Chairman. Prior to that time you were where ? 

Mr. Garner. Prior to that time I was Director of City Delivery 
Service. Prior to that time I had jurisdiction over a portion of the 
country on all matters pertaining to post office service. 

33 



34 ORGANIZED CRIME IN INTERSTATE COMMERCE 

The Chairman. How long have you been in the postal service alto- 
gether ? 

Mr. Garner. Thirty years last March. 

The Chairman. We would be glad to have you tell us about the pos- 
tal service, the statutes that you have under your jurisdiction, the prob- 
lems that you have, and any suggestions that you have as to your serv- 
ice, such as amendments of statute, which might be of interest or help 
to this committee in its inquiry and also in making its recommenda- 
tions for any changes or additions to statutes that might be helpful 
in connection with the matter of organized crime in interstate com- 
merce. 

Mr. Garner, it would be of assistance if we first put in the record as 
exhibits Nos. 4 through 9 the six statutes that relate to the postal serv- 
ice in which this committee might be interested. 

Mr. Garner. I think it would be very helpful, Mr. Chairman. 

The Chairman. The first I believe would be title 18, United States 
Code, Crimes and Criminal Procedure, chapter 41, Extortions and 
Threats, section 871 and section 876, which relate to threats against 
the President, and mailing threatening communications, and section 
877, which has to do with threatening communications from foreign 
countries. That will be exhibit No. 4. 

Chapter 61, section 1301, has to do with mailing lottery tickets or 
related matters; section 1303, postmaster or employee as lottery agent, 
which will be exhibit No. 5. 

Chapter 63, sections 1341 and 1342, which have to do with mail fraud, 
will be exhibit No. 6. 

Chapter 71, section 1461, has to do with mailing obscene or crime- 
inciting matter through the mails. 

This will be made exhibit No. 7. 

As exhibit No. 8 we should put in section 1463, mailing indecent 
matter on wrappers or envelopes. 

Chapter 83, section 1716, which has to do with sending dangerous 
substances through the mails, will be exhibit No. 9. 

Are those all of the statutes ? 

Mr. Garner. I believe that would pretty well cover it. 

(The statutes referred to, exhibit Nos. 4 through 9, appear in the 
appendix on pp. 244 through 248.) 

The Chairman. Any general statement you would like to make, we 
would be glad to hear, Mr. Garner. 

Mr. Garner. Mr. Chairman, I would like to explain briefly the 
functions of post office inspectors. Each post office inspector is a 
special representative of the Postmaster General and virtually acts as 
his eyes and ears with respect to the postal establishment. The In- 
spection Service is charged with the investigation of all matters con- 
nected with or of concern to the postal service and the inspectors by 
means of rendering reports keeping the Postmaster General and his 
assistants informed of the condition and needs of the entire service. 

For convenience, the work of the inspectors may be grouped under 
two broad general classifications : One, investigations of matters hav- 
ing to do with providing the best possible postal service to the public 
and, two, the apprehension of those who violate criminal and postal 
laws. The latter is of course what this committee is very much inter- 
ested in. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 35 

Under the heading of criminal investigations or those involving the 
audit of accounts to detect embezzlement and illegal withholding of 
funds and the prevention and eradication of mail losses due to theft, 
rifling, and other criminal motives. This is especially important to 
the citizens who entrust millions of pieces of mail to the postal service, 
representing tremendous money values as well as personal and business 
secrets. Inspectors are constantly alert to detect and bring to justice 
thieves and marauders who prey upon the mails. They also investi- 
gate claims for reward for information leading to the arrest and con- 
viction of mail robberies, burglaries, and hold-up men. Other viola- 
tions of criminal postal laws investigated by inspectors include the 
forging and altering of money orders, postal notes, and postal savings 
certificates, fraudulent use of the mails, the mailing of explosives, 
poisons, obscene and other unmailable matter. 

Inspectors also devote considerable time to the prosecution of postal 
law violators. The decision whether to prosecute rests with the local 
Unitd States district attorneys, but it is the duty of inspectors to obtain 
and present the evidence upon which prosecutions are based. They 
also testify when the cases are presented to United States grand juries 
or are brought before the courts for arraignment and trial and other- 
wise assist in the prosecution of criminal offenses. Some cases are 
handled in State courts, and some assistance is given by inspectors to 
the local law-enforcement officers. 

While the numerous other duties of inspectors do not permit them 
to devote full time to the investigation of criminal postal law viola- 
tions, nevertheless 5,388 arrests were made as a result of their investi- 
gations, and 4,387 persons were convicted in 1949. As an indication of 
the thoroughness of the investigations and adequacies of evidence pre- 
sented, statistics have shown that over 95 percent of those arrested are 
convicted and about 90 percent of those convicted plead guilty. Ar- 
rests for postal law violations occur most frequently in connection with 
theft and riflling of mail from mail receptacles. About fifth on the 
list would be those who violate the fraud statutes. Inspectors act 
under the immediate supervision of inspectors in charge and are 
assigned to domiciled officers throughout 15 field divisions. Each 
domicile is the central office of one or more territories assigned to the 
individual inspectors, and the inspector assigned to a territory usually 
performs all the work arising therein. There are 815 inspectors at 
present, of which 15 are inspectors in charge, and 15 are assistant 
inspectors in charge. 

During the fiscal year 1949, there were 150,569 investigations made. 
Of that number, 11,692 were what we call the "F series or violations 
of the fraud statute. 

Mr. Halley. Mr. Garner, before you leave the F series of violations 
of the fraud statutes, could you just in brief form give a few examples 
of the various types of mail fraud, whether they are serious crimes or 
trivial crimes, and how the mail fraud statutes can be used ? 

Mr. Garner. There are so many ways that people who set out to de- 
fraud may operate, they are just too numerous to mention. I think 
those you are particularly interested in are those pertaining to lot- 
teries, such as turf tipster cases and things of that nature. 

Mr. Halley. I think so, but before we go into that, I would appre- 
cite your illustrating to what acts mail fraud attaches. If mails are 



36 ORGANIZED CRIME IN INTERSTATE COMMERCE 

used in connection with any scheme to defraud, is there a violation of 
the statute, generally speaking? 

Mr. Garner. If the mails are used with the intent — 

to devise any scheme or artifice to defraud, or for obtaining money or property 
by means of false or fraudulent pretenses, representations, or promises, or to sell, 
dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or pro- 
cure for unlawful use any counterfeit or spurious coin, obligation, security, or 
other article, or anything represented to be or intimated or held out to be such 
counterfeit or spurious article, for the purpose of executing such scheme or 
artifice or attempting so to do, places in any post office or authorized depository 
for mail matter, any matter or thing whatever to be sent or delivered by the 
Post Office Department, or takes or receives therefrom, any such matter or thing, 
or knowingly causes to be delivered by mail according to the direction thereon, 
or at the place at which it is directed to be delivered by the person to whom it is 
addressed, any such matter or thing, shall be fined not more than $1,000 or im- 
prisoned not more than 5 years, or both. 

Mr. Halley. To illustrate a little further, you mentioned tipster 
sheets or sending trick schemes through the mail in order to induce 
the public to part with its money. That is one phase of it. 

Mr. Garner. Yes. 

Mr. Halley. On the other hand, mail fraud can also be used for 
such complicated schemes as very involved embezzlements, can they 
not? 

Mr. Garner. Oh, yes. For confidence schemes in many cases. 

Mr. Halley. Would a good illustration be the Associated Gas case 
in which a tremendous amount of money was embezzled from a huge 
corporation, and the mails just happened to be used in nefarious ways, 
and still it was possible to convict under the mail fraud statute, isn't 
that right? 

Mr. Garner. I am not personally familiar with that particular case, 
but I am sure that what you say is true. If the public was defrauded 
and the mails were used in connection therewith, then surely a 
conviction could be obtained with the proper evidence presented. 

Mr. Halley. Even the mailing of a check by a bank for clearance to 
another State would be a mailing that would suffice for conviction 
under the mail-fraud statute, is that right ? 

Mr. Garner. It has been held by some courts, I understand, that 
under certain circumstances that is true. Some courts have held that 
it is not. 

Mr. Halley. It depends on when the mailing takes place and the 
circumstances. 

Mr. Garner. That is it exactly. My understanding is that if the 
scheme has been completed before the check clears from one bank to 
the other, for instance, by mail, then it may not be held that the mails 
were used to defraud. 

Mr. Halley. Thank you. 

Mr. Garner. Answering your question concerning the turf tipster 
cases, we do not have many of those cases, but certain individuals will 
devise a scheme to sell a system or sell information which they claim 
in many cases will insure a profit. This system, as a general rule, pro- 
vides for a study from racing forms of the history of the horses. This 
operator in checking the record will add up points for each of the 
horses in a particular race and decide finally that a certain horse 
should win the race. In glowing terms in many cases he will advertise 
in literature to a mailing list that he can assure these people an enor- 



ORGANIZED CRIME IN INTERSTATE COMMERCE 37 

mous profit if they will follow his system. We have had convictions 
in some cases after investigations of men of that kind. 

I may give you a concrete example of that here. A number of years 
ago there were five brothers, two brothers-in-law, and other associates 
in Brooklyn, N. Y., who operated a big business along the line that I 
was just describing. This scheme was conducted under more than 126 
different assumed names by Jake Adelman, of Brooklyn, N. Y., and 
his four brothers and brothers-in-law and other associates, from about 
1920 to 1938. It was estimated that over $5,000,000 was filched from 
the betting public in the sale of advice relative to the placing of wagers 
on horse races under the false representation that it was advance in- 
formation and the inference of payments of huge sums to owners, 
trainers, and jockeys for information and fixing of races. There were 
46 indicted ; 21 pleaded guilty and were given suspended sentences and 
placed on probation for from 1 to 3 years. 

The Gold Bond Co., of Chicago, 111., operated for many years. In- 
vestigation began in 1938, and it revealed that this company handled 
various lottery tickets based on sporting events, United States Treas- 
ury balances and combinations thereof. One such lottery was fraudu- 
lently operated under the name of Will Rogers Memorial Hospital 
Charity Fund. Branch headquarters of Gold Bond Co., which had 
been in business for 15 years, were located in New Jersey. The opera- 
tions of the concern were Nation-wide and there were hundreds of 
distributors and agents. The mails were used extensively. Twelve 
million purported tickets on various devices of chance were turned out 
annually, but only a small part of the promised prizes was ever paid 
out. It was estimated that more than $20,000,000 were filched from 
the public by the syndicate operating the Gold Bond Co. 

After lengthy investigation the matter was presented to a grand 
jury in 1939, and indictments were returned against 72 defendants, 
charging use of mail to defraud, shipment of lottery matter interstate, 
use of mails to promote lottery, and conspiracy. Seventy-one de- 
fendants were convicted. The principal promoter was a noncitizen, a 
lottery promoter for years, and had previously been convicted for 
income-tax evasion, for which he was sentenced to 20 months in jail 
and fined $2,000. In the Gold Bond case he was fined $22,000, sen- 
tenced to 1 year and 1 day in the penitentiary, and put on probation for 
3 years. Practically all the defendants in this case had been devoting 
their full time to the promotion, distribution, and sale of fraudulent 
lottery matter. The principal promoter was Abraham F. Zimmerman, 
who had at least two aliases. His assistant promoter was David 
Edward Burnstein, who had several aliases. Two of the distributors 
were William Baker, of Indianapolis, who had a long police record, 
with over 25 arrests, and Julius Zweig, St. Louis, a big racketeer, so 
they said at the time, in the St. Louis area. He had a previous con- 
viction for income-tax evasion. 

Those are two samples of some of the cases that we handled. I am 
glad to say that we don't have many of those big ones any more. I 
think they have been stamped out, most of them. 

You are interested, I believe, as we are, in keeping obscene matter 
out of the mail. This is an example of some of the cases along those 
lines that we handle. 

Complaints were received from the parents of seven different minors 
concerning the receipt by their sons of letters mailed bearing return 



38 ORGANIZED CRIME IN INTERSTATE COMMERCE 

addresses of Frank Suffern, Charles Griffin, and James Cunningham, 
all with the street address, 200 Broadway, New York. The letters 
contained a sample cartoon booklet of a decidedly obscene nature as 
well as a printed letter wherein the writer requested the addressee to 
become an agent for him in the sale of obscene cartoon booklets and 
other things that are unmailable. Investigation disclosed the return 
address to be a mail-receiving-privilege office operated by a person by 
the name of Leon Eadell. He had typewritten applications on file for 
all three names and claimed they were separate individuals. This 
address was just desk space in an office building. An attempt was 
made by Leon Radell to identify a man coming into his office as one 
of the mailers, but this was not the man. Upon questioning at great 
length, Radell finally admitted that he was the person dealing under 
those three names. He claimed that he had purchased about 5,000 of 
the obscene cartoon books for 1 cent each from a person in a cafeteria, 
who was never identified. He offered them in a circular to the agents 
for 10 cents each, to be sold for 25 cents. He purchased mailing lists 
from several sources, but no indication was disclosed to determine he 
made any attempt not to send to minors. About 750 letters had been 
mailed and returns were being received from all sources when he was 
taken into custody. All material was confiscated when he was arrested. 

He pleaded guilty and was sentenced to 6 months' probation. He 
had no previous record. 

A person was arrested in Minneapolis for indecent exposure to child- 
ren, and literature from Eadell was found on his person. That is just 
an indication of what obscene literature might do. 

Mr. Halley. Does the post office police the mails or do you wait 
for a complaint ? 

Mr. Garner. We wait for the complaints. There is no other way, 
as a general rule. We cannot under the law, of course, open first-class 
mail. The only time we open other classes of mail is when we suspect 
that it contains unmailable matter. 

Mr. Halley. By and large, you act on complaints ? 

Mr. Garner. Yes, sir ; that is true. 

Mr. Halley. Would you say that almost exclusively the types of 
crimes we are talking about are not committed by organized criminal 
syndicates ? 

Mr. Garner. They are not. So far as we know, none of the investi- 
gations under way today; nor do our records indicate that we have 
investigated any cases operated by a large syndicate such as you 
have in mind. 

Mr. Halley. That would not be within your jurisdiction. 

Mr. Garner. That is correct, unless there is evidence of violation 
of the postal laws. 

Mr. Halley. These people operate on the fringes of syndicates and 
prey on people who bet, is that correct ? 

Mr. Garner. I think as a general rule they begin as one or two 
individuals and add to their groups until they have the people they 
need with which to operate. 

Mr. Halley. They prey on the gullibility of the bettor, is that 
correct ? 

Mr. Garner. Yes ; that is correct. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 39 

Mr. Hallet. Would you say that over the course of years they have 
mulcted the betting public out of very large sums of money ? 

Mr. Garner. In the aggregate they have in the past. I do not 
think that there are any great or large operators now. 

Mr. Halley. There are some operations now, are there not? 

Mr. Garner. Some. We have one inspector who handles all the 
lottery cases, for instance. 

Mr. Hallet. Have you any lottery cases that you want to tell the 
committee about ? 

Mr. Garner. I have some examples before me here. This we con- 
sider a fraud and a lottery, and this dates back about 10 years, an 
organization called Railroader, in Boston, Mass. Tickets to this 
lottery were sold throughout New England, and semimonthly draw- 
ings with payment of $14,000 in prizes for each were advertised. The 
fraudulent lottery was in operation for about 3 years. Drawings were 
held each month, but the stubs used were not those of the tickets 
sold. Therefore, no ticket holder could win. Small sums of money 
were, however, paid out to a selected few in order to stimulate sales in 
certain communities. Ax>proximately $500,000 was filched from the 
public in this scheme, $125,000 of which went to the promoter. Six 
principals in the lottery were convicted of using the mails in a scheme 
to defraud, conspiracy therewith, and use of mails to promote a lottery. 
All were given penitentiary or jail sentences, which were suspended 
in the case of four of the defendants. Three of the defendants were 
also given suspended sentences in State court. The promoter of this 
scheme was sentenced to serve 1 year and 1 day in a penitentiary and 
was given a suspended sentence of 1 year and 1 day to run concurrently, 
and was also placed on probation for 2 years at the expiration of the 
jail sentence. In addition, he was given an 18-month suspended 
sentence and 2 years* probation in State court. It is estimated that 
the promoter had defrauded the public of two or three million dollars 
over a period of 5 years by his schemes. 

The Chairman. Let us go into that a little bit further, Mr. Garner. 
How many people were involved and how many were tried ? 

Mr. Garner. There were six principals. 

The Chairman. What was the name of that case again? 

Mr. Garner. Railroader, R-a-i-1-r-o-a-d-e-r. 

The Chairman. Over how long a period did they operate? 

Mr. Garner. In this particular scheme I don't have the exact date 
but this man had operated over a period of 5 years, and it was estimated 
that he had defrauded the public of two or three million dollars. I 
am not sure that that was all in connection with this one scheme. 
Apparently it was not, because there is a statement here with my notes 
that approximately $500,000 was filched from the public by this 
scheme. 

The Chairman. What was his name ? 

Mr. Garner. His name was Martin A. Bowman, who had many 
aliases, in Braintree, Mass. 

The Chairman. You mean the stubs for the lottery that they oper- 
ated did not compare with the numbers of the ticket holders? 

Mr. Garner. No. He was not using the same stubs. 

The Chairman. So the people had no chance of winning. 

Mr. Garner. No chance whatever. 

The Chairman. What court was Mr. Bowman tried in? 



40 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Mr. Garner. I am not sure. I do not have that information before 
me, but I presume it was in Boston in the Federal court. 

The Chairman. The United States district court. 

Mr. Garner. Yes. 

The Chairman. Would you get the name of the judge and the court 
he was tried before ? 

Mr. Garner. I would be glad to. 

(The information requested was subsequently furnished by Mr. 
Garner in a letter to the committee dated June 23, 1950. It was marked 
"exhibit No. 10," and appears in the appendix on p. 248.) 

The Chairman. How much sentence was he given ? 

Mr. Garner. He was sentenced to serve 1 year and 1 day in the 
penitentiary, and was given a suspended sentence of 1 year and 1 day 
to run concurrently, and was also placed on probation for 2 years at the 
expiration of jail sentence. In addition, he was given an 18-month 
suspended sentence and 2 years probation in State court. 

The Chairman. All he was actually sentenced to serve was 1 year 
and 1 day. 

Mr. Garner. That is all. 

The Chairman. Is that the type of sentence where they can be put 
on probation within a shorter period? 

Mr. Garner. They frequently do not serve the entire period. 

The Chairman. That comes under the jurisdiction of the parole 
board when they have served a third of their sentence. Is that not 
correct ? 

Mr. Bennett. Yes. 

The Chairman. A model prisoner is subject to parole after one- 
third of his sentence has been served. 

Mr. Bennett. That is correct. 

The Chairman. I see that Mr. Bennett, who is director of the Bu- 
reau of Prisons, gives his assent to that statement. 

This man may have gotten out after 3^ months. You say there 
were four or five others. 

Mr. Garner. Five other principals. 

The Chairman. Five other principals. Some of them were given 
suspended sentences ? 

Mr. Garner. I do not have that information in front of me, Mr. 
Chairman. I can get it for the record, if you like. 

The Chairman. You related some history of what happened to the 
other people. 

Mr. Garner. I beg your pardon, I do have that, too. Six principals 
in the lottery were convicted of using the mails as a scheme to defraud, 
conspiracy therewith, and the use of mails to promote a lottery. All 
were given penitentiary or jail sentences which were suspended in 
the case of four of the defendants. Three of the defendants were also 
given suspended sentences in State court. I don't have the informa- 
tion as to what was done. 

The Chairman. It must have been awfully discouraging to the 
postal inspector and the post office solicitor's office that these people 
got off so easily. 

Mr. Garner. It is discouraging from one standpoint when these 
people are permitted to begin their schemes again. I can give you 
an example of that, too. An inspector was in my office 2 or 3 days 
ago and explained to me a case that he handled in New York about 



ORGANIZED CRIME IN INTERSTATE COMMERCE 41 

15 years ago. A man was arrested named Little, and he was prosecuted 
as a turf tipster for use of the mails to defraud. This man had ap- 
parently never been arrested before, for that offense at least, and he 
asked the inspector what was the maximum prison sentence that he 
coujd get. The inspector answered and said 5 years on each of the 
four counts, which would be 20 years. He said, "I have made up my 
mind already that if I have to serve those 20 years by that time I will 
have really worked out a scheme and I will go to work then." 

This inspector was transferred to the Los Angeles division at his 
own request a few years ago, and he got another case of that kind, and 
he ran into the same man using an assumed name, a fictitious name, and 
operating in substantially the same way. They recognized each 
other. This man admitted that he was still trying to make money the 
same way he had been when he was convicted. This man actually 
served about two-thirds of a year and a day sentence that he was given 
in New York back about 15 years ago. 

The Chairman. Mr. Garner, I am not being critical, or course, but 
from the viewpoint of preventing mail frauds and violations of the 
postal statutes, do you feel that more severe sentences would be helpful 
in your work and also would be a protection to the public ? 

Sir. Garner. You mean to revise the laws so that the penalty would 
be greater ? Is that your thought ? 

The Chairman. Yes, sir ; that is what I mean. 

Mr. Garner. I am fearful that that might be a deterrent the other 
way. I am like you; I don't want to be critical of any judge or any 
court. If a judge is inclined to be lenient and the penalty is greater, 
it would seem to me that he would be inclined to give more suspended 
sentences if the minimum penalty were greater than it is now. 

The Chairman. When a matter is presented to the district court or 
to a State court, does the district attorney or the solicitor's office of 
the Post Office Department give the judge the benefit of the full 
record as known of the defendant? 

Mr. Garner. The post office inspector writes a report to United 
States District Attorney where it is a Federal offense and gives 
him all the facts that he has obtained in his investigation, and usually 
they are very complete. 

The Chairman. You may proceed with anything else you would 
like to state. 

Mr. Garner. I have several similar examples of cases that post 
office inspectors have investigated. One of these would perhaps be 
interesting to the committee. It has to do with bookmaking activities 
involving the mailing of circulars relating to bets on horse races and 
baseball games, mailing of receipts and acknowledgement of debts and 
otherwise using the mails in conducting the business. It has been 
reported that C. J. Rich & Co., of East St. Louis, 111., handled up to 
$500,000 a day in bets. That is our understanding. Following in- 
vestigation in 1949 by post office inspectors, the defendants in this 
company and a company known as the Melba Co. were indicted for 
violation of the postal lottery statutes and conspiracy to do so. The 
defendants filed a motion to dismiss the indictment as being insufficient 
in form and substance. The court held that the form of the indictment 
was sufficient, but that the acts cited were not considered to violate the 
postal fraud statutes, contending that skill is involved in picking 



42 ORGANIZED CRIME EST INTERSTATE COMMERCE. 

winners, especially in horse races. The sitting judge was Judge Wham. 
He termed the operation of these firms more evil and much more per- 
nicious than lotteries which are prohibited from the mails, but sug- 
gested that Congress would have to broaden the laws to cover such 
operations. The indictments were dismissed. 

The. Chairman. Let us go into that matter a little further. T"his 
is the same C. J. Rich & Co. whose books were subpenaed some time ago 
by State authorities upon the suggestion, I believe, of Governor Dris- 
coll, of New Jersey. These people apparently continued to operate 
after the 1949 case ; is that correct ? 

Mr. Garner. Yes, sir ; that is correct. 

The Chairman. What was the name of the district judge in St. 
Louis ? 

Mr. Garner. Judge Wham. I don't have his given name. 

The Chairman. He held that even though the allegation showed 
that they were laying off bets or engaged in the bookmaking business 
to the extent of $500,000 a day, in which they used the mails to send 
out information about who was going to win horse races, and to re- 
ceive bets, that was not a violation of the lottery statute ? 

Mr. Garner. That was his ruling ; yes, sir. 

The Chairman. Some skill was used in diagnosing who was going 
to win ? 

Mr. Garner. That is correct, 

The Chairman. Did the Post Office Department or the district 
attorney appeal from Judge Wham's decision, or was it not an 
appealable case ? 

Mr. Garner. Yes; it was, but it was decided by the United States 
attorney not to pursue the case further. 

The Chairman. Was that with the concurrence of the solicitor's 
office in the Post Office Department? 

Mr. Garner. No. They would not have had anything to do with 
that, Mr. Chairman. The Department of Justice, the Attorney Gen- 
eral, perhaps, would have been the only one who could have directed 
the United States attorney to proceed further, and I feel quite cer- 
tain that the advice of the Attorney General was not requested in 
that case. 

The Chairman. You mean the district attorney took the action 
on his own. Who is the district attorney ? 

Mr. Garner. I don't recall his name, and I do not have it before 
me. It was the district attorney in East St. Louis, representing the 
district. 

(Mr. Garner subsequently submitted a correction to his testimony 
in a letter to the committee, dated July 7, 1950. The letter is herewith 
incorporated into the record.) 

July 7, 1950. 
Hon. Estes Kefauver, 

Chairman, Senate Special Crime Investigating Committee, 

United States Senate. 
Dear Mr. Chairman : Reference is made to my testimony before your com- 
mittee on June 23 with respect to the decision of Judge F. L. Wham, East St. 
Louis, 111., that the operations of Charles J. Rich et al. and Frank Camarrata 
et al. involving use of the mails in bookmaking schemes did not violate the 
postal lottery statutes. 

In response to a question whether the United States attorney involved had 
appealed the decision, I informed the committee that he had not. Since that 



ORGANIZED CRIME IN INTERSTATE COMMERCE 43 

time it has come to my attention that the United States attorney had submitted 
the question of appeal to his superiors in Washington, so that final decision in 
the matter was not made by the United States attorney. 
I believed I should clarify this point with you. 
Sincerely yours, 

C. C. Garner, 
Chief Inspector. 

The Chairman. The Melba Co. operated in the same manner ; did 
it not ? 

Mr. Garner. Yes, sir ; that is my understanding. 

The Chairman. These operators, as I recall, send out informa- 
tion through the mail to people so they can place bets on horses, and 
they will take the bets and they will remit the proceeds through the 
mail. 

Mr. Garner. That is my understanding, either through the 
mails 

The Chairman. Or through Western Union. 

Mr. Garner. Or through the telegraph offices. 

The Chairman. Does the solicitor's office of the Post Office Depart- 
ment agree that under the present law 7 that interpretation is correct? 

Mr. Garner. The Solicitor wouldn't have anything to do with 
+li at, Mr. Chairman. We, as a general rule, do not feel that we should 
press these cases because it is not within our jurisdiction to make a 
determination. We obtain the facts. 

The Chairman. Yes ; I know you are not charged with the over-all 
duty of law enforcement. 

Mr. Garner. That is correct. We make the investigations. 

The Chairman. It is an inspection service to get the facts and 
present the facts, and from that point on it is the duty of the district 
attorney. 

Mr. Garner. Yes, sir. 

The Chairman. Senator Hunt, do you have any questions? 

Senator Hunt. Is this operation in East St. Louis where you were 
unsuccessful in getting convictions still active ? 

Mr. Garner. No, sir. So far as we are concerned, that case is 
closed. 

Senator Hunt. I do not mean the case, but is the information still 
being sent through the mail and is the operation still being carried on? 

Mr. Garner. I am sure it must be. I have not checked on that since 
this case was closed, but I feel certain that they have not changed 
their methods of operation. 

Senator Hunt. Do you consider the operations of Mr. Carroll, of 
St. Louis, the betting commissioner, a recognized betting authority in 
the United States, to be legal ? 

Mr. Garner. I am not familiar with those, Senator Hunt. I cannot 
answ r er that question. 

Seantor Hunt. Whose responsibility is it to look further into these 
operations in East St. Louis, which may still be actively carried on? 

Mr. Garner. We don't get into these cases unless we get complaints, 
and we don't know about them until w T e get complaints, as a general 
rule. For instance, in lottery cases where many thousands, perhaps 
many millions of dollars have been filched from the public, in many 
cases we may get one complaint. The average person will not com- 
plain when he spends one dollar for a lottery ticket. Of course, he 



44 ORGANIZED CRIME IN INTERSTATE COMMERCE 

does not know whether they are legitimate lotteries. He is hopeful 
that they are. If he doesn't hear any more about it, he just forgets it, 
it seems. We don't get many complaints of that kind. 

Senator Hunt. Do you ever initiate investigations on your own 
without waiting for a complaint? 

Mr. Garner. We do, yes. If we find that the mails are being used 
in violation of the law, if that comes to our attention, even without a 
complaint, we of course will make the investigation. 

The Chairman. Mr. Garner, in these lay-off bets where, for instance, 
the bookie may lay off a bet with Frank Erickson, or used to, anyway, 
either in New York or in New Jersey : those clearances and the state- 
ments of account do go through the mails ; do they not ? 

Mr. Garner. It is- very likely that they would. 

The Chairman. Could that be conceived to be a violation of any 
postal statute? 

Mr. Garner. No, Mr. Chairman ; I don't believe that that would be 
a violation of the postal laws. 

Mr. Halley. You do not want to go clearly on record without 
knowing whether or not in connection with that use of the mails 
there might be a fraud on someone ; do you ? 

Mr. Garner. From the question, I do not see how there can be, but 
I certainly would not go on record as saying definitely that there is 
not unless there is some evidence of fraudulent use of the mails or 
something that is prohibited in the mails. 

Mr. Halley. Let us take the thing piece by piece. As Senator 
Kefauver pointed out, if a bookie, say in Palm Beach, Fla., mails a 
check to a lay-off bettor in Los Angeles, Calif., that is a mailing, isn't 
it? 

Mr. Garner. Yes; that is mailing. That is using the mails. 

Mr. Halley. If some place in connection with the use of that mail 
those two people are defrauding anyone at all and have devised a 
scheme to defraud anyone, you would have mail fraud under section 
338 of title 18, would you not? 

Mr. Garner. There is a possibility. I would not want to answer 
that as positively being a mail fraud or not. 

Mr. Halley. In other words, it is something that is at least subject 
to investigation? 

Mr. Garner. Yes; I would say so. 

Mr. Halley. Thank you. 

The Chairman. But your point was that if a bookie took the bet 
and laid off a part of it with someone in another State and there were 
a mailing of checks back and forth in connection with that bet, in the 
absence of some particular scheme to defraud other than just the mere 
betting, that would not be something that you would go into. 

Mr. Garner. No, sir ; we would not go into that under those circum- 
stances, particularly in view of Judge Wham's decision. 

Mr. Halley. Suppose one of the purposes of this lay-off betting was 
to defraud the State of the taxes on the bet ; do you think you might 
work out a mail fraud then '. 

Mr. Garner. I think we should look into it if that is happening 
and we get the information. 

Mr. Halley. First, they are taxable in most States where pari- 
mutuel betting is permitted, are they not? 



ORGANIZED CRIME IN INTERSTATE COMMERCE 45 

Mr. Garner. I am sorry. I did not hear your question. 

Mr. Halley. Bets at race tracks are taxable, are they not ? 

Mr. Garner. I understand that where they have pari-mutuel ma- 
chines in operation, the State exacts a certain percentage as taxes. 

Mr. Halley. And the revenues are very substantial, are they not? 

Mr. Garner. That is my understanding. 

Mr. Halley. If big bets were placed in such a way that the State 
did not get the tax, there could conceivably be a scheme to defraud the 
State of its taxes ; could there not? 

Mr. Garner. There would seem to be, but there again, I think, the 
United States attorney would have to make the decision as to whether 
that would be a violation. 

Mr. Halley. It is something worth looking into in any event, is it 
not ? 

Mr. Garner. Yes ; we could look into that. 

The Chairman. It is only your duty to get the facts about them. 

Mr. Garner. That is correct, sir. 

The Chairman. I think I might say, Mr. Garner, that the committee 
ran into this situation, for example, in the State of Florida at some of 
the tracks and this may be prevalent at other tracks, but we have not 
run into it. Where they do have a pari-mutuel and the State, of 
course, gets a tax on the bets that go through the pari-mutuel ma- 
chines, some of the gamblers would go in to the race tracks, to a stable, 
and instead of letting the clients go in and place their bets through 
the machine, the bookie would just handle it out of his own pocket 
with the people, without placing the money through the pari-mutuel 
machines at all. Naturally on the odds posted on the board the bookie 
would get the money that otherwise would have gone for State tax 
and expenses. 

There was testimony that part of the consideration was to enable 
him to get the money that otherwise would go' to the State for the 
purpose of paying tax. In connection with those operations we did 
find where books of accounts, check books and checks, and interstate 
facilities generally were used. That might be something for some- 
body to look into. 

Mr. Garner. I think we could look into it. You might have to prove 
intent to commit fraud there because that is part of the law, to devise 
a scheme with intent to defraud. It is something that we could cer- 
tainly investigate. 

The Chairman. The person who would be doing this would be get- 
ting the track odds and he also would be getting the odds that other- 
wise would go to the State in the form of taxes. 

I would be glad if you would proceed on with any other types 
of cases you may have. The committee is very much interested in 
them, Mr. Garner. 

Mr. Garner. I have other cases with me, but they are similar to 
those that I have already described. Perhaps this would be an inter- 
esting one. 

Arthur McKell and George J. Tennant, citizens of Australia, flew 
to this country in 1947 allegedly to sell books on the southwest Pacific 
to former Gl's in this country, those who were in Australia. McKell 
traveled about contacting veterans' organizations for list of members 
who had served in the Pacific. Tennant, claiming to be a journalist 

C8958 — 50 — Dt. 2 4 



46 ORGANIZED CRIME EST INTERSTATE COMMERCE 

interested in matters regarding the American worker, contacted trade- 
unions for lists of members. Lists obtained were mailed to Australia 
where some 60,000 letters were prepared and sent to the names listed, 
soliciting the purchase of lottery tickets and also asking each recipient 
to act as an agent for friends and associates. Inspectors soon became 
aware of the scheme and exchange post offices were alerted to the ap- 
pearance of the solicitations. These were caught and stamped "sup- 
posed to contain matter prohibited importation by the PL&R," 
postal laws and regulations, which resulted in postmasters securing 
custody of the letter after delivery to the addressee. Of course, as you 
know, we do not open first-class mail, but when a letter supposed to 
contain lottery material, for instance, is held at the post office, the 
addressee is asked to call there and open the letter. If it does con- 
tain lottery material, it is turned over to the postmaster. That is, on 
foreign mail coming in. 

The Chairman. Do you not do that on domestic mail ? 

Mr. Garner. So far as I know, that has never been done. I do not 
believe the law would permit us to do that. We might do it, we might 
request it, but the patron could refuse to turn it over, and I am sure 
that he would be within his rights. 

Approximately 150 fraud orders were issued against the various 
addresses in Australia given for returns, the return addresses used on 
this mail. This action was very effective and soon put an end to the 
solicitations.- 

Within a few weeks after their arrival McKell and Tennant were 
arrested, prosecuted, and convicted for violation of the postal lottery 
statutes. They were permitted to leave the United States or serve a 
term in the penitentiary, and they left the United States. 

The Chairman. They did not serve any time ? 

Mr. Garner. No, sir ; they didn't serve any time. 

The Chairman. Do you have any other similar cases that you could 
put in the record, Mr. Garner? 

Mr. Garner. Yes, sir ; I have two or three more here. 

The Chairman. We might have some other questions, and if they 
are similar, we would appreciate it very much if you just put them in 
the record. 

Mr. Garner. All right, sir. 

(The other cases referred to were supplied by Mr. Garner and are 
included, as exhibit No. 11, in the appendix on p. 249.) 

The Chairman. As I understand it, you have approximately 800 
inspectors in the postal service. 

Mr. Garner. We are limited by law to 815 at the present time. 

The Chairman. Postal inspectors have a splendid reputation for 
efficiency in their work. 

Mr. Garner. Thank you, sir. 

The Chairman. They have made 150,000 investigations in 1949? 

Mr. Garner. That is correct. 

The Chairman. Something over 11,000 were under the so-called 
fraud statutes. 

Mr. Garner. Yes, sir. Many of those are cases that were jacketed 
on one or two complaints, the failure of a concern to send merchandise 
or to refund money. 

The Chairman. What percentage of the investigations were in con- 
nection with the statute ? 



ORGANIZED CRIME IN INTERSTATE COMMERCE 47 

Mr. Garner. I don't have the percentage in front of me, but I can 
get that information for the record. 

The Chairman. If it is not too much trouble, will you supply 
that? 

(Mr. Garner subsequently informed the committee that 7.7 percent 
of all postal investigations were in connection with the fraud statutes.) 

The Chairman. The committee's attention has been called to vari- 
ous kinds of comic books, crime books, which are a big business in the 
country today. The comic books usually seem to be all right. Some 
of the crime books do not seem to be particularly obscene. But there 
are certain of these crime books that encourage juveniles to try to com- 
mit a more perfect crime, and undoubtedly have quite an effect on 
juvenile delinquency. It has been so stated by Mr. J. Edgar Hoover 
in some of his pamphlets and speeches. Also investigation has been 
made of acutal cases where a juvenile tried to commit this offense or 
that offense, and said he got that idea out of a crime story. 

Mr. Garner. That is correct. 

The Chairman. My personal opinion is that one of the substantial 
reasons for the great amount of juvenile delinquency today is that 
children are reading this kind of literature rather than something 
that is more wholesome. Do the postal regulations put any obstacle 
in the way of sending these bad types of crime books through the 
mail ? 

Mr. Garner. No, sir ; we do not try to police that at all. There is 
no law to prohibit the sending of that type of material through the 
mail. 

The Chairman. I believe Canada does have a law on that. 

Mr. Garner. Canada does. It was passed last December. 

The Chairman. I think the State of California has attempted to 
enact some kind of law governing intrastate commerce. 

Mr. Garner. Yes, sir, I understand they have, and I understand 
some cities have banned the sale of certain of those comic books. 

The Chairman. You may be familiar with the activities of Dr. 
Wertham, famous criminologist and juvenile psychiatrist in New 
York, who has made a very extensive study of the results and effects 
of some of these crime books, and he found the result I have stated. 

Would it be a very difficult job, if the law were changed so as to 
try to differentiate as to the type of crime books that are sent through 
the mail? Would that be a pretty sizable job for the Post Office 
Department ? 

Mr. Garner. I think it would be a most difficult job to attempt to 
decide, and there again I suppose the Solicitor would have to make 
those decisions. That would not be an easy task. Unless the States 
and various cities suppressed them at the same time, I. do not believe 
that would be a very effective way of eliminating them. 

The Chairman. Of course if they are eliminated in the mails, they 
could be sent by express, I suppose. 

Mr. Garner. By almost any other means. I doubt that very many 
of them are now sent to the news dealers by mail. I think most of 
those go by freight or some other way. 

The Chairman. Of course you would have the same problem with 
clearly obscene literature, would you not ? 

Mr. Garner. Yes ; we have that problem. 



48 ORGANIZED CRIME IK INTERSTATE COMMERCE 

The Chairman. Does it ever reach the point where a scratch sheet 
sent through the mail becomes a mail fraud? Have you any cases 
of that sort? 

Mr. Garner. I don't believe that we have, Mr. Chairman. I do not 
recall any cases of that kind. 

The Chairman. In other words, Armstrong's scratch sheet, and 
Pioneer News Service, or the Daily Racing Form 

Mr. Garner. I don't believe there is a violation of the law in con- 
nection with the mailing of those. 

The Chairman. Do you have any offenses or much trouble with 
efforts to send narcotics through the mails ? 

Mr. Garner. We don't know of that. It is very possible that nar- 
cotics are sent through the mails, and we hear of cases that the nar- 
cotics bureau has solved wherein the mails have been used in concealing 
the narcotics in various things, but I don't know of any actual cases 
at the moment that I could discuss. 

The Chairman. Where lottery tickets are sent by first-class mail, 
how do the inspectors get convictions if they can never open first- 
class mail ? 

Mr. Garner. The information is usually obtained by someone in- 
forming us that a certain concern is operating and by questioning the 
people whose names are on mailing lists that we might find, we get 
the information. We do not open any first-class mail except in the 
dead-letter office, of course, where there is no way to deliver a letter 
and there is no return card on it or the return card is incorrect. The 
mail is opened in the dead letter office solely for the purposes of at- 
tempting to deliver it. 

The Chairman. Senator Hunt, do you have any questions? 

Senator Hunt. No. 

Mr. Halley. I have just one more. In the case of lotteries there 
are a great many lotteries where you try to stop something by a cease 
and desist order, is that correct? 

Mr. Garner. Oh, yes; fraud orders; yes. 

Mr. Halley. Have you found in connection with various types of 
lotteries any important expression of public opinion reflecting a pos- 
sible difference of opinion as to whether you should or should not 
stop these lotteries from going through the mails ? 

Mr. Garner. That would be difficult for me to answer unless you 
might put it this way : As I said before, a concern may be operating 
a fraudulent lottery that we find out about and investigate, and we 
may have but one or two complaints from all of the many hundreds 
and thousands, in many cases, who have defrauded. We just don't 
get complaints. 

Mr. Halley. I am talking about things like church bingo games 
and drawings "for prizes and fishing contests. Do you try to stop them, 
too? 

Mr. Garner. It is not that we try to stop them. We just try to in- 
terpret the law. When I say "we," the Solicitor for the Post Office 
Department interprets the law for the Postmaster General. 

Mr. Halley. Is there any opinion that you should not interfere 
with that type of operation even though technically it might be a 
lottery? 

Mr. Garner. Yes ; I have seen publicity which would indicate that 
the general public is unhappy when we issue a fraud order against a 



ORGANIZED CRIME IN INTERSTATE COMMERCE 49 

charitable institution that may be well-meaning but still violating the 
law in operating a gift enterprise or a lottery. 

Mr. H alley. Thank you. 

The Chairman. Mr. Garner, I think that some times even Members 
of Congress come down to complain about the postal inspectors stop- 
ping some charitable lottery or a lottery conducted by some organiza- 
tion for a good purpose. 

Mr. Garner, we appreciate very much your coming to help the 
committee. 

Mr. Garner. Thank you. 

The Chairman. We are hopeful that from time to time we will have 
an opportunity to go into some of the postal statutes with you. If any 
suggestions come to you or information that you think this committee 
would be interested in, I know we can count on your cooperation. 

Mr. Garner. I will be very happy to cooperate with you in every 
way. 

Senator Hunt. Mr. Chairman, may I ask a question of the Inspec- 
tor? It is our intention to suggest some legislation to help clean up 
this situation over the United States ; and, if in your work you think 
that some legislation should be incorporated in our report, we would 
be glad to have you make the suggestion . 

Mr. Garner. I will be glad to do so, Senator Hunt. 

The Chairman. In that connection, Mr. Garner, we have already 
run across some matters and will undoubtedly have evidence of others 
of similar nature that I know will be of interest to you and your 
department. 

Mr. Garner. Thank you, sir. 

TESTIMONY OF JAMES V. BENNETT, DIRECTOR, BUREAU OE 
PRISONS, ACCOMPANIED BY H. G. MOELLER, SUPERVISOR, JUVE- 
NILE BRANCH, BUREAU OF PRISONS, DEPARTMENT OF JUSTICE 

The Chairman. Mr. Bennett, will you raise your right hand. Do 
you solemnly swear that the information you give this committee will 
be the whole truth and nothing but the truth, so help you God ? 

Mr. Bennett. I do. 

The Chairman. Mr. James V. Bennett, Director of the Bureau of 
Prisons, and also secretary of the criminal-law section of the American 
Bar Association, is our second witness today. Mr. Bennett, in con- 
ferences with the chairman and with members of this committee, has 
been very helpful and has given us ideas and suggestions. We know 
of his interest in our problem both as Director of the Bureau of Pris- 
ons and secretary of the criminal-law section of the American Bar 
Association. Mr. Bennett over a period of many years has been a 
member of various committees dealing with crime, organized and 
otherwise. 

The committee wishes first to express its appreciation for your co- 
operation, Mr. Bennett. We would be very glad to have your obser- 
vations on the work-of this committee as related to the two positions 
that you hold and which you are representing here today. 

First, Mr. Bennett, when did you become the Director of the Bureau 
of Prisons? 

Mr. Bennett. Twelve years ago, Mr. Chairman. 



50 ORGANIZED CRIME EN INTERSTATE COMMERCE 

The Chairman. Prior to that, what did you do ? 

Mr. Bennett. I was assistant director prior to that time, since 1930. 
Prior to that time I was associated with the United States Bureau of 
Efficiency. 

The Chairman. Will you give us generally your background in 
criminal work and what you have had to do with the United States 
prisons ? In other words, your qualifications. 

Mr. Bennett. Mr. Chairman, as I indicated, I have been connected 
with the prison service since I originally made an investigation or was 
associated with the congressional investigation of the Federal Prison 
system back in 1928 and 1929. Subsequently, I became Assistant Di- 
rector of the Federal Bureau of Prisons and later its Director. I am a 
member of the bar, of the American Bar Association, and various 
associations connected with law enforcement and legal matters. 

The Chairman. Mr. Bennett, we know that you can tell us about 
case histories of certain criminals, whether they have been given such 
sentences as to keep them out of circulation, the recurrence of different 
types of crimes, and the general background of your recommendations. 

Mr. Bennett. Mr. Chairman, I had a brief prepared statement here, 
but I would like, with the permission of the committee, merely to sub- 
mit it for the record and use it as notes. May I say first of all that I 
am very pleased to be here and I pledge you all of my help and coopera- 
tion, as the Attorney General, as you know, wanted us to do, both in 
my official and in my private capacity. 

The Chairman. We appreciate that. Your statement will be made 
a part of the record at this point. 

(The statement referred to follows:) 

Statement Before Senate Committee on Investigation of Organized Crime 
by James V. Bennett, Director, Bureau of Prisons ; Secretary, Criminal 
Law Section of American Bar Association 

Mr. Chairman and gentlemen, I am very happy to respond to yonr request to be 
here because, first of all, it furnished me an opportunity to tell you that, as the 
Attorney General has directed, we in the Prison Bureau will be glad to cooperate 
with you in every way possible. I shall be happy to do this incidentally in my 
official capacity as Director of the Bureau of Prisons or in my private capacity 
as secretary of the section of criminal law of the American Bar Association. 

As an indication of how we might be helpful to your committee, I might tell 
you that I come in contact with a great many different types of Federal offenders. 
A large proportion of these are ordinary liquor-law violators, check forgers, auto- 
mobile thieves, income-tax violators, and others of similar categories who hardly 
can be considered members of any group of organized criminals. They are, 
so to speak, just run-of-the-mine offenders. In addition, of course, sOine prisoners 
are committed to our custody who are alleged to be members of organized groups 
of criminals. Many of those we receive of this type are narcotic-law violators, 
income-tax violators, and some are violators of the auto-theft statute. Over the 
years there have been quite a few of these, ranging from Al Capone to others of 
more recent notoriety. 

In looking over some of the case histories of those who have probably been 
members of organized groups, I've been surprised at the large number who gradu- 
ated into this business from short prison terms followed by minor roles in the 
gangs. It is clear that some men who leave prison prove easy prey for organized 
groups. Many of them have lost their respectability, so to speak, do not fear 
further disgrace, and thus the deterrents which serve to keep the ordinary person 
from joining such organized groups do not apply in their cases. Moreover, 
they are sometimes quite bitter and want to get square with society. And then 
there are all of the other motives and incentives to easy money, adventure, and 
the like, that make the ex-prisoner especially an easy recruit for the organized 



ORGANIZED CRIME IN INTERSTATE COMMERCE 51 

gang looking for a minor henchman, enforcer, strong-arm man, runner or what 
not. 

.Let me give you an instance of the kind of case I have in mind. This man 
spent his childhood in a city neighborhood where commercial vice flourished. 
His mother died when he was 4 years old and he quit school when he was 15 
to go to work. Exposed to all kinds of delinquency he was committed to an 
institution at 17 because of a theft. 

Following his discharge he had trouble finding legitimate employment. But 
with his many delinquent contacts, he soon was offered a job as a bartender 
and bouncer in a speakeasy which he accepted. He had no reputation to lose 
by working in a shady occupation. A short time later he joined up with a pin- 
ball and slot-machine organization. In this job he became acquainted with pro- 
fessional gamblers, bootleggers, and others involved in organized crime. After 
a few years during which he made easy money, he became a "big time operator" 
by organizing a distributing outlet for a large counterfeit ring. At the age of 23 
he was convicted on counterfeiting charges and sentenced to 10 years. 

Another example of this process is a boy who was raised in a slum neighbor- 
hood in New York City and was involved in occasional delinquencies during his 
teens. At the age of 21 he was committed to a Federal reformatory for passing 
counterfeit money. He was released during the depression period when employ- 
ment was most difficult to find particularly for a person with a criminal record. 
Soon after his release he resumed his relationships with delinquents and rather 
readily found work with a bookmaker. 

In this occupation he lived primarily with persons who were chronic law- 
breakers and in order to add to his income he began to peddle narcotics on the 
side. He was arrested for this and given a sentence for violation of the Harri- 
son Narcotic Act. 

Once again he returned to live and work among his antisocial friends, and sub- 
sequently he became involved deeply in professional criminality of the most 
vicious sort, hijacking and racketeering. He is now serving a long sentence in a 
Federal penitentiary for stealing an interstate shipment. 

His case well illustrates the connection between organized illicit gambling, 
the narcotics racket, and other forms of organized crime. 

STATISTICS 

Perhaps some statistical information on the number, types, and sentences of 
Federal prisoners would be of help to the committee. Here is a table showing 
the number of Federal prisoners received from courts and the general types of 
crimes they have committed. It shows, as you will note, the number of commit- 
ments for various types of Federal prisoners over the last 13 years. One of the 
significant trends has been the decrease in the number of prisoners committed to 
us for violation of liquor laws. In 1937 we received 12,238 liquor-law violators, 
and in 1949 we received only 2,035. Another trend which should be noted is that 
during the war years the commitments for ordinary types of law violations 
decreased and that several of those are now again on the upward swing. For 
example, in 1943 we received 1,241 violators of the narcotic-drug laws, whereas 
this past year we received 1,503. 

You might also be interested in the percentage of men sent to Federal prisons 
who have previously been convicted. You see from this chart that over 60 per- 
cent of those received have previously been convicted of at least one prior 
offense. That gives you some idea of how difficult it is for a man with a prior 
record to rehabilitate himself. 

You will note that so-called white-collar crimes, such as income-tax violations, 
embezzlement, and fraud, are among those which are least apt to be repeated. 
It is significant, too, I think, that 67.7 percent of the violators of the Narcotic 
Drug Act have served previous prison sentences. Another type of offense which 
tends to be committed by people with prior records is the stealing of automobiles. 
You will note that 73 percent of the men we received for violating the National 
Motor Vehicle Theft Act had previous criminal records. If we could only find 
some way to prevent a known offender from again becoming a law violator we 
would make a tremendous contribution to law enforcement and reduction of 
crime. I may have some suggestions for the committee to this end at a later 
date. 

I have no doubt also that the committee may be interested in the average 
length of sentences meted out for various types of Federal crimes, and so I 
am submitting a table showing sentences received for certain types of offenses. 



52 ORGANIZED CRIME IN INTERSTATE COMMERCE 

These are broken down by judicial districts and give some general ideas of sen- 
tencing policies of Federal courts. You will note considerable variation, some 
of which can be easily explained by local conditions and situations. 

I should also like to file with the committee a table showing the number of 
prisoners in State institutions. This shows that the number of prisoners at 
present in State and Federal institutions decreased from 182,000 in 1939 to a low 
point of about 134,000 in 1944, and increased to 157,470 in 1948. We estimate 
that as of today there are approximately 165,000 prisoners in all State and 
Federal institutions. This table is both a solace and a warning. It shows that 
despite the increase in the general population since 1939, the number of men 
actually in prison is less than it was at the end of that year. There is some 
comfort, of course, in that. But recent trends also warns us that there has 
been a steady increase in the last 5 or 6 years. 

But I want to make it clear that none of these statistics is of much help in 
determining the extent of organized crime. That is partially because the com- 
pilation of truly comparable crime statistics is an extremely difficult, if not 
impossible, job. More importantly, however, men arrested or sent to prison 
for engaging in gangster activities or some sort of organized crime are convicted 
for offenses which really give no true indication of the character of the offense 
or the offender. For example, we had in one of our institutions a notorious col- 
lector and pay-off man for one of the syndicates who was actually sent to prison 
for violating the Selective Service Act. He was engaging in gambling rackets 
for years, was a stick-up man and pistol toter who had been arrested previously 
only for vagrancy and disorderly conduct and had been discharged both times. 

The facts about organized crime, therefore, will have to be obtained through 
making spot surveys and special studies. 

SPECIAL STUDIES 

There is, as I am sure you already realize, much unexplored territory in the 
field of organized crime, as well as in broader fields dealing with the prevention 
and control of all forms of crime. In thinking this over and some of the aspects 
of the problems on which further information is needed, it occurred to me that 
you might wish to undertake : 

1. A study of the methods used by gang leaders to recruit followers, organize 
their activities and maintain control. How does the racketeer enforce his orders, 
where does he recruit his agents, do his methods fall into any common pattern, 
why are certain industries selected as in need of so-called protection, etc.? 

Such a study to be made by an investigator through obtaining opinions of 
police officials, newspapers, case workers, etc. Also to include a study of 
such activities in a particular community or area. 

2. A detailed study of the extent and social implications of all forms of gambling 
with special emphasis on horse racing. 

To cover the number of tracks, the amounts wagered, the tax revenue, the 
characteristics of the hangers-on and touts, the audience attracted, the 
psychological motivation of those who gamble, the supervision and control 
of the operators, methods of cheating and fixing races and gambling devices, 
etc., etc. To be done by a committee of sportsmen, race-track operators, etc., 
under leadership of an outstanding sportsman. 

3. A study of the number, size, profits, and operational and promotion methods 
of businesses engaged in producing, manufacturing, and distributing gambling 
devices and paraphernalia including slot machines, punchboards, roulette tables, 
policy tickets, etc. 

4. Studies of each important field of crime control to determine how each area 
can be improved, with special reference to Nation-wide problems and perspectives. 
To include : 

(a) Probation and parole methods and extent to which Federal Govern- 
ment can set standards, aid individual localities, and perhaps cooperate in 
improving methods and standards. 

(b) Jail, detention, and prison methods to determine how these may be 
improved and rehabilitation of offenders promoted and the significance of 
viewing all of these as a Nation-wide problem and doing something about 
each on a broad basis. 

5. A study of judicial and legal attacks upon crime, including: 

(a) Methods of modernizing of rules and judicial procedure. 

(b) Codification and study of criminal codes similar to the Indiana plan. 

(c) Public defender acts. 

( d ) Sentencing methods and practices. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 53 

All to be aimed at how the Federal Government can cooperate in a Nation-wide 
effort to better law-enforcement methods and the administration of justice. 

6. Some studies of influence of comics, movies, radio, and press upon crime. 
To be made by obtaining cooperation of some private foundations who will 
engage research technicians, public opinion analysts, etc. 

These suggested special studies I realize will, in some instances, be rather diffi- 
cult and expensive to undertake, but I believe the committee can obtain the 
cooperation of private groups and foundations to conduct certain of the studies. 
A group such as the Social Science Research Council, the Bureau of Applied Social 
Research of Columbia University, the Institute of Human Relations at Yale, and 
the sociological and research departments of several other universities, could be 
called upon. So could other associations and agencies working in allied fields. 
I am sure that the various bar associations, including the section of criminal law 
of the American Bar Association, would cooperate to the extent of their resources. 
Our section, for instance, is studying at the suggestion of the chairman, Mr. 
Arthur Freund of St. Louis, the feasibility of a special Federal excise tax on the 
profits of gambling activities operated in violation of State laws. Also, we are 
studying the feasibility of drafting an amendment to the internal revenue laws 
requiring the various collectors to publish the names of those paying taxes on 
slot machines wherever the possession or operation of these are in violation of 
State laws. Another proposal is that the penalties for operating lotteries, policy 
games, making book, setting up gambling tables, and so forth, be studied with 
some recommendation as to the severity of these penalties, particularly limita- 
tions on the amount of fines which can be levied. 

Other specific suggestions, including a proposal to study the problem of how 
genuinely comparable crime statistics on a city-to-city or region-to-region basis 
may be secured will be presented to the committee at a later date. 

May I repeat in conclusion that I will be very happy to comply with the wishes 
of the Attorney General and cooperate with the committee and its able counsel 
and staff in every way possible. 

Mr, Bennett. It is true, Mr. Chairman, that I do come in contact 
with a lot of men who have come in conflict with the law, and a few 
of these of course are young men and older men who are engaged in 
what I would define as organized crime. It is surprising how large 
a number of those people are young men who first of all commit some 
minor offense and then subsequently fall easy prey for the groups of 
organized criminals. These are young men who, for one reason or 
another, feel they can't find a job or may be bitter toward society or are 
looking for money or adventure, and thus they easily play the role, first 
of all, of a minor henchman, and then perhaps as a strong-arm man 
and enforcer, and finally perhaps they get to the top of the crowd. 
That is the life history of most of these people. 

Take, for instance, one of my cases that I know of rather intimately, 
a young man who was brought up in a section where commercial vice 
flourished, and he was exposed to all kinds of delinquency. He went 
to prison on a minor theft charge, and then, following this, he got 
acquainted w 7 ith men who recruited him as a bouncer in a speakeasy. 
Then he became associated with a pinball and slot-machine organiza- 
tion, and from there on he graduated to become a very important big- 
time operator. However, he was not convicted for violation of any 
statute connected with organized crime, but for a counterfeiting 
charge. 

It is a very common situation, Senator and gentlemen of the com- 
mittee, to find people in our institutions particularly who are there on 
some charge not really connected with the character of the offense for 
which they were most notorious. The various Government law- 
enforcement agencies and others have to convict these people on charges 
other than the offense where they were most dangerous to the com- 
munity. Of course, that means that frequently the statutes are such 



54 ORGANIZED CRIME IN INTERSTATE COMMERCE 

and the penalties are so limited that they cannot really get a sentence 
which is in full conformity with the nature of their offense and their 
characteristics. 

I will give you some other cases later on, Senator, if you will 
permit me and if time permits, but I would like from that point to 
show you, because I know the committee is interested, some of the 
statistical information which our Bureau gathers particularly with 
regard to sentenced prisoners. I have prepared here some data, 
Senator, that might interest you. 

The Chairman. Mr. Bennett, this information you have submitted 
to us is of great interest to the committee, and we will have this made 
a part of your statement as a part of the record in the form of exhibits. 

(The chart referred to below were marked "Exhibits Nos. 12 through 
16" and appear in the appendix on pp. 251 through 260.) 

Mr. Benxett. You notice the first table on top shows you the num- 
ber of Federal prisoners received from the courts for the past 12 years. 
(Exhibit No. 12, appendix, p. 251.) That will show you the trend and 
the number of convictions in Federal courts. There are one or two 
significant trends there that might be of interest to you. You will 
notice, for instance, that in 1937 the number of persons convicted of 
violating the liquor laws was 12,238, whereas this last fiscal year it was 
2,035. There has been a very considerable decrease in that. 

Senator Wiley. Is that a good sign or a bad sign ? 

Mr. Bex t nett. Senator. I would rather not pass on that. 

Senator Wiley. I think you would have the right to draw that con- 
clusion from your former statement. After all, are the courts and 
enforcement officers delinquent? As far as I know, they have not 
stopped drinking in this country. 

Mr. Bennett. Senator, I think that anything that tends to reduce 
the amount of crime is certainly a good thing, and I think not only 
the number of convictions for liquor-law offenses has. decreased, but. 
from my general knowledge of it, I think the amount of bootleg 
whisky being made and used is on the decrease ; yes, sir ; and I think 
that is a very good thing. 

Senator Wiley. Do the latest statistics show that? 

Mr. Bennett. Yes, sir ; I think they would bear that out. 

The Chairman. I think it might be well to point out something I 
have been told. It is due, perhaps, to not having quite so much 
money, and also maybe the increased State and Federal taxes on 
liquor. There has been some increase, at least clown in Tennessee, in 
moonshine during the last year. I am so informed by the Alcohol 
Tax Unit people at Louisville. 

Senator Wiley. I am glad you added that last statement so you 
could qualify as a witness. 

The Chairman. I think there has been quite recently some increase 
in moonshine activities, but of course that would not be reflected as 
yet in these statistics. 

Mr. Bennett. That is correct, sir. 

Another interesting trend might be in connection with the narcotic- 
drug laws. You will notice that during the war they went down to 
the low point of 1,134 cases in 1946 and in 1949 have reached 1.503. 
That is an upward trend that is the cause of a considerable amount of 
concern, I should think. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 55 

On the next table. Senator, the percentage of repeaters and the per- 
centage of recidivists will interest you, because I think it shows that 
as a whole some 60 percent of the men who are committed to Federal 
institutions have previously been convicted of some State or Federal 
offense. (Exhibit No. 13, appendix, p. 252.) 

Senator Wiley. Those folks have been paroled ? 

Mr. Bennett. That is of all types, Senator, both parolees, people 
who are on conditional release, so-called, people who have been dis- 
charged completely and again convicted. There is some variation, 
you will notice, in the type of offenders. The so-called white-collar 
crimes, for instance — that is to say, such as income tax and embezzle- 
ment and things of that sort — are the types of offense least apt to be 
repeated, whereas taking narcotic-drug offenses, for instance, 67 per- 
cent of the men who were received for violation of the narcotic-drug 
laws were previously in conflict with the law. 

Senator Wiley. How many of those were parolees? 

Mr. Bennett. I would be happy to furnish that information. I do 
not think any of them, Senator, or very few of them at least, were 
reconvicted while they were on parole. 

The Chairman. I think Senator Wiley's suggestion would be just 
to make it a matter of report to the committee. That is, if you do have 
statistics or could furnish statistics with the record of offenses by 
parolees, it would be of interest to us. 

Mr. Bennett. I will be happy to do that. 

Senator Wiley. I might say, Mr. Chairman, we know there have 
been repeated charges also that the parole system has been abused be- 
cause of political influence in many cases, resulting in sentences that 
were short, so short that individuals who were supposed to get sen- 
tences were actually out before they felt the penalty of prison life. Do 
you feel these political considerations resulting in shortening sentences 
are making a farce of prison terms and encouraging cynicism among 
our people and among the prisoners themselves ? I would like to get 
your reaction to that situation which I personally find is quite preva- 
lent throughout the country. I should think you are in a position to 
give us your own judgment on that. 

Mr. Bennett. Senator and gentlemen of the committee, I am a 
very strong advocate of the parole system generally. I feel that that 
is the safest way by which a man can be discharged from prison and 
brought back into the community. It bridges the gap between the 
prison term and the community. However, parole is just as strong 
as the people who operate it and the supervision which the parolee 
receives when he leaves the institution. It is an anomaly to say a 
fellow is on parole, release him from the institution on the under- 
standing that he will be supervised and helped, and then not help 
him. Unfortunately, there are some States and some jurisdictions 
where the parolee receives virtually no supervision after he leaves 
the institution. In other places he receives very excellent supervision. 

Senator Wiley. In that connection are the Federal prisoners re- 
ceiving appropriate psychiatric treatment or attention? 

Mr. Bennett. Yes, sir. While they are in the institution we have 
methods of giving them vocational training, academic training, work 
opportunities, and, as well, we attempt to get at the inner drives of 
the man. 

Senator Wiley. Curing the mental quirks? 



56 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Mr. Bennett. Changing and readjusting him. It is an extremely 
difficult job, as you well know, Senator, but nevertheless we are doing 
it and we are making some very interesting experiments. For in- 
stance, you mentioned psychiatry. We are utilizing in the Federal 
system the so-called group therapy method whereby, under the aus- 
pices of a psychiatrist, these people with similar characteristics and 
similar offenses are brought together and under his leadership he 
tries to get these people to discuss what were the factors which caused 
them to commit an offense. They will accept the criticism of their 
fellows where they will not accept the criticism of some other person. 

Senator Wiley. The point I was getting at there was for one serv- 
ing a sentence in prison. Do your prisons simply serve as a coop to 
hold men up — I might say there you have also spoken about the 
number of repeaters — or is there an opportunity for the prisoner ther« 
to be reconstructed, so to speak ? Is our present policy really serving 
as a preventive, or is the prison system merely keeping offenders 
within the prison walls until they can go out and repeat ? 

Mr. Bennett. Senator, if you refer to the Federal system, I think 
we are making some real progress and we are subjecting them to re- 
habilitative influences. If you are speaking of the State prisons, the 
situation is extremely spotty there, and of the approximately 150,000 
men in State reformatories today, I should say that there were at 
least two-thirds of them, Senator, or 100,000 of them, who during 
the entire course of their prison treatment do not come in contact 
with a single rehabilitative influence. That is for a lot of reasons. 

What I was trying to bring out, Senator Wiley, was that it is the 
men who have been in these institutions who fall ready prey to these 
organized groups. 

Mr. Chairman, I know your committee is interested in sentences re- 
ceived by men sent to Federal institutions for violation of various 
Federal crimes. 

Senator Hunt. Mr. Bennett, will you explore the line of thinking 
that Senator Wiley discussed briefly there? What relationship, if 
any, exists between the Federal Bureau of Prisoners and the various 
State penitentiaries? If you will pardon a personal reference, I will 
tell you why I ask that question. It was my privilege to be a mem- 
ber of the State board of pardons and parole for 11 years, 6 years 
as chairman of that board, with the sole authority to grant pardons. 
I have never heard of a single situation where there was any relation- 
ship between the Federal Bureau of Prisons and the various State 
penitentiaries, and I do not believe that there is any national associa- 
tion of wardens of penitentiaries. Is there not a great lack of co- 
ordination between the States and the Federal Government ? 

Mr. Bennett. Senator, it is true that the Federal Prison Bureau 
and the Federal laws do not authorize any official contact or advice 
with the State institutions. However, in a number of States, upon the 
request of the governor we have gone into the State and assisted them 
with various problems. Lately we have completed a survey in Dela- 
ware. We studied for Governor Caldwell the Florida prison system; 
in Louisiana, and so on. We are very limited in our funds and we can- 
not do too much of it. I think, since I believe, Senator Hunt and 
gentlemen, that this whole problem of crime is a Nation-wide problem 
and it cannot be separated into little enclaves, that some scheme 



ORGANIZED CRIME IN INTERSTATE COMMERCE 57 

whereby there could be greater working together would be very much 
worth while. 

Senator Hunt. Let me ask you to take the initiative, then. 

Mr. Bennett. Senator, I don't know. 

The Chairman. Let us follow that up. Would not this be a goou 
place for the American Bar and other associations to do some effective 
work ? 

Mr. Bennett. Yes, I think so, Senator. You realize of course there 
are certain jealousies in that regard, and it is a matter that has to be 
approached very cautiously. What happens to a man in the prisons of 
Wyoming or Alabama or Tennessee is of concern to the citizens of 
Wisconsin. If they make him into a bad man in that State, then it is 
the citizens of Wisconsin who might sufTer. 

Senator Hunt. For this reason : A man who is discharged from a 
penitentiary of Ohio, who is a citizen of California, when he is dis- 
charged tells the pardon and parole board, "I want to go home ; I want 
to go back to California.'' The prison authorities and other authorities 
in Ohio are very pleased about that, so they give him carfare to go 
back home, and that gets him out of the State. 

There exists no manual, no textbook, so to speak, with reference 
to paroles and pardons. Every case is an individual case, although of 
course thousands of them fall into a pattern and there could be drawn 
up, I should think, some sort of manual for all of the various States 
to follow in handling the discharge of prisoners. There is a great field 
of opportunity there, Mr. Bennett, that will decrease this repeater 
proposition, with which, of course, we are all so very familiar. Mr. 
Bennett, if we could have a national law that would apply to the 
States, that no prisoner could be discharged until a position or a job 
of some kind had been found for him, and that there was a continuity 
of his sentence extending into his working on that job for a period of 
6 or 8 months, something like that, so that when he leaves the peni- 
tentiary within 10 days he isn't broke again and has to go into some 
sort of skullduggery in order to exist, do you not think this great and 
vast number of repeaters would be reduced almost overnight ? 

Mr. Bennett. I am a very strong advocate, Senator, of so-called 
indeterminate sentence whereby a man can be kept under supervision 
and aided by the authorities over a considerable period. I had hoped 
that some day that movement would spread further, the same system 
that exists in California, for example, whereby the court has nothing 
to say about the amount of time a man should serve or how long he 
should be under supervision other than prescribing the maximum sen- 
tence, which I think is an excellent system and is of great aid in 
helping these men readjust in the community. It is just futile to 
give a man, as the boys in the institution express it, $5 and an "I hope 
it won't rain" suit, and turn them out in the community to fend for 
themselves. That is a serious defect. 

Senator Hunt. Mr. Bennett, would it be out of line for a member 
of this committee to make the suggestion to you to consider a project 
to start an organization of wardens throughout the United States and 
you take the lead in getting those folks together and getting them in an 
annual convention where they can talk over their problems and work 
out something uniform throughout the Nation ? 



58 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Mr. Bennett. No, sir. I appreciate the suggestion. It is true,, 
though, Senator, that there is an association of wardens, the American 
Prison Association. 

Senator Hunt. It isn't very active. 

Mr. Bennett. We held a parole conference here in Washington some 
10 or 11 years ago, and during that conference we got up, as you no- 
doubt read, Senator, this statement of principles and percepts that 
should be used in granting parole, and one of them was that there 
should be no sunset paroles, as you have described them, merely to get 
them out of the institution and get them on the adjoining States. We 
think it is a very serious mistake to push a man from one State to 
another State just to get him out of town. 

Senator, I brought with me and have filed with the committee a 
statement on the average sentences by offense and judicial districts of 
men sentenced in Federal courts. You will notice that it shows that 
the average sentence for all offenses in Federal courts is now 19 months. 
The sentence for forgery for the country as a whole is 18 months, and 
so on. The sentence for Motor Vehicle Theft Act is 25.5 months, and 
so on. I think if the committee keeps that before it, from time to time 
it will be able to refer to it and notice certain situations that may 
interest it. 

The Chairman. This has been made a part of the record as an ex- 
hibit, Mr. Bennett, (Exhibit No. 14, appendix, p. 253.) 

Mr. Bennett. I would like to file also with the committee. Senator, 
a statement showing the number of prisoners at the end of each year 
in both State and Federal prisons. (Exhibit No. 15, appendix, p. 258. 1 
If you will notice that, you will notice that it is both a solace and a 
warning that from 1939 the number of men committed to prison de- 
creased to 134,000 in 1944, but is now again on the increase up to 
157,000, the solace being of course that the number has not yet reached 
the number that were committed in 1939 despite the increase in popu- 
lation, but the warning is in the fact that they are going up very 
rapidly at the present time. 

There is one other table I would like to file with the committee, 
which is not in these figures. I have noted you have been interested in 
the number of persons sent to prison for violation of the income tax 
laws. I have taken those off for the last 5 years. It shows that in 
1944, 14 men were committed to prison. That doesn't mean the num- 
ber of convictions. That is just the men sent to prison. Fourteen 
men were convicted of violations of the income tax laws in 1944, 15 
in 1945, 51 in 1946, 43 in 1947, 103 in 1948, and 146 last year. 

(The table referred to was marked "Exhibit No. 16" and appears 
in the appendix on p. 260.) 

Mr. Bennett. These statistics that I have shown you, while they 
show you the general crime trend, for the reasons I have indicated 
don't show the actual number of men who are arrested and convicted 
for being engaged in organized crime. We had, for instance in one of 
our institutions, a notorious pay-off man, a runner for one of these 
big syndicates, who actually was sent to prison for violation of the 
Selective Service Act, and he got a minor sentence for that. And so 
it goes. It seems to me, therefore. Senator, that the facts which are all- 
important to this committee have got to be obtained through some 
special spot surveys and studies of one kind and another, which would 
be organized by the committee. 

Trying to think that over for myself, I would like to suggest for your 
consideration the fact that you might wish to undertake, for example,, 
a study of the methods used by gang leaders to recruit their followers. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 59 

how they organize their activities, how they maintain control. How 
does the racketeer, for example, enforce his orders? Where does he 
recruit his agents, and so on ? I think that is a study that is susceptible 
of being made by a number of different people, by an investigator, or it 
can be made through obtaining the opinions of police officials, news- 
paper reporters, case workers, lawyers, and others. If this committee 
undertook to do that one job alone, it would be a tremendous job, but I 
believe you might want to consider setting it up as a project and allo- 
cating it to one individual because I believe it would develop informa- 
tion of tremendous value. 

The Chairman. I am sure the committee would agree with you 
about that. Would you give us your ideas about what individuals or 
what organizations we might be able to get to become interested in 
some of these particular phases? 

Mr. Bennett. Yes, sir. There are a number of organizations in 
this country, private organizations. One of them might be the Social 
Science Research Council. Columbia University maintains a bureau 
or an institute of human relations which makes this sort of study. 
There are a number of other universities. The University of Wiscon- 
sin, for example, maintains a group of research students and research- 
ers in the universities which could make that sort of study, either in 
Wisconsin or any place else that the committee might choose. 

Another suggestion I have to make for your consideration, Mr. 
Chairman and gentlemen, is that you might care to make a detailed 
study of the extent and the social implications of all forms of gambling 
with special emphasis on horse racing. I would like to suggest that 
that sort of study cover the number of tracks, the amount of money 
wagered, the tax revenues received, the characteristics of the different 
people who play the races, the hangers-on, how they gamble, and so on. 
I would like to suggest that the committee consider having such a study 
made by organizations of race track owners themselves because they 
are extremely interested in this matter ,and I should think they could 
be asked to take charge of it and make the study. 

The Chairman. There is an association — what is the name of it, 
Mr. Bennett? 

Mr. Bennett. I think there .is a national association as well as the 
jockey clubs of the various States. 

The Chairman. That would include, I suppose, the social implica- 
tions and other kind of crimes that might be correlated. 

Mr. Bennett. That is right, how they can be of help and what the 
attitudes of the public are toward this matter; if it could be gotten 
down to small communities in a few cases, I think it would be very 
helpful to the committee as well as to the public. 

I would like to suggest also that perhaps the committee, through 
information available to it, could put out some kind of study on the 
number, size, profits, operational, and promotional methods of busi- 
nesses engaged in producing, manufacturing, and distributing gam- 
bling devices, slot machines, punch boards, roulette tables, policy 
tickets, and all of the rest of it. It is a big business and it would 
be very helpful if the committee, with the power that it has, could 
undertake a study of that kind and publish it. 

I would like, too, to say that I am sure if the committee cared to 
have studies of problems such as that which Senator Hunt men- 



60 ORGANIZED CRIME IN INTERSTATE COMMERCE 

tioned, the problem of prison operations and parole and probation 
costs, how to aid prisoners on discharge, and so on, I think if the 
committee would care to invite certain groups to cooperate with it, that 
would be done and they would be happy to report to the committee. 

I think, too, Mr. Chairman, it would not be too difficult to get 
various bar associations and others to study and submit to the com- 
mittee its views of various methods of attacking crime legally and 
how these methods may be modernized and how these loopholes in the 
criminal law could be plugged, these technicalities and so on that are 
used and taken advantage of so frequently by criminals, particularly 
of the organized group type where they hire their lawyer in ad- 
vance, and he knows just how to evade the law. I think studies 
would enable the committee to help plug those loopholes, and I 
believe they would find that bar associations and lawyers would study 
them. 

You mentioned, also, Mr. Chairman, in talking with Mr. Garner 
that the influence of comics, movies, radio, the press, and so on upon 
crime was a matter of concern to the committee. I believe that is 
a matter of very great importance. I think it is a sort of study that 
could be made under the auspices of this committee by one of these 
groups like the Social Science Research Council and that it would 
be of great value and help in your researches and in your studies. 

Specifically, the section on criminal law of the American Bar Asso- 
ciation has been giving some thought to this question of organized 
crime and how it may be combated, particularly matters that are 
within the purview of this committee and the Congress. One of our 
members, the chairman, Mr. Arthur Freund, of St. Louis, has sug- 
gested that the feasibility of a special Federal excise tax on the profits 
of gambling activities operated in violation of State laws be given 
consideration and has indicated if the committee thought well of 
such idea that he would be able to draft a statute and submit it to the 
committee for its consideration. 

Also it has been suggested that an amendment to the internal 
revenue laws be drafted requiring the various collectors to publish 
the names and addresses and so on of those paying taxes on slot 
machines. I presume those are available now upon demand but the 
suggestion of the group is that they make these a matter of public 
record routinely as they occur, as the licenses are issued. 

Another proposal is that the committee study the penalties for op- 
erating lotteries, policy games, making book, not only Federal pen- 
alties but State penalties as well so that when a man is found guilty of 
one of those things he can be properly taken care of and the public 
protected. As it is in many cases it is merely a misdemeanor. The 
amount of fine that can be levied is nominal. There is no way of get- 
ting at the tremendous profits he makes in this business and if those 
penalties could be established and some penalties recommended by the 
committee, it might be a fruitful thing to do. 

Mr. Chairman, perhaps from time to time, as your committee goes 
on, I will have some other specific suggestions for you which I will 
be very happy to present to you. 

The Chairman. Mr. Bennett, you have given us a pretty good load 
of work here today, so I guess we have enough to digest for a few weeks 
if we get all the studies you have suggested going. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 61 

Senator Wiley, do you have any questions to ask Mr. Bennett? 

Senator Wiley. I want to express my appreciation of his statement 
and for giving us considerable light on this subject. 

In your categories of suggestions for study I did not hear you say 
anything about what I think America is most interested in, and that 
is the matter of crime related to political influence in big cities, like 
Kansas City and other cities, resulting in murder, resulting in stuffing 
ballot boxes, resulting in virtually taking over governments, which to 
me is the high crime of the century and which has so much to do with 
setting the pattern for our youngsters who come up and think, "Men in 
big places can do this, therefore it is O. K." If I had my way we 
would concentrate on that one subject, and I think we would do a grand 
job for the Nation. We can run around looking after mice, but what 
we had better do is get at the breeding places and there will not be any 
mice. 

Have you any suggestions on that subject? 

Mr. Bennett. Senator, that sort of study is not susceptible of the 
kind of research that I had in mind. I think that is a matter which the 
committee can do better than some researcher, perhaps. 

Senator Wiley. That is the only question that I have. 

Senator Hunt. Mr. Bennett, I was interested in your suggestion 
that we ask the race-track owners association to assist us in a study 
of gambling on the tracks and off the tracks, and so forth. I wonder 
if you have thought that suggestion through. We hope that as a 
result of our work we will be able to stop the activities of the race-track 
promoters. What success would we have in asking their cooperation in 
such a study ? 

Mr. Bennett. Senator, I think the sportsmen who are anxious to 
maintain law-abiding horse racing, and so on, will be the first ones to 
agree that these improper practices, this bookmaking, and so on, 
should be stopped ; and they would be anxious, I know, to assist the 
committee with suggestions as to how they perhaps could cooperate 
to a greater extent. 

Senator Hunt. Do you think horse racing would be profitable if 
you take the gambling out of it ? 

Mr. Bennett. I wasn't suggesting that the parimutuel system, if 
that is what you mean, be abolished, but I was suggesting that horse 
racing, and so on, could be continued and yet remain within the law. 

Senator Hunt. As a pure sport like baseball, basketball, and foot- 
ball. 

Mr. Bennett. Those that own them and operate them, I think, are 
anxious to see that they are not used for illegal and improper gam- 
bling purposes. 

Senator Hunt. Some of the larger gamblers are owners of race 
tracks. 

Mr.» Bennett. Well, I suppose that is true, but I don't think that is 
the same thing as saying that the larger bookmakers and payoff men, 
layoff men and so on, are owners and operators of race tracks or 
horses or things of that kind. 

I don't know enough about it, Senator, really to say that, except I 
do believe that you would find that there are public-spirited citizens 
who would be anxious to cooperate with the committee. 

Senator Hunt. I have no further questions. 

68958— 50— pt. 2 5 



62 ORGANIZED CRIME IN INTERSTATE COMMERCE 

The Chairman. Mr. Bennett, yon mentioned a particular study 
with reference to the influence of comics, movies, and radio on crime. 
You have I believe made a particular study of the effect of some of the 
worst crime books upon juvenile delinquency and juvenile offenders, 
have you not ? 

Mr. Bennett. Yes, sir; I have given considerable attention to it. 

The Chairman. Will you state for the benefit of the committee what 
you found out in that connection and what your conclusions are ? 

Mr. Bennett. Senator, first of all, I found out that the circulation 
of some of these more harmful crime comic books, with a title like 
"Murder, Incorporated," or which says "Crime" at the top and "Does 
not pay" down below, that type of crime comic book which blueprints 
an actual crime, is harmful to the enforcement of the law to a consid- 
erable degree. I have had cases under my jurisdiction of boys who 
have imitated almost exactly the pattern found in some of these crime 
comic books. 

I am not here to say that they alone were the cause of it, but I do 
have to say that with certain types of individuals who are already 
susceptible, fertile ground, they are frequently the influence that puts 
them over the top. I do not think there is anything character-building 
or ennobling about any of them. They cater purely to the thrill, sadis- 
tic and primitive, in young people. I for one can see that they serve 
no useful purpose whatsoever. However their circulation is tremen- 
dous. 

The Chairman. What is their circulation ? 

Mr. Bennett. I cannot tell you the circulation of the restricted 
group that I have in mind, but upwards of 70,000,000 copies of comic 
books are distributed in this country each month. 

One of the vicious things about this business, Senator, is that the 
ordinary drug-store man or the ordinary newspaper distributor has 
to accept the books he receives in a package, a sort of block booking, 
and along with the good comic books or at least the comic books which 
are not the least bit harmful — and there are a great many of those — 
he has to accept some of these less desirable, one of these one-shot 
affairs. For example, they published a comic book showing the de- 
tails of the Black Dahlia case in Los Angeles. Those are one-shotters 
that they get out from time to time. The newspaper dealer frequently, 
in order to get the good ones, has to accept a certain percentage of 
others, or at least they are sent to him and he is billed for them. Of 
course, naturally if he has them on hand he will be more apt to dis- 
tribute them, although I want to say a good word for a great many 
of the newspaper distributors and drug-store operators. They simply 
refuse to sell some of those more harmful types of books. On the 
whole, they are beginning to recognize that they might be harmful to 
the children in the neighborhood and are being very, very coopera- 
tive. There are a number of organizations, Senator, that are engaged 
in trying to reduce, through the cooperation of news distributors and 
drug-store people, and so on, the dissemination of this type of litera- 
ture. 

The Chairman. Ordinarily when they are distributed in a package 
lot, if they do not take the whole package and try to sell the whole 
package, they may lose their franchise. 

Mr. Bennett. That is right. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 63 

The Chairman. You and the members of your organization, of 
course, talk with and try to ferret out the reasons why juveniles par- 
ticularly commit crimes, do you not, Mr. Bennett ? 

Mr. Bennett. Yes, sir. 

The Chairman. Have you had many cases that you felt were at- 
tributable to trying to imitate or trying to improve upon some crime 
that they read about in some of these bad crime books ? 

Mr. Bennett. No, sir; from the statistical viewpoint there have 
not been many, but there have been some, and there have been very 
many more young people who try to apologize or find some way of 
rationalizing the offense they committed by blaming it on something 
or other, hoping they could thus win the sympathy of the court. 

The Chairman. On the inside cover of most of these crime books, 
the bad ones as well as the good one, one usually finds "This is pub- 
lished under the auspices and direction of — " some high-sounding so- 
ciety or some big-sounding psychiatrist. Have you looked into 
whether those people are subsidized or just what sort of organizations 
are they ? 

Mr. Bennett. No, sir ; I haven't looked into whether or not they are 
subsidized. I know something about some of these individuals, and 
perhaps they are just misguided individuals. There are one or two 
of them who do that sort of thing, Senator, who have very fine reputa- 
tions. I do not agree with them in the least, and I do not think you 
would find very many people who are acquainted with child psychol- 
ogy who lend respectability to those magazines by allowing their 
names to appear. 

The Chairman. Do you know Dr. Wertham ? 

Mr. Bennett. Yes, sir. 

The Chairman. Is he one of the leading child psychologists in the 
country ? 

Mr. Bennett. Yes, sir. He has given a great deal of study to this 
particular problem. He has a pretty wide knowledge of it. I think 
he is generally accepted by psychologists as a man whose opinions are 
worthy of a great deal of attention. 

The Chairman. Do you have a sufficient staff in your own estimation 
to do the best job possible for the kind of job that ought to be done in 
criminal rehabilitation ? 

Mr. Bennett. Senator, no ; I am afraid I can't answer that in the 
affirmative. 

The Chairman. I have always had the opinion personally that in 
organizations like yours and also the enforcement officers of our Na- 
tion, the tax people, the Department of Justice, and the Bureau of 
Internal Revenue, a little more money spent for personnel for in- 
vestigators would be a tremendously great investment for the Nation 
which would pay dividends many, many times over. 

Mr. Bennett. I am very happy to have you say that, Senator. I 
certainly agree that no tax dollar could be spent to greater advantage 
and save the taxpayer more in real dollars and in human suffering 
than that which was spent in helping to prevent crime and helping to 
ferret it out and helping to rehabilitate and readjust men who do get 
into difficulty. 

The Chairman. I have one final question, Mr. Bennett, and then Mr. 
Halley wishes to present some. I want to ask you this question for 



64 ORGANIZED CRIME IN INTERSTATE COMMERCE; 

your view. In your opinion from what you have seen of criminal 
elements and from your study of what is taking place in the country 
and the general pattern, do you feel that there are syndicates or groups 
operating in interstate commerce carrying out organized crime in the 
United States? 

Mr. Bennett. Senator, of course I wouldn't be in position to answer 
that as of today, but I can say in my own judgment in the past I 
think there have been organizations of that kind. 

Mr. Halley. I have no questions at this time, Mr. Chairman. 

The Chairman. Mr. Bennett, on behalf of the committee we do want 
to express our very deep appreciation not only for the work that you 
are doing but for the very wholehearted support and help that you 
have given the committee. In connection with these various sug- 
gestions of yours, the staff and the members of the committee will be in 
touch with you to see if we can interest a number of groups in assisting 
the committee in these particular studies that I believe will be worth 
while. 

We would like to call on you from time to time, and of course we 
want your suggestions and ideas as we go along with our investigation. 

The committee will stand in recess until our next hearing. 

(Whereupon, at 12: 15 p. m. the hearing recessed, to reconvene at 
10 a. m., Wednesday, June 28, 1950.) 



INVESTIGATION OF ORGANIZED CRIME IN INTERSTATE 

COMMERCE 



WEDNESDAY, JUNE 28, 1950 

United States Senate, 
Special Committee To Investigate 
Organized Crime in Interstate Commerce, 

Washington, D. C. 

The committee met, pursuant to recess, at 10 : 15 a. m., in room 457 
Senate Office Building, Senator Estes Kefauver (chairman) presiding. 

Present : Senators Kefauver and Tobey. 

Also present : Rudolph Halley, chief counsel ; George S. Robinson 
and Harold G. Robinson, associate counsels ; and Alfred Klein, assist- 
ant counsel. 

The Chairman. The committee will come to order. 

This morning the committee is glad to have Mr. E. H. Foley, the 
Under Secretary of the Treasury Department, and representatives of 
the various bureaus of the Treasury Department. The committee 
is grateful to Mr. Foley and to the representatives who have accom- 
panied him here for their thoughtfulness in preparing statements 
and coming up to testify and to give the committee the benefit of their 
views and the views of the various divisions of the Treasury Depart- 
ment. 

Mr. Foley, do you first wish to introduce the gentleman who came 
with you representing the various branches of the Treasury Depart- 
ment ? 

Mr. Foley. I will be very glad to do that, Mr. Chairman. On my 
left is Mr. Thomas Lynch, the general counsel of the Department. 

The Chairman. We are glad to have you, Mr. Lynch. 

Mr. Foley. Mr. Dan Bolich, who is Assistant Commissioner of the 
Bureau of Internal Revenue; Mr. Dwight Avis, who is Assistant 
Commissioner of the Alcohol Tax Unit of the Bureau of Internal 
Revenue; Mr. Harry Anslinger, who is the Chief of the Narcotics 
Bureau of the Treasury Department. Mr. Baughman, who is Chief 
of the United States Secret Service ; Mr. Strubinger, who is Assistant 
Commissioner of Customs ; and Mr. James Maloney, who is the Chief 
Coordinator of Treasury Law Enforcement. 

The Chairman. Also I believe Mr. Oliphant. 

Mr. Foley. Mr. Charles Oliphant, the assistant general counsel of 
the Treasury Department and chief counsel of the Bureau of Internal 
Revenue, and Mr. Harry Woolf, who is the Chief of the Intelligence 
Unit of the Bureau of Internal Revenue. 

Mr. Chairman, if it is agreeable, I would like to make my statement 
for the Department and then call on the individual bureau repre- 

65 



66 ORGANIZED CRIME IN INTERSTATE COMMERCE 

sentatives to make statements in regard to their activities that might 
be of some interest to your committee. 

The Chairman. Yes; that will be fine, Mr. Foley. We are not 
going to question the veracity of any of you, but we have a general 
rule to swear all of our witnesses, so if all of you who are going to 
testify will rise : Do you' solemnly swear the testimony you will give 
this committee is the whole truth and nothing but the truth, so 
help you God ? 

Mr. Foley. I do. 

Mr. Lynch. I do. 

Mr. Bolich. I do. 

Mr. Oliphant. I do. 

Mr. Avis. I do. 

Mr. Anslinger. I do. 

Mr. Baughman. I do. 

Mr. Strubinger. I do. 

Mr. Woolf. I do. 

The Chairman. All right, Mr. Foley, we appreciate your appear- 
ance, and we will be glad to hear you. 

TESTIMONY OF HON. E. H. FOLEY, JR., UNDER SECRETARY OF THE 
TREASURY, ACCOMPANIED BY THOMAS J. LYNCH, GENERAL 
COUNSEL, TREASURY DEPARTMENT 

Mr. Foley. Mr. Chairman and members of the committee, I am glad 
to have this opportunity to appear before your committee to assure you 
of the Treasury Department's desire to assist in every way possible 
the efforts of your committee in carrying out its most important 
function. 

The Treasury Department is very hopeful and believes that the 
committee's investigation will have a far-reaching and highly con- 
structive result. To this end, we are greatly interested in contributing 
in any way we can to the study which the committee is making of one 
of the country's greatest problems. I assure you that the Treasury 
Department is eager to provide the committee with every assistance 
that may be desired. Along these lines, as you know, the President's 
Executive order of June 17 provides that tax returns shall be open to 
inspection and use by your committee. 

The Treasury Department is charged with suppressing criminal 
activities in a number of specific fields, each of which requires a highly 
specialized corps of enforcement agents. The Department is not a 
general law-enforcement agency, and it is important that it not be 
conceived as such, yet it is a fact that its criminal-enforcement meas- 
ures in specific fields often serve to aid greatly in the suppression of 
general criminal activities. In offering you the Department's full 
cooperation, I might best assist at the outset by telling you what we 
are doing and by indicating what problems we have in meeting our 
responsibilities. 

With me today are Mr. Bolich, Assistant Commissioner of Internal 
Revenue, and Mr. Avis, the Bureau's Assistant Deputy. 

I might say here, Mr. Chairman, that Commissioner Schoeneman 
had expected to appear, but a previous engagement outside the city 
has detained him. But he is willing to come before your committee 



ORGANIZED CRIME IN INTERSTATE COMMERCE 67 

at any future time if you should desire him to do so. Also, we have 
Mr. Anslinger, Commissioner of Narcotics, who has already testified 
before the committee; Mr. Maloney, Chief Coordinator of Treasury 
Enforcement Agencies; Mr. Baughman, Chief of the Secret Service; 
and Mr. Strubinger, Assistant Commissioner of Customs. These offi- 
cers are prepared to discuss with you the details of Federal law en- 
forcement within their specific responsibilities. For my part, before 
leaving the field to them, I should like to address myself to the general 
aspects of Treasury law enforcement. 

First of all, I think it might me helpful for me to outline the nature 
and scope of Treasury investigative and law-enforcement activities, 
commenting upon the specific functions assigned to Treasury agencies 
with enforcement duties. These agencies are the Bureau of Internal 
Revenue, particularly its Intelligence Unit and its Alcohol Tax Unit, 
the Bureau of Narcotics, the Secret Service, the Bureau of Customs, 
and the Coast Guard. 

Treasury enforcement agencies are responsible for protecting the 
revenues of the United States, and for carrying out other specified 
Federal enforcement duties of major importance. Each of the agen- 
cies has specialized functions and of course they also work together 
as a team. Their activities are carefully coordinated both in Wash- 
ington and in the field. Three of them, the Bureau of Narcotics, the 
Bureau of Customs, and the Secret Service, are concerned with crime 
on a more or less global as well as national basis, as their activities 
are intimately affected by criminal operations not only in the United 
States but also in many parts of the world. 

The primary mission of the Bureau of Internal Revenue is of course 
collection of the revenue. In order to preserve the integrity of our tax 
system the Internal Revenue Code provides criminal sanctions which 
apply to persons who evade, or attempt to evade, taxes for which they 
are liable. The criminal enforcement function of the Bureau stem- 
ming from these specific sanctions should therefore be viewed as only 
one of several important instruments used in the accomplishment of 
the Bureau's basic mission. 

The criminal aspects of the Bureau's enforcement activities fall 
into two general categories. Of first importance are the activities 
aimed at the uncovering of internal revenue frauds, a field handled 
in the investigative stages by the Bureau's Intelligence Unit. In 
1949, as a result of the Unit's work in fraud cases, taxes and penalties 
amounting to more than $270,000,000 were assessed against tax evaders. 
This, I think, is a most remarkable record. Yet we in the Treasury 
Department believe that many more agents could be employed before 
we would begin to reach the point of diminishing returns. 

The facilities of the Bureau, particularly its Intelligence Unit, have 
been very successfully employed in bringing about the downfall of 
some of the most notorious racketeers, gamblers, and gangsters in the 
United States. The list includes a host of criminal figures. But 
while the Bureau is always ready and able to use every means avail- 
able to it for punishing the tax evader and for maintaining the in- 
tegrity of our taxing system, prosecution under the Federal tax laws 
is not always a suitable device for reaching major criminal figures 
who have escaped prosecution for flagrant crimes against State or 
local laws. 



68 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Conducting investigations into the financial affairs of a clever under- 
world figure is usually a difficult, costly, and prolonged procedure, 
often fraught with disappointments. Most modern gangsters and 
racketeers have learned a tax lesson from the experiences of their 
counterparts in the 1930's. Many of them receive the advice of pro- 
fessional tax consultants and are ingenious in the means of reporting 
net income. Even an individual who wantonly disregards local crimi- 
nal laws is usually scrupulous in observing Federal tax laws. 

Often the Bureau can accomplish its basic purpose and at the same 
time perform a valuable function above and beyond the collection 
of revenue in a tax prosecution of a racketeer. We have been pleased 
by the remarkable record that Treasury enforcement has made in 
bringing to justice criminals who were successful in avoiding convic- 
tions under other laws. And of course, as you know, the facilities 
of the Bureau may be of invaluable assistance to the work of your 
committee in ways not directly connected with tax prosecutions. 

The other category of the Bureau's criminal law enforcement is 
in the suppression of the non-tax-paid liquor traffic. This field is 
handled by the Alcohol Tax Unit. Liquor taxes are accruing to the 
United States at the rate of well over $2,000,000,000 per year. In- 
dicative of the size of the Alcohol Tax Unit's job is the fact that, in 
1949, it seized 8,649 illicit stills. The Unit is also charged with the 
enforcement of the National and Federal Firearms Acts. The pur- 
pose of the National Firearms Act, which requires registration of 
certain types of firearms, is to prevent weapons such as machine guns 
and sawecl-off shotguns from getting into the hands of the criminal 
element. The Federal Firearms Act makes it an offense to transport 
firearms in interstate commerce under certain conditions, thus pro- 
viding a limited means for prosecuting criminals not reached under 
local laws. 

The Bureau of Narcotics enforces the Federal narcotic and mari- 
huana laws. It has about 180 agents to combat illicit dealers and 
traffickers in opium, heroin, morphine, cocaine, marihuana, and other 
narcotic drugs. This small organization, whose agents must neces- 
sarily operate clandestinely in large part, has probably been respon- 
sible for sending to penitentiaries more criminals per officer than 
any other Federal enforcement agency in the United States. Narcotic 
agents deal with the most depraved and vicious types of criminals, 
many of whom are active in a number of fields of criminal activity. 
The war against the illicit narcotics traffic, in my opinion, is an 
important part of the battle against organized crime, for it strikes 
directly at underworld leaders and interstate criminal organizations. 
Mr. Anslinger can go into this with you much more in detail. I be- 
lieve that a strengthened Bureau of Narcotics would prove to be one 
of the most potent weapons in the suppression of organized crime. 

The Secret Service, along with its duties in connection with the 
protection of the President and of his immediate family, enforces the 
laws relating to our money, securities, and other obligations, sup- 
pressing the crimes of counterfeiting and forgery. Upon the enforce- 
ment work of the Secret Service depends the physical integrity of 
these obligations. Counterfeiting, forgery, and other offenses against 
our money have been increasing year after year since the end of the 
war. Postwar foreign black markets in United States currency have 



ORGANIZED CRIME IN INTERSTATE COMMERCE 69 

been a contributing factor in this increase. It may surprise you to 
know that the Secret Service has less than 200 enforcement agents in 
the field, yet this small force arrested more than 2,900 counterfeiters 
and forgers during 11 months of current fiscal year. According to 
the Bureau of Prisons, Federal penitentiaries are rapidly becoming 
populated with more counterfeiters and forgers than any other class 
of law violator. For several years the Secret Service has been under- 
manned and overworked, and with a present backlog of over 18,000 
pending investigations, an average of approximately 100 per inves- 
tigator, it must be strengthened if it is to meet its mounting respon- 
sibilities with its traditional efficiency. 

The principal function of the Bureau of Customs is the assessment 
and collection of import duties. Incident to this function is the duty 
to prevent smuggling, including the smuggling of contraband such 
as narcotics. Customs enforcement personnel cooperate closely with 
other Government agencies, including the Bureau of Narcotics. The 
Bureau has about 200 agents assigned to criminal investigations. 
In addition, it has about 800 port patrol officers whose principal du- 
ties are searching and guarding of vessels to prevent smuggling and 
the apprehension of persons smuggling contraband in or out of the 
country. These enforcement personnel deal with clever and vicious 
criminals who operate on both sides of the border. Here too I be- 
lieve that additional manpower would go far toward coping with 
the increasing activity in the smuggling of marihuana, narcotics, and 
other contraband. 

The Coast Guard has responsibilities for maritime law enforce- 
ment, and it also cooperates with other Treasury enforcement agen- 
cies in enforcing laws within their jurisdiction. For example, it as- 
sists the Bureau of Customs in the prevention of smuggling, and it 
cooperates with the Alcohol Tax Unit in tracking down illicit liquor 
operations. 

Treasury enforcement agencies are assisted in great measure by 
various laboratories maintained by the Department. The Bureau of 
Engraving and Printing has laboratory facilities which are utilized 
effectively in analyzing materials and processes employed in coun- 
terfeiting currency. The examiner of questioned documents has a 
laboratory which is used to identify handwriting and typewriting 
and to make determinations with respect to forgeries and altera- 
tions. The Bureau of Internal Revenue has laboratories located in 
several cities which specialize in analyses of alcoholic products and 
other commodities which are subject to internal revenue taxes. Cus- 
toms laboratories are equipped to conduct a wide variety of tests. 

The facilities of interstate commerce, such as means of transpor- 
tation and communications, are unquestionably used extensively in 
violations of the laws enforced by the Treasury Department. With 
respect to smuggling of marihuana and narcotics and domestic nar- 
cotic law violations, it appears that interstate organizations of rack- 
eteers are active and that they work together effectively. However, 
whether criminal operations are in interstate commerce, or utilize the 
facilities of interstate commerce, for the most part does not influence 
Treasury enforcement activities. In general, the criminal laws en- 
forced by the Treasury Department are not dependent upon the 
existence of interstate traffic or the employment of the facilities of 



70 ORGANIZED CRIME IN INTERSTATE COMMERCE^ 

interstate commerce. Our principal problems are not of a jurisdic- 
tional nature, but rather relate to the matter of manpower. 

In saying that the problems of the Department in the field of crim- 
inal enforcement relate principally to manpower, I have in mind the 
more difficult and complex conditions that face our law-enforcement 
staffs today in contrast to other times. In the area of income-tax 
fraud we are dealing with a base of Federal taxpayers greatly broad- 
ened over the prewar base, and our problem is a mixed one of mass 
education and effective exemplary criminal punishment of defraud- 
ers. Compared with war times, greater activity is required for the 
same dollar return because the war-swollen profits of black marketeers 
and other evaders have diminished and the return per individual in 
fraud cases has been reduced. In counterfeiting there has been a 
tendency toward consolidation of activity in more complex and re- 
sourceful hands, with consequent multiplication of the time and effort 
neccessary for successful suppression of each case. The volume of 
Federal checks in number and aggregate amount has increased so 
much during the war that forgery has multiplied remarkably. Illicit 
traffic in alcohol again has available the sources of sugar and other 
materials of which it was deprived during the war. Indeed, this may 
be symptomatic of the problem which faces this committee in many 
areas of crime and enforcement where the facilities of quick commu- 
nication and transportation and the management genius of the lawless 
typify the organized crime to which this committee is directing its 
attention. 

In closing, let me again pledge to you the wholehearted coopera- 
tion of all elements of the Treasury Department in this important 
undertaking. If you wish, the heads of the Treasury enforcement 
agencies will now present their statements, commencing with Mr. 
Bolich, of the Internal Revenue Bureau, if that meets with your 
approval. 

The Chairman. Thank you very much, Mr. Foley, for this clear 
and illuminating statement of the work and the problems of the Treas- 
ury Department and its various bureaus. 

Senator Tobey, do you have any questions ? 

Senator Tobey. No, thank you. 

The Chairman. If you will stay with the committee we might have 
some matters to discuss later. 

Mr. Foley. I will remain here while the committee is in session, Mr. 
Chairman. 

The Chairman. Mr. Bolich, the committee will be glad to have your 
statement. 

TESTIMONY OF DANIEL A. BOLICH, ASSISTANT COMMISSIONER OF 
INTERNAL REVENUE, ACCOMPANIED BY CHARLES OLIPHANT, 
ASSISTANT GENERAL COUNSEL, TREASURY DEPARTMENT AND 
CHIEF COUNSEL, BUREAU OF INTERNAL REVENUE 

Mr. Bolich. Mr. Chairman, Commissioner Schoeneman has asked 
me to express his disappointment at not being able to appear before 
you today. As Mr. Foley told you, his speaking engagement before a 
convention of accountants on the west coast, which he had committed 
himself to, has made it impossible for him to be present. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 71 

With your permission, I will read the statement that he had pre- 
pared and had intended to present in person. 

The Chairman. All right, Mr. Bolich. Mr. Schoeneman explained 
to the chairman his difficulties, which we understand. We have been 
in touch with Mr. Schoeneman on previous occasions. So you will 
read his statement, please. 

Mr. Bolich. This is the statement of George J. Schoeneman, Com- 
missioner of Internal Revenue, before the committee. 

Mr. Chairman and members of the committee, I am glad to have the opportunity 
to testify before you today on this all-important question of crime suppression 
and control. It is a thought-provoking subject and one in which I, both as a 
private citizen and as a commissioner of internal revenue, have a deep and abid- 
ing interest. 

I have assumed, for purposes of this statement, that, at this point in your 
inquiry, there are, insofar as the Bureau of Internal Revenue is concerned, 
probably two questions uppermost in your mind. First, What is the Bureau 
doing toward the investigation of racketeers, gamblers, and other members 
of the criminal element? And second, How can the Bureau best aid this com- 
mittee in the crucially important task which confronts you? 

Before answering these questions, however, I think it is important that I 
give you something in the nature of a backdrop against which the present-day 
law-enforcement activities of the Bureau must be viewed. Moreover, with your 
permission, I intend to confine myself almost exclusively to our activities in con- 
nection with enforcement of the Federal income tax laws. I will leave it to 
Mr. Avis, Assistant Deputy Commissioner of the Bureau's Alcohol Tax Unit, who 
will follow me, to tell you of what the Bureau is doing in combating the non-tax- 
paid liquor traffic. 

Let me contrast for a moment the workload of the prewar Bureau with that of 
the Bureau today. In late 1947 an advisory group appointed by the Joint Com- 
mittee on Internal Revenue Taxation conducted a thorough-going survey of the 
Bureau's operations. In its report, it stated : "The general public has as yet 
an inadequate appreciation of the radical changes wrought in the Federal tax 
system during the war period." The report then went on to compare the prewar 
and postwar tax systems in terms of tax yields, numbers of tax accounts, and the 
number of taxpayers' returns and supplemental documents. 

The group found, for example, that in 1940 the Bureau collected 5.3 billion 
dollars ; while in 1947, it had collected nearly 40 billion dollars. It found that in 
1940 the Bureau maintained 12% million taxpayers' accounts ; while in 1947 this 
number had increased to over 63 million. The number of returns received by the 
Bureau in 1940 amounted to approximately 19 million. In 1947 this figure had 
increased to 90% million plus 161 million supplemental documents of various 
kinds. 

This increase in our workload brought with it many new problems. Among 
ether things, it focuses attention on the need to simplify tax forms and instruction 
sheets. Expanded programs of taxpayer assistance became necessary. It re- 
quired the development of new and better methods of processing taxpayers' 
returns and keeping their accounts. It called for a vigorous program for un- 
covering taxpayers who have never filed returns. It involved the working out 
of better methods to insure prompt collection of unpaid taxes. Finally, it 
demanded the development of enforcement programs that would insure a much 
wider audit coverage than had heretofore been necessary. 

In the words of the report of the advisory group to the joint committee, these 
enforcement programs had to be aimed at preserving an equitable balance not 
only "between honest and dishonest taxpayers, but also between those with 
simple and those with complicated returns, between those to whom the taxing 
statute may be applied with ease and those to whom its application is difficult, 
and between those who are careless and those who are meticulous in keeping 
their supporting records." 

I think this statement of the advisory group not only points up the fact that 
the Bureau's task is a many-sided one, but it also serves to drive home a prin- 
ciple on which the Bureau has always operated, but as to which some misunder- 
standing is prevalent. That principle may be summed up briefly by stating that 
the enforcement of criminal provisions for tax evasion is entirely auxiliary 
to the Bureau's primary and basic mission which is collection of the internal 



72 'ORGANIZED CRIME IN INTERSTATE COMMERCE 

revenue. In short, these provisions are not directed at raw criminality or 
general crime control, but rather at aiding in accomplishment of the Bureau's 
essential task of collecting the internal revenue. They are not ends in them- 
selves, but are rather facilitating factors to the preservation and maintenance of 
our voluntary system of tax assessment and collection. 

The traditional attitude of the Bureau on the contribution which criminal 
prosecutions make toward maintenance of this system is ably expressed in the 
following excerpt from one of our annual reports : 

"While it is recognized that criminal offenders in tax cases should be pun- 
ished for violation of law, successful prosecutions have the added and more 
far-reaching effect of impressing upon the taxpayer's community the results of 
infractions of the law in tax cases, and serve as a warning to other possible law 
breakers. The penal provisions of the law are, of course, incidental to the 
general purpose of raising revenue, but the successful prosecution of numerous 
violators of the tax laws is believed to have resulted indirectly in the voluntary 
payment of large amounts of taxes legally due." 

The emphasis here is on the word "successful." Indiscriminate and unsuccess- 
ful prosecutions can boomerang on the Bureau, since they encourage, rather than 
deter, violations. It is consequently vital to us that we make certain that we 
have a provable tax fraud case before prosecution is instituted. 

With this backdrop before you, I will now turn to, and answer, the first ques- 
tion which I posed at the beginning of my statement. What is the Bureau doing 
toward the investigation of racketeers, gamblers, and other members of the 
criminal element? 

Mr. Halley. Would you prefer that questions be saved until you 
finish the statement ? 

Mr. Bolich. I would like to continue with the statement if I may. 
Mr. Halley. All right, sir. 
Mr. Bolich (reading) : 

Here the record speaks for itself. The Bureau has investigated, is investigat- 
ing, and will continue to investigate any criminal, racketeer, or other hoodlum 
suspected of evading his liabilities under the Federal tax laws. Moreover, the 
Bureau has recommended, and will continue to recommend, for prosecution, the 
cases of any such individuals where the facts uncovered by the investigation 
disclose that criminal tax fraud has been perpetrated. By the same token, 
however, the Bureau cannot recommend for tax prosecution the case of any 
individual, regardless of how notorious he may be, if the investigation of his 
case fails to disclose that criminal fraud against the revenue has been committed. 
This is only a logical application of the principle I have just referred to. Like 
any other responsible Government agency, the Bureau is, of course, anxious to 
make any contribution it appropriately can toward solution of the problem of 
general crime. Under the law, however, it has its limitations which cannot be 
ignored. 

You will no doubt be interested in a summary of the results of the Bureau's 
tax fraud activities over the period of the past few years. During the 5 fiscal 
years from 1946 to date, approximately 15,600 tax fraud investigations were 
completed by special agents of the Bureau in cooperation with the regular reve- 
nue agents or deputy collectors. These investigations resulted in additional tax 
and fraud penalty assessments of over $1,000,000,000. During that same period, 
approximately 3,000 tax fraud cases were referred to the Department of Justice 
for criminal prosecution. Approximately 10 percent of these investigations 
and referred cases involve members of the criminal element. These include 
gamblers, slot-machine operators, bookmakers, extortionists, narcotic smugglers, 
abortionists, and a host of others. 

As to current investigations, the record shows that as of May 31, 1950, the 
special agents had a total of 3,416 suspected tax fraud cases either under, or 
definitely scheduled for, complete investigation, and a total of 9,110 not yet 
reached for action and decision. Many of these cases also involve members of 
the criminal element. At the same time, of course, the revenue agents and 
deputy collectors are conducting initial inquiries into numerous other suspected 
fraud cases. 

I think this record demonstrates that tax evaders of all types, including 
gamblers and racketeers, are receiving, and will continue to receive, the attention 
of the Bureau. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 73 

I will turn now to the second question which I posed at the beginning of this 
statement. How can the Bureau best aid this committee in the task which has 
been set for it? 

I should like first to repeat the assurance which Under Secretary Foley has 
already given you of the desire of the Bureau to extend to you all possible 
cooperation and assistance in the conduct of your inquiry. I have an intense 
pride in the investigative competence and zeal of our revenue service, and 
feel sure that much of the experience which it has gained during the past 
quarter of a century will be of substantial aid and value to you in your task. 
We are glad to be able to make that experience available to the committee. 

One of the significant things we have learned, and which you will undoubtedly 
encounter during the course of your investigation, is that there is quite a differ- 
ence between the tax consciousness of some of our present-day racketeers and 
many of their predecessors of the early 1930's. To understand this difference, 
it is necessary to go back to the prohibition era and the postrepeal period when 
public attention was focused on the activities of a number of notorious gangsters 
and racketeers. 

The story of how these criminals were successfully attacked through income- 
tax prosecutions is well known. There was, however, a basic reason for the 
success which attended these prosecutions. Actually, these individuals were 
caught by surprise. They had been successful in avoiding prosecution for 
their basic crimes, but had given no attention to the need for protecting them- 
selves from tax prosecutions. Some of them had not even filed returns. A 
number reported no more than nominal income. Many carried on their illegal 
activities in a relatively open manner. In addition, their operations were more 
or less localized. All of these factors worked to the advantage of the Govern- 
ment's prosecution efforts. 

These prosecutions, coupled with the effective post-repeal policing of the 
liquor traffic by our Alcohol Tax Unit, caused many of these law violators to 
turn to greener and safer fields. Gambling and bookmaking became their new 
stock in trade. While they were products of the same prohibition era that 
gave birth to our notorious gangsters of that period, they differ in one important 
respect from their tax-ignorant predecessors. Unlike the gangsters of the 
thirties, many of our modern big-time racketeers take deliberate and carefully 
contrived steps to defend themselves against the possibility of successful tax 
prosecutions. They obtain professional tax advice and, in numerous cases, they 
report substantial net income on their returns. They frequently attempt to 
insulate themselves from direct attack by operating through a maze of cor- 
porations, dummy stockholders, and "fronts." Under these conditions, in- 
vestigations on the part of the Bureau, aimed at determining whether the returns 
or supporting records of these individuals are false or fraudulent so as to sustain 
a charge of criminal tax evasion, is frequently a long, difficult, and time- 
consuming process. 

This is one of the practical aspects of our enforcement problem which we have 
encountered and one which has required us to develop new investigative tech- 
niques in an endeavor to meet it. It also presents for your consideration the 
question as to how much law enforcement officials concerned with the problem of 
general crime suppression and control can properly rely on the Federal taxing 
statutes for effective policing of our modern racketeers. 

Because you gentlemen are concerned primarily with the criminal enforce- 
ment aspects of the Bureau's work, I have devoted substantially all of my 
statement to a discussion of our activities on that front. I would be most re- 
luctant, however, to close this statement without making clear that, in relation 
to the size of our over-all job, we do not regard tax evasion as a problem of 
excessive proportions. I have no hesitancy in saying that the overwhelming 
majority of our taxpayers are honest and either file true returns or, if they 
err, they err in good faith. I think the public at large ought to know and ought 
to be reassured that, percentagewise, the number of persons who undertake to 
evade their income taxes is negligible compared to that great body of honest, 
forthright, and patriotic citizens who form the bulwark of our revenue system 
and our Nation. 

The Chairman. Thank you, Mr. Bolich. Senator Tobey, have you 
any questions? 

Senator Tobey. On page 3 of your statement, paragraph 3, you say : 

This Bureau has investigated, is investigating, and will continue to investigate 
any criminal, racketeer, or hoodlum suspected of evading his liabilities under the 
Federal tax law. 



74 ORGANIZED CRIME IN INTERSTATE COMMERCE, 

So we have there a specification of the intent of the Bureau to in- 
vestigate frauds. Now we come to paragraph 4 and you point out 
that — 

During that same period approximately 3,000 tax fraud cases were referred 
to the Department of Justice for criminal prosecution. Approximately 10 per- 
cent of these investigations and referred cases involve members of the crime 
element. They include gamblers, slot machine operators, bookmakers, extor- 
tionists, narcotic smugglers, abortionists, and a host of others. 

Does that give the committee to understand that 90 percent of these 
investigations of tax frauds in the country are not of the criminal 
element ? 

Mr. Bolich. That is right. 

Senator Tobey. They are of those who pose as good citizens. 

Mr. Bolich. That is right, sir. That is a rather fine distinction, 
but we are discussing two types of evaders, one 

Senator Tobey. Ten percent are known crooks and the other 90 per- 
cent are gentlemen who are crooked inside but never had the appella- 
tion of crooks. 

Mr. Bolich. They have never been charged with any other crime. 

Senator Tobey. Take the tax recoveries here, which is a fine record. 
Do I understand if an informer comes to the Department and offers 
evidence that a person is defrauding the Government, that informer 
comes in for a fee basis or percentage basis of the recovered amount ? 

Mr. Bolich. He can make a claim for the information he has given 
us, and that will be appraised on its merits. 

Senator Tobey. Have you paid sums ? 

Mr. Bolich. We have paid considerable. 

Senator Tobey. What information do they have to give, informa- 
tion leading to conviction or just evidence? 

Mr. Bolich. Just to the recovery of the taxes. 

Senator Tobey. In other words, you or I may have a suspicion of 
John Jones who lives in our street or neighborhood, and we can advise 
the Department that he filed an inaccurate return, and if you investi- 
gated and found he did, whatever you recovered would accrue to Bill 
Smith who gave the information? 

Mr. Bolich. That may not follow. One of the things we try to 
determine in considering a claim for award is whether or not we 
would have found that deficiency in the regular course of our in- 
vestigations. The informer has to develop as a fact that his infor- 
mation was unique in that we would not have had or could not have 
gotten it without him. We examine any number of returns every 
year, as you know. If it would have shown from our investigation 
of this particular case that this would have been turned up from the 
regular examination and in all possibility Jones would have been 
examined, then we take issue with the informer in allowing his claim. 

Senator Tobey. Then is there a field of claimants who have a hunch 
that somebody is defrauding the Government and who merely send in 
suggestions, and you separate the wheat from the chaff? 

Mr. Bolich. That is quite a lively group, in fact. 

Senator Tobey. There are some who live on that ? 

Mr. Bolich. They try to, if they could. 

Senator Tobey. How much in total does the Department pay to 
so-called informers ? 



ORGANIZED CRIME IN INTERSTATE COMMERCE 75 

Mr. Bolich. We were allowed $500,000 for that by the Congress. 

Senator Tobey. Is that tax-exempt to the informer? 

Mr. Bolich. No, sir. We may even wind up withholding the tax 
from it. 

Senator Tobey. What is the percentage you pay ? 

Mr. Bolich. Not to exceed 10 percent. It is up to us to determine 
that percentage administratively, based on the merits and the facts. 

Senator Tobey. Thank you. 

The Chairman. Mr. Bolich, in 1947 you stated that you received 
over 90,000,000 tax returns. That is on page 1 of your statement. 

Mr. Bolich. Yes ; in 1947 the number of returns increased to 90y 2 
million. 

The Chairman. Do you mind telling us how many special agents 
or agents investigating tax returns you have in your Department? 

Mr. Bolich. There are about 1,300 special agents and there are 
about 7,700 revenue agents. The deputy collectors are about 10,000. 

The Chairman. Have you an appropriation for all of the agents 
that you requested from the Congress ? 

Mr. Bolich. We have done fairly well with the Congress in the 
last few years, but things being what they are, there has been a 
tendency to economize and we have never gotten quite what we 
asked for. 

The Chairman. Is it your opinion that it would be a good invest- 
ment for the Government in tax returns to have a larger number of 
agents ? 

Mr. Bolich. We have always contended that, sir, and we think we 
are correct in our analysis of the situation and that it is logical and 
sound. 

The Chairman. Do you mind telling the committee what method 
you use in selecting the returns that you check ? Manifestly you can- 
not check all of them. 

Mr. Bolich. At the present time we have instituted an audit control 
program after several years of study, in which we hope to scientifically 
select the returns which this analysis has indicated to us would be most 
susceptible of change. That does not mean just deficiency. Th,at 
would mean that even the taxpayer might have made a mistake to his 
own disadvantage and would be entitled to a refund. We approach 
it from the standpoint of a study of the number of or percentage of 
incorrect returns, or returns in which there are apparently errors, 
which of course would be the field that we should operate in with 
our auditors and deputy collectors. 

The Chairman. Do you think that is an effective way so that actu- 
ally somewhere along the line you are apt to ascertain or get informa- 
tion about anyone who has not filed a correct return ? 

Mr. Bolich. Yes. We hope to perfect methods whereby we can 
process the great bulk or the great volume of these incorrect returns 
by some other method than by having the agent or the deputy collector 
directly contact them and their books. We feel that some of these 
mistakes can be corrected without using our ordinary investigative 
methods. So we do reserve our so-called front line enforcement force 
of investigators then for those cases where we know we are going to 
have to go in and do a thorough and complete investigation. 



76 ORGANIZED CRIME IN INTERSTATE COMMERCE 

The Chairman. Are these special agents and revenue agents civil 
servants ? 

Mr. Bolich. They are all civil servants. 

The Chairman. Are your deputy collectors ? 

Mr. Bolich. Yes, sir ; they are civil servants. 

The Chairman. All of your agents, then, are civil servants. 

Mr. Bolich. They are all in the civil-service classification. 

The Chairman. How long have you been with the Department ? 

Mr. Bolich. Twenty-nine years. 

The Chairman. Prior to being Assistant Commissioner, what did 
you do ? 

Mr. Bolich. I started out as deputy collector and I became a rev- 
enue agent and afterward a special agent. I was a special agent from 
1924 to 1929. In 1929 I was appointed internal revenue agent-in- 
charge, and I have been in charge of several divisions. In 1946 I was 
appointed special agent in charge of New York to succeed Mr. Hugh 
McQuillen, who, after some 55 years of Government service, had re- 
tired. After 21/2 years at that post I was appointed Assistant Com- 
missioner. That will be 2 years in September. 

The Chairman. In making their tax returns, do these racketeers 
and the criminal element have to show the source of the money that 
they report in their return % I understood that some of them say, from 
business operations, from gambling operations, $100,000 without any 
explanation about what kind of business it was. 

Mr. Bolich. They try to make a very general statement as to their 
source of income. I can remember any number of returns where it 
used to be labeled as commissions. 

The Chairman. Is it your policy to require a more detailed state- 
ment of what their source of income is % 

Mr. Bolich. We make every effort to get a more detailed statement 
of the source of their income, but we are at a disadvantage there be- 
cause it is a voluntary declaration of income, and under the policy of 
voluntary assessment we rely pretty much on the taxpayer's telling us 
the truth about his source of income, and it makes it difficult to go be- 
yond his statement as to what his income is. 

The Chairman. But in order to ascertain whether he reported it 
correctly, it would be of considerable benefit to you to require a detailed 
statement of the source of the income ? 

Mr. Bolich. In this particular area we make every effort to get be- 
hind that statement of income and find out where it comes from. 

The Chairman. Do you not think a general policy by your Depart- 
ment requiring a more detailed statement of the source of the income 
would be helpful not only in collecting more taxes but also in giving 
you information about the activities of this racketeering element. 

Mr. Bolich. In general, sir, the requirement of the return does give 
us that information, and in probably 98 percent of the cases we do get 
all the detail we need. It is just in this one particular area of our 
work that we are concerned with the question that you just posed. 

Mr. Halley. Following up the chairman's question, you do, how- 
ever, have the power to step in and to ask the taxpayer to clarify his 
return, do you not ? 

Mr. Bolich. We could, yes. 

Mr. Halley. Do you do that in the case of racketeers ? 



ORGANIZED CRIME IN INTERSTATE COMMERCE 77 

Mr. Bolich. We have in many cases. In some cases we have even 
invoked the requirement that they keep records so that their source 
of income and their statement of income in particular can be verified. 

Mr. Halley. The committee has received concrete cases in which, 
as well as the source of income being vague, very large amounts of ex- 
pense are charged off without any itemization. One in particular upon 
which I hope you will be able to comment is the following : In connec- 
tion with gambling enterprises, a business expense is charged off sim- 
ply as payment to the bank roll. The bank roll is a sum of cash, we are 
informed, which is kept on the premises in order to pay gambling 
losses. Each night if the bank roll has been increased, the cash from 
the bank roll is supposed to be deposited in a bank account over and 
above a basic amount. If the gamblers have lost, the bank roll is re- 
plenished the next morning by a check drawn on the bank account, a 
regular formal bank account, made payable to the bank roll. The 
items appear to be very substantial. For instance, in one case, in 
which I will not name the taxpayer and I will waive the reward, the 
total gross income was in the neighborhood of $500,000 and expenses 
were charged up on the tax return of over $200,000 as simply "re- 
plenishment of the bank roll." It would seem to me that very large 
amounts of cash are completely unaccounted for. 

Is there any way that the Bureau has of either checking up on the 
amount or bringing civil suit ? I understand it would be very difficult 
to bring a criminal case. 

Mr. Bolich. We certainly would on the facts you have just indi- 
cated on that deduction of $200,000. 

Mr. Halley. We have not seen such tax return. 

Mr. Bolich. Has it been examined as such ? 

Mr. Halley. I think so. 

The Chairman. I think it might be fair to say that that particular 
one is now under investigation. 

Mr. Bolich. Then, of course, they will have the very unenviable 
job of explaining that deduction. It would not follow that any 
money used to replenish bank roll would be allowed as a deduction 
from profit and loss. Any moneys coming in to a so-called bank roll 
with which they operate some of these gambling installations we would 
be very much concerned with, the same as we would be if you were the 
proprietor of a business and brought new capital into your enter- 
prise, into your venture. We would want to know where you got it. 
Those are questions that we always ask. 

Mr. Halley. I think that is a subject that you were discussing with 
the chairman. The subject in which I am interested is that the pay- 
ments going to the bank roll from their own bank account is an ac- 
cumulation of capital or income. 

Mr. Bolich. We would not allow it as a business expense because 
if that is the explanation, it certainly is not a business expense. That 
could be in the nature of a dividend or a withdrawal from the bank 
roll. 

Mr. Halley. That is right, or it might be siphoned off into the 
pockets of any of them. 

Mr. Bolich. That is right, taken out of the venture. 

68958 — 50 — pt. 2 — —6 



78 ORGANIZED CRIME IN INTERSTATE COMMERCE. 

Mr. Hallet. Yet how could any gambling establishment file an 
income-tax return that would pass scrutiny unless you required them 
to keep detailed books on all their gambling transactions ? 

Mr. Bolich. Many of them do keep detailed books. That is one of 
our problems. Our real problem is to prove that those books and 
records are incorrect. 

Mr. Hallet. For instance, an establishment that is running a crap 
game would hardly be in a position to keep a record of the wins and 
losses at a table each night. 

Mr. Bolich. Some of them do and, of course, some of them do not. 
Those that do not, we are pretty much at a loss as to how we can es- 
tablish their true income over a period. One of the devices that we 
have used over the years is the comparative net worth approach to 
determining their income. 

Mr. Halley. What I have had in mind in asking these questions is 
the statement you made in your formal presentation concerning your 
limitations in the proof of fraud cases and that seems to be completely 
unarguable. Is there not a very large field in which light should be 
thrown on situations in which racketeers can accumulate large sums 
of cash and yet not expose themselves to a provable tax fraud case ? 

Mr. Bolich. The only way we can throw the limelight on them is 
either by a criminal reference, which winds up in an indictment, which 
makes it a public record, or by taking them to the Tax Court, where 
again it becomes a public record. Otherwise we are enjoined to main- 
tain secrecy, recognizing a privilege between the taxpayer and the 
Bureau, no matter who it is. 

Mr. Halley. Without disclosing any specific confidential names, 
do you think it would be possible in connection with your cooperation 
with this committee to bring before the public the picture of the possi- 
bilities for the accumulations of large sums of un-tax-paid wealth by 
people operating beyond the law ? 

Mr. Bolich. That is something that would have to depend on 
Treasury policy which I am not responsible for. I would be reluctant 
to express an opinion on that. That would have to be from the 
Treasury. 

Mr. Halley. Short of an expression of policy, would you say that 
without making a tax fraud case it would be possible to bring before 
the public facts in which the honest taxpayer would be interested, to 
find out how people operating outside the law are able to accumulate 
money which it is almost impossible to check on for income-tax pur- 
poses ? 

Mr. Bolich. While I agree with what you are trying to accomplish, 
nevertheless there are any number of difficulties in trying to accom- 
plish it. Of course, it would require a fundamental change in the law 
and its administrative provisions. 

Mr. Halley. You would agree that one of the purposes of this 
committee would be very carefully to study and illustrate the various 
ways in which the law is certainly not capable of following the income 
and business expenses of people operating various rackets. 

Mr. Bolich. Yes, I think something could be accomplished in that 
direction but as I say it is going to be difficult without a change in the 
law. 

The Chairman. Mr. Bolich, I do not understand that Mr. Halley 
in his first question meant giving the names of these particular people 



ORGANIZED CRIME IN INTERSTATE COMMERCE 79 

necessarily, but to indicate to the public, so they would understand the 
seriousness of the problem of dealing with racketeers and gamblers, 
some estimate or idea of the amount of money that might be in their 
hands and subject of course to their investment coming from this type 
of activity. 

Mr. Bolich. I understood Mr. Halley's question to be concerned 
with that group of cases that fell short of criminal reference, yet 
nevertheless do have some of these characteristics which classify them 
as fraud cases. If those cases fall short of being prosecution cases there 
is no way of letting the public know about the avoidance or the evasion 
of tax. AVas that your point, Mr. Halley ? 

Mr. Halley. I think the chairman has the point exactly, which is, 
without violating the law and mentioning names, or to the extent of 
violating your confidence, whether you could state facts which would 
illustrate the cases. Could you not do that ? 

Mr. Bolich. It would have to be in a very general way. 

Mr. Halley. The general facts could be stated in such a way that 
the nature of the near fraud would be perfectly clear to the public. 

Mr. Bolich. I think so, but I would not want to be held to any 
details as to how we could work that out. 

Mr. Halley. Naturally. It is now in a nebulous state. In that 
connection, however, would you care to venture an opinion as to 
whether it has been possible and has actually happened that known 
criminals and racketeers have accumulated large fortunes ? Have you 
any information on that subject? 

Mr. Bolich. I think the record of our published cases would sus- 
tain the premise that they have accumulated large fortunes. You 
can get that from the record of cases that we have prosecuted. 

Mr. Halley. In many instances they now have very considerable 
sums of money invested in wholly legitimate enterprises; is that 
correct ? 

Mr. Bolich. I would say that is right. 

Mr. Halley. Thank you. 

The Chairman. Thank you, Mr. Bolich. I see with you, Mr. Bo- 
lich, Mr. Charlie Oliphant, the Assistant Counsel for the Treasury 
Department. The chairman and the members of the committee know 
Mr. Oliphant. I understand you do not have a prepared statement, 
Mr. Oliphant, but would you care to give the committee the benefit of 
any ideas supplemental to Mr. Foley ? 

Mr. Oliphant. I will be glad to. I will proceed in any way that 
you wish. 

The Chairman. We would be glad to have any general observation 
that you wish to make. 

Mr. Oliphant. I think the statement we have here pretty well sum- 
marizes the difficulties that we have with respect to enforcing the 
criminal sanctions of the tax laws, and of course the work of all of 
us went into the preparation of this statement. 

The Chairman. Would it be fair to ask you one question about 
a matter of legislative policy, Mr. Oliphant, and Mr. Bolich also? 
It is the general policy of the Treasury Department, the Bureau of 
Internal Revenue, that if a voluntary disclosure is made before the 
Department has information about a tax case or against an investi- 
gation, and if the tax plus the penalty and interest is paid, generally 
there will be no prosecution of the taxpayer; is that correct? 



80 ORGANIZED CRIME IN INTERSTATE COMMERCE; 

Mr. Oliphant. That is correct. That has been a part of the Bureau 
and Department policy since 1919. 

The Chairman. We are informed that it has been proposed by the 
Ways and Means Committee of the House that that not be a Depart- 
ment policy but that it be made a part of the statute. It would ap- 
pear to me, speaking personally, that that would be rather like a 
law saying that embezzlement is a crime, but if you later acknowledge 
your embezzlement that makes you innocent of the original offense. 
I am wondering what position the Bureau of Internal Kevenue would 
take on this. 

Mr. Oliphant. That is exactly the position of the Bureau and the 
Department. The proposed provision does not appear in the bill 
as reported to the House. 

The Chairman. In other words, you are opposed to that provision. 

Mr. Oliphant. Exactly. 

The Chairman. Do you wish to elucidate any further on your 
reasons for your opposition to that proposal ? 

Mr. Oliphant. The reason, as far as I would state it, is that in 
enforcing the criminal laws we are in the same position as any 
prosecuting attorney, and as you well know, the prosecuting attorney 
may have before him an absolutely mandatory statute which requires 
a presentation to a grand jury for the violation of any law, but that 
does not mean that the prosecuting attorney will prosecute every case 
that comes before him. There is lodged in the prosecuting attorney, 
and by the same token there is lodged in the Bureau, discretion with 
respect to the cases that will be proposed for prosecution. Historically 
that is the way all criminal laws are administered. The basis of the 
Bureau's objection goes just to that, with one further point. In addi- 
tion to having to try the case twice, namely, once on whether there 
was or was not a voluntary disclosure and second whether there was 
or was not tax evasion, a statute of the type proposed could seriously 
cripple the revenue because the taxpayer, knowing he has a statutory 
right, could well figure, "I will file a return for half of my income 
now and when they come around to see me I will file a return for 
the other half." 

The Chairman. In other words, it might be a little more convenient 
later on. 

Mr. Oliphant. That is right. It is at that point that the total 
revenue could well be endangered because it would affect adversely 
the voluntary compliance that most taxpayers have in filing their 
original returns. 

The Chairman. Before we leave that subject, do you wish to ques- 
tion Mr. Oliphant, Senator Tobey ? 

Senator Tobey. Just one question, please. I want to ask you, Do 
you suppose that it was the intention of those who proposed this 
change in the law to give that latitude to gentlemen who might want 
to carry through just as you have suggested? 

Mr. Oliphant. I do not think I could say what the intention was. 

Senator Tobey. In efforts about which you and I have some definite 
understanding, certain entrepreneurs and prominent gentlemen in this 
country avoid paying taxes through clever legal devices, to be specific, 
the setting up of so-called charitable trusts which are phoney chari- 
table trusts and which allow them to avoid millions and millions in 



ORGANIZED CRIME IN INTERSTATE COMMERCE 81 

taxation. Do you feel that the changes proposed by the Ways and 
Means Committee in the present tax bill would plug that loophole 
to some extent and make more justice for taxpayers as a whole? 

Mr. Oliphant. That would be my personal opinion. 

Senator Tobey. You are familiar with that law, of course. 

Mr. Oliphant. I am. 

Senator Tobey. Do you agree with the action of the House Ways and 
Means Committee concerning legislation some of us have introduced ? 

Mr. Oliphant. I am going to pass that question to Mr. Lynch or Mr. 
Foley. Mr. Lynch is responsible for the views of the Department 
on that. 

Senator Tobey. Then as we go ahead that would seem to be just 
elementary justice, and isn't it a truism, and put it on the record, that 
on the advice of distinguished counsel of the Internal Revenue De- 
partment, every dollar of taxes that these entrepreneurs and prominent 
gentlemen avoid by this clever device, which has been legal, the rank 
and file of citizens, 150,000,000, must take up the slack and pay for the 
cost of government. Is that not true ? That is elementary, is it not ? 

Mr. Oliphant. That is right. Whenever there is an evaded or 
avoided dollar, then the slack has to come from somewhere else. 

Senator Tobey. Exactly. So if that were realized more closely and 
thoroughly by the people across the country we might develop a sense 
of righteous indignation about these gentlemen who look after No. 1 
and forget the common interest. Is that an idealism or a truism ? 

Mr. Oliphant. I would agree with your conclusion. 

Senator Tobey. Thank you very much. 

Mr. Foley, do you care to comment on that? 

Mr. Foley. I would like to say, Senator Tobey, while we are on this 
subject that in fairness to the Ways and Means Committee this dis- 
closure proposal was not considered favorably by the Ways and Means 
Committee, and it is not in the bill that was introduced by the chair- 
man and that is now under consideration by the House. 

Senator Tobey. Then you got the wrong impression from what was 
said here at the table. I gathered it was considered by the committee. 

Mr. Foley. But it was not considered favorably by the committee. 

Senator Tobey. Who was the brilliant mind that thought that up 
and proposed it ? 

Mr. Foley. I really don't know. It was considered by the com- 
mittee, and the Department's views were presented to the committee. 
The committee rejected the proposal. 

Senator Tobey. Good for them. Now touching upon the question 
I asked eminent counsel, Mr. Oliphant — and I say that in all sincerity — 
about the so-called charitable trusts, you undoubtedly have reviewed 
this thing. In your judgment are you making progress in the avoid- 
ance of that menace to the taxpayers ? 

Mr. Foley. I think we are making appreciable progress, yes, in 
the closing up of loopholes that exist in the present law which afford 
legitimate means for avoiding taxes. 

Senator Tobey. I thank you, sir. 

The Chairman. If the record shows I stated the voluntary dis- 
closure amendment had been approved by the Ways and Means Com- 
mittee, I want to correct it. I think it was approved by the subcom- 
mittee or at least was considered by the Ways and Means Committee. 
I want the record correct on that point. 



82 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Senator Tobet. I presume if the subcommittee approved and the 
larger committee did not, that is an obvious demonstration of the fact 
that in a multitude of counsel there is wisdom. 

Mr. Foley. The processes of democracy. 

The Chairman. Mr. Lynch, I would be glad to have you give us 
comment as general counsel for the Treasury Department. 

Mr. Lynch. I have only a comment to make with reference to Sena- 
tor Tobey's last inquiry with respect to the matter of charitable trusts. 
As the Senator doubtless knows, the Ways and Means Committee in 
its present bill has attempted to deal quite effectively with that situ- 
ation. As a matter of fact, they have directed their attention to the 
two principal areas of what we might call avoidance. The first is in 
the accumulation of income for purported charitable purposes without 
payment of the income, and the second is with respect to the close 
relationships as between the creators of the trust on the one hand and 
the management of the business enterprises under management on the 
other hand. They have attempted to deal effectively with those two 
principal points in the pending bill with reference to charitable trusts. 

Senator Tobey. I am so glad you said that. Mr. Oliphant knows 
whereof I speak. In fact, in an investigation into certain cases along 
these lines we developed a so-called charitable trust which started at 
nothing and went to several million dollars in a short space of time by 
this modus operandi. They accumulated considerable sums, but the 
beneficiaries never got even a smell of them. There is another weak- 
ness in the situation. It is a charity, but the beneficiaries never expe- 
rienced the charity. The accumulated capital is used as working capi- 
tal, you might call it, to deal in commodities and industries, and so 
forth, which should go to beneficiaries. In some cases, as a matter 
of fact, the trustee's salary would be far more than was paid to the 
beneficiaries, and in some cases the salaries were all of it, and nothing 
was paid to the beneficiaries. No audit was required. The trustees 
of the trust had the power to sell securities and profit themselves with- 
out notifying anybody about it. So it goes on ad infinitum, ad nau- 
seam. So if you have a passion in your soul to make this Nation a 
nation in which there is righteousness and to give everybody a square 
deal, you cannot sit by idly and say "Let them get by with it." 

I might point out I think it was today or yesterday that in a Fed- 
eral court in this country there will probably be a settlement effected, 
an interesting settlement respecting the initiation and the results, 
of such a trust. I am interested very closely in it, as Mr. Oliphant 
knows. I think some of us have the conception that we are fiduciaries 
of the people, and here is a field in which we must operate and be very 
firm. 

The Chairman. Mr. Lynch, would you or Mr. Oliphant outline the 
procedure that is followed before a case reaches the district attorney 
for prosecution in a tax-fraud case? We have heard some criticism 
that there is too much delay between the time the return is made and 
the time of the prosecution, if it ever comes. On the other hand, we 
want to give the taxpayer every consideration and opportunity to be 
heard and to protect his rights. So if you would outline the procedure 
that is followed and also give us your comment about whether that 
is enough consideration or whether there is too much delay, we would 
be glad to hear from you. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 83 

Mr. Lynoh. I would be very happy for Mr. Oliphant and Mr. 
Bolich to answer. That involves the administrative processes of the 
Bureau of Internal Revenue and its various branches, very distinctly 
the Office of the Chief Counsel of the Bureau of Internal Revenue. 
I think they might well outline that for you in detail. Perhaps Mr. 
Oliphant would comment on that. 

Mr. Oliphant. I shall take a typical case where the examining 
revenue agent is performing a routine audit, a verification of the tax- 
payer's return. He may discover there in that routine audit a sus- 
picious circumstance with respect to inclusions of income or false 
deductions. At that point the case will be taken up with a special 
agent and a thorough investigation will be made. When I say thorough 
investigation, that may be quite a time-consuming process. After the 
investigation has been completed, if the special agent and the special 
agent in charge believe that the taxpayer has committed a fraud upon 
the revenue and that the evidence will support a prosecution, he will 
then recommend that prosecution. That recommendation passes from 
the examining officer to my office, which is a group of lawyers spread 
over the country, who go over that report and the accompanying 
exhibits and evidence adduced, to determine whether in the opinion 
of the lawyer the taxpayer is guilty of attempted evasion and whether 
there is sufficient evidence to convict. 

The Commissioner, therefore, has two functions : One, the examining 
function made by the agents, and the other, a determining function 
made by the lawyers. If it is concluded that the recommendation of 
prosecution should go forward to the Department of Justice, that 
will go to the Commissioner or the Assistant Commissioner for ap- 
proval of that recommendation. The case then goes to the Tax Divi- 
sion of the Department of Justice. They go over the case, and if they 
believe a prosecution should be undertaken, they then refer the case 
to the United States attorney in the field. He will then go over the 
case and present it to a grand jury for indictment. 

That is the pattern all of the cases follow. 

You referred to some statements that have been made that there is 
a delay in the process. Fraud cases and particularly criminal fraud 
cases in terms of numbers are a minor amount of the Bureau's work. 
The great business collected, as the Assistant Commissioner has 
pointed out, is voluntary. In this specialized area of criminal fraud 
it has to be time-consuming, and for two purposes : One, to be sure 
that the taxpayer is guilty and, second, to be sure that we have de- 
veloped all of the evidence. 

The Chairman. Then I take it you are satisfied with the present 
steps by which the returns are investigated before the prosecution. 

Mr. Oliphant. I would say we are satisfied with our method of pro- 
cedure. It does fall behind what is the usual audit year, but that is 
just because of the nature of the case. It is not like a civil determina- 
tion where there is no fraud, where you can believe what the taxpayer 
says, where the case can be settled, as more than 98 percent of all 
the revenue cases are, without even civil litigation. 

The Chairman. Any further questions? Thank you very much, 
Mr. Oliphant. 

Mr. Foley. Mr. Chairman, if it is agreeable I would now like to 
call Dwight Avis, Assistant Commissioner of the Alcohol Tax Unit. 



84 ORGANIZED CRIME IN INTERSTATE COMMERCE: 

TESTIMONY OF DWIGHT E. AVIS, ASSISTANT DEPUTY COMMIS- 
SIONER, ENFORCEMENT, ALCOHOL TAX UNIT, TREASURY 
DEPARTMENT 

The Chairman. All right, Mr. Avis, we will be glad to have your 
statement. First tell us how long you have been Assistant Deputy 
Commissioner. 

Mr. Avis. Since the Alcohol Tax Unit was formed, which was in 
1934. Prior to that time I was in the field as a supervisory officer and 
prior to that time as an investigator. 

The Chairman. How long altogether have you been with the Alco- 
hol Tax Unit? 

Mr. Avis. Since 1926; 24 years. That is the Alcohol Tax Unit 
and its predecessor agencies. 

May I proceed, Mr. Chairman ? 

The Chairman. Yes ; please proceed, Mr. Avis. 

Mr. Avis. I am glad to supplement Commissioner Schoeneman's 
statement and to tell the committee of the work of the Alcohol Tax 
Unit. 

The Alcohol Tax Unit is a compact self-supporting unit of the 
Bureau of Internal Revenue, the activities of which are coordinated 
with the functions of other units of the Bureau and with other en- 
forcement agencies of the Treasury Department. It is charged with 
the control and supervision of the legitimate liquor and industrial 
alcohol industries, the assertion and assessment of liquor taxes, the 
suppression of the non-tax-paid liquor traffic, the enforcement of 
the Liquor Enforcement Act of 1936, and the National and Federal 
Firearms Acts. 

The regulatory function is referred to as permissive and the law- 
enforcement function as enforcement. The activities of the Unit 
are administered through 15 supervisory headquarters districts and 
58 branch offices. There are 4,180 employees in the field service, of 
which 1,418 are storekeeper-gaugers engaged in the supervision of 
plants, 610 are inspectors who exercise regulatory functions, and 900 
are investigators engaged on strictly law-enforcement work. The 
Unit's appropriation allotment for the current fiscal year is approxi- 
mately $17,905,000, of which $5,834,000 or 33 percent,* is allocated for 
strictly law-enforcement activity. 

Existing legislation covering the regulation and supervision of the 
legitimate liquor industry and the collection of excise taxes is regarded 
as entirely adequate, the Congress having just enacted a bill moderniz- 
ing the collection of liquor taxes. Under the internal revenue liquor 
laws, the Bureau has complete control of liquors for beverage purposes 
and industrial alcohol from the point of production to the point of 
distribution to the consumer. This control is maintained through a 
rigid system of permits, inspection, investigation, and direct super- 
vision. There is a high degree of observance of the internal revenue 
liquor laws on the part of the industry, which is due in part to the 
vigilance exercised by the Bureau. A segment of the industry did 
engage in extensive black-market operations during the whisky short- 
age. The objective of these black-market operations was to evade 
income taxes in toto on cash "side money" transactions. Under an 
arrangement with the former Office of Price Administration, the Unit 



ORGANIZED CRIME IN INTERSTATE COMMERCE 85 

perfected a substantial number of criminal cases against industry 
members resulting in millions of dollars in cash "side money" trans- 
actions being reported to the Income Tax and Intelligence Units for 
tax evasion investigative purposes. This is an example of the close 
coordination of the Bureau's activities. 

Time has wrought significant changes in the law-enforcement prob- 
lem. Prohibition developed the most lucrative criminal enterprise the 
world has ever known. Murderers, thieves, confidence men, and petty 
criminals of all types entered the traffic, later to be characterized as 
"gangsters, racketeers, and mobsters." Large syndicates were formed, 
particularly in the metropolitan cities, to control the illicit traffic. 
Territory was allocated by the block. Gang slayings became an almost 
daily occurrence as these criminals fought for control of this lucrative 
traffic. The present-day racketeer is largely a product of that era. 

The confidential list of alleged prominent underworld figures re- 
cently prepared by the Department of Justice, or, for that matter, any 
other list of so-called public enemies, represents, for the most part, a 
roll call of the master minds who directed large-scale illicit liquor 
operations during the prohibition and immediate post-repeal era. 
These individuals, with few exceptions, have deserted the non-tax-paid 
liquor traffic for more lucrative and perhaps less hazardous rackets. 
Even before the beginning of the war the Alcohol Tax Unit, with the 
assistance of the Department of Justice, through effective policing 
and criminal prosecution had reduced the syndicated traffic in metro- 
politan cities to the point where only remnants of the prohibition and 
post-repeal groups of violators remained. 

Sugar rationing and other wartime controls tended to further re- 
strict illicit distilling in all sections of the country. While small illicit 
stills are being operated in practically all areas, there is little organized 
traffic, except in metropolitan centers on the east coast and in the 
Southern States. 

At the present time there are several groups operating on an inter- 
state basis in the Pennsylvania-New Jersey-New York-Connecticut- 
Massachusetts area engaged in the production and distribution of 
high-proof alcohol for beverage purposes. Some of these groups have 
been persistent in their operations and effective policing and prosecu- 
tion have failed to eliminate them, although practically all of the 
principals involved, as well as their subordinates, have served one or 
more terms in the penitentiary. This type of operation, however, con- 
stitutes only a fraction of the prewar traffic in this area. 

The non-tax-paid liquor traffic in the Southern States of Alabama, 
Arkansas, Florida, Georgia, Kentucky, Mississippi, North Carolina, 
South Carolina, Oklahoma, Tennessee, Virginia, and West Virginia, 
however, has presented a much more difficult enforcement problem. 
The Unit has never been able to satisfactorily control the illicit traffic 
in these States, violations in some of which are now rapidly approach- 
ing the pre-war level. Certain of these areas make up the preprohibi- 
tion Moonshine Belt where in the mountain sections illicit distilling 
has been inherent in the population and the technique has been handed 
down from generation to generation. 

The Chairman. I notice Louisiana is not included in that list of 
States. 

Mr. Avis. We have been able to lick the traffic in Louisiana pretty 
well, Senator. We have never quite been able to understand it our- 



86 (ORGANIZED CRIME IN INTERSTATE COMMERCE: 

selves. There is a Federal judge in the northern judicial district, 
maybe they call it the western district, with headquarters at Shreve- 
port, who right after repeal started sending these fellows to the peni- 
tentiary for 5 years, and that probably has something to do with the 
solution along with the over-all type of liquor control in the State of 
Louisiana as distinguished from most of the other States. 

The Chairman. You do not have any mountains down there. 

Mr. Avis. That could have something to do with it, too, Senator. 

The distilling apparatus used by the moonshiner requires virtually 
no financial outlay, and the character of the violator is often such that 
imprisonment does not prove the deterrent to be expected. That is a 
little inconsistent with what I just said, but we haven't had any judges 
that have been quite so severe as Judge Dawkins was in Louisiana. 

The underlying reason for the large volume of violations in 
these States is the preponderance of low-income groups which furnish 
the demand for cheap spirits, coupled with the fact that more than 40 
percent of the population is located in local-option counties where 
tax-paid liquor is not readily available. 

Since repeal, the Unit, up to and including the month of May 
1950, seized 162,292 illicit distilleries, 105,000,794 gallons of mash, 
47,000 automobiles and trucks, and arrested 293,800 defendants. It 
now appears that during the current fiscal year the Unit will have 
seized approximately 10,000 illicit distilleries, 5,000,000 gallons of 
mash, 2,000 automobiles and trucks, and arrested 10,000 persons. As 
indicated, the great volume of violations represented by these statis- 
tics is in the Southern States. 

Non-tax-paid competes with tax-paid liquor in the low-income mar- 
ket. Increases in liquor taxes not only increase the revenue but in- 
crease the law violators competitive margin. Just how effective 
the Unit's enforcement effort has been in suppressing the non-tax-paid 
liquor traffic and in increasing and protecting the revenue is reflected 
by the fact that mash-gallons seized at illicit distilleries, which is the 
best measure of enforcement progress, decreased from 21,373,000 gal- 
lons for the fiscal year 1935 to approximately 5,000,000 gallons for the 
current fiscal year, or in other words 76.6 percent. During the same 
period of time, tax-paid withdrawals of domestic and imported spirits 
increased from 82,558,000 proof-gallons to about 157,000,000 proof- 
gallons, or by about 90 percent. The tax on distilled spirits was in- 
creased from $2 to $9 a proof-gallon during the same time. 

Just a few words about the National and Federal Firearms Acts. 
These laws were enacted by the Congress at the suggestion of the 
Attorney General following a wave of kidnapings and bank robberies 
in the early thirties. The over-all objective of the National Firearms 
Act, which became effective July 26, 1934, was to keep strictly gang- 
ster weapons, namely, machine guns and sawed-off weapons, out of 
the hands of the criminal element by freezing these weapons in the 
hands of the then owners through the imposition of a prohibitive 
transfer tax. The National Firearms Act, as well as the Federal Fire- 
arms Act which was passed September 30, 1938, provided an emer- 
gency method of prosecuting persons apprehended either in the pos- 
session or in the transportation of weapons coming within the purview 
of these acts where such individuals had criminal records and were 
suspected of the commission of crimes of violence. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 87 

Inasmuch as practically all privately owned machine guns at the 
time of the enactment of the National Firearms Act, were in the hands 
of banks or law-enforcement officers, very little difficulty was encoun- 
tered in the enforcement of the law until the influx of so-called war 
souvenir weapons, which were either sent or brought back by the 
military forces. As soon as it became apparent that these weapons 
were becoming a threat to law enforcement, this Unit instituted in 
September 1945 an intensive investigative and educational program 
designed to bring about the registration of all fully automatic weapons 
such as machine guns and machine pistols. Every medium of pub- 
licity was resorted to, including newspaper and magazine articles, 
radio and television programs, public addresses, exhibits and posters, 
as well as direct notices to veterans as to the requirements of the acts. 

During the last 5 years 103,000 firearms have been examined, result- 
ing in the registration with the Bureau of Internal Revenue of 14,717 
weapons, 99 percent of which have been machine guns and machine 
pistols. Eight thousand three hundred and seventy-nine of these 
weapons were rendered permanently unserviceable through facilities 
arranged by the Government in accordance with a program inaugu- 
rated by the Unit by which the owners of the firearms would volun- 
tarily agree to their deactivation. One hundred and sixty machine 
guns and machine pistols, 400 sawed-off shotguns, and 92 sawed-off 
rifles have been seized in connection with criminal cases perfected 
by the Unit. 

Due to the Unit's investigative effort and the publicity campaign 
carried on in conjunction therewith, underworld characters are finding 
it increasingly difficult to acquire machine guns from veterans and 
their families. As the result, these criminals are purchasing shotguns 
and sawing off the barrels with the intent of using them in the com- 
mission of violent crimes. Under the law, the failure to register a 
shotgun sawed off to less than 18 inches in length subsequent to acqui- 
sition does not, in the absence of a transfer, constitute an offense. 
Legislation to correct this defect in the law is needed. 

In order that the Unit might have the cooperation of local officials 
in the enforcement of the National and Federal Firearms Acts and 
so that they would understand just how these laws could be of assist- 
ance in maintaining law and order in their communities, every police 
department and sheriff's office in the United States has been circu- 
larized, and in a great many instances contacted by investigators. 
The Unit is, of course, anxious to be of every assistance consistent with 
its jurisdiction to both local officials and this committee in connection 
with the suppression of interstate crime. 

The Chairman. Mr. Avis, we appreciate your statement. You have 
made one suggestion for legislation which would help the enforcement 
work of your Bureau. Do you have any other recommendations of 
that nature ? 

Mr. Avis. That is all, Senator. 

The Chairman. How serious is the matter of failing to register 
shotguns, sawed-off shotguns, and so forth? 

Mr. Avis. There is no terrific volume involved, Senator, but when 
you get one of those cases it is usually the kind of fellow that ought 
to be put in the penitentiary. He is usually a racketeer or a robber. 
Two cases that come to my mind in the last 2 weeks involved in both 



88 ORGANIZED CRIME EST INTERSTATE COMMERCE 

instances criminals with long robbery records. One of them was on 
probation with a 20-year sentence from a California penitentiary. 
As far as volume of cases, I would say it is not a serious matter, but 
the intent of the Firearms Acts was to reach these specific situations 
which the local officers could not reach under their State statutes. 

The Chairman. Thank you very much, Mr. Avis. Are there any 
questions, Mr. Halley? 

Mr. Halley. No ; I have no questions. 

The Chairman. Mr. Foley, it is quite apparent that we are not go- 
ing to be able to finish this most useful and interesting session at this 
time. I wonder what is your pleasure and the pleasure of the other 
gentlemen who have been so good as to come up here this morning. 

Mr. Foley. We are at your disposal, and anything that suits your 
convenience I am sure we can adjust our schedules to meet, Mr. Chair- 
man. If you would like to have us come back this afternoon, we will 
be glad to come back this afternoon. On the other hand, if you want 
to ask us to come back tomorrow morning, that will be entirely agree- 
able. 

The Chairman. Mr. Foley, could you come back here at 2 o'clock 
and carry on this afternoon? 

Mr. Foley. That will be entirely satisfactory. I have three addi- 
tional witnesses and I think probably their part of the schedule would 
take about an hour, that is, not including any questions that you might 
want to put to them. 

The Chairman. We would appreciate it very much. I am sorry to 
inconvenience you and your other witnesses, but we have this situation. 

Mr. Foley. We will be very happy to be back at 2 o'clock. 

The Chairman. We will stand in recess until 2 o'clock this after- 
noon when we will resume our meeting here. 

(Whereupon, at 12 noon the committee recessed until 2 p. m. the 
same day.) 

afternoon session 

(The committee reconvened at 2 : 40 p. m. pursuant to the taking of 
the noon recess.) 

The Chairman. The committee will come to order. The Chair 
wishes to apologize for being late. At the time we recessed I did not 
know that the draft was to be voted on at 2 o'clock, and then follow- 
ing that we had some discussion about extension of rent control for the 
District. 

Mr. Foley, who should appear as the next witness ? 

Mr. Foley. Mr. Chairman, if it is agreeable, I would like to call Mr. 
Harry Anslinger, the Chief of the Narcotics Bureau as our next 
witness. 

TESTIMONY OF HARRY J. ANSLINGER, COMMISSIONER OF NAR- 
COTICS, BUREAU OF NARCOTICS, ACCOMPANIED BY M. L. HAR- 
NEY, ASSISTANT TO THE COMMISSIONER 

The Chairman. Mr. Anslinger, we appreciate your appearance. 
The committee has had a lengthy executive session with Mr. Anslinger, 
and today Mr. Anslinger will testify about matters which he feels can 
be made public at this time. 

Mr. Harney, we welcome your appearance also. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 89 

First, Mr. Anslinger, you became Commissioner of the Bureau of 
Narcotics upon its creation in 1930, did you not? 

Mr. Anslinger. Yes. 

The Chairman. You have held that position since that time ? 

Mr. Anslinger. Ever since. 

The Chairman. I think the effective work you have done deserves 
the compliments of the committee and this country. All right, Mr. 
Anslinger. 

Mr. Anslinger. Enforcement of narcotics laws in this country for a 
generation has not only stopped the spread of narcotic addiction but 
has reduced its incidence by more than half. This reduction has been 
steady and unspectacular. But over the years it has represented a 
great gain against the traffic. The downward trend in the traffic and 
in addiction, which was continued and was even accelerated through 
the war years, recently has shown a reversion. Some retrogression 
was to be expected. However, the recent increase in addiction, mainly 
among young hoodlums, and the more ready availability of heroin in 
many parts of the country has been marked. 

Since it is a truism that addicts make addicts, and because a ma- 
jority of the persons who become addicted cannot be cured by any 
means presently known, there is a tremendous responsibility on law 
enforcement to prevent addiction by shutting off courses of narcotic 
supply. Our present situation suggests that our agent force is nu- 
merically inadequate. We are carrying on with about the same appro- 
priation as we had 20 years ago. I think it is actually less. The fact 
that we have practically the same funds as in the immediate prewar 
days means that our agent force has been reduced about one-fourth 
from that period. This is a severe attrition in an organization which 
must be spread so thinly. We have approximately 180 men for the 
entire country. 

The Bureau of Narcotics is daily concerned with interstate criminal 
organizations. This is obviously the case since most of the narcotics 
in the illicit traffic are not produced within the United States but flow 
here from abroad. On being landed here, they are distributed through- 
out the country. This distribution is accomplished sometimes by indi- 
viduals, but more generally by organizations of greater or less com- 
plexity. Sometimes a relationship between individuals in these organ- 
izations will be merely on the order of buyer and seller. More often 
it will consist of a number of persons in a common conspiracy to dis- 
tribute narcotics. Persons may shift from one organization to another 
and intermittently in and out of the traffic. 

However, our experience has taught us that once a man has had a 
taste of the business, he is a logical suspect to repeat. Before the war, 
some of the most important gangsters in the country were in the illicit 
narcotic traffic at one time or another. 

Such hoodlums as "Waxey" Gordon, "Legs" Diamond, "Lucky" 
Luciano and their organizations have from time to time dipped into 
the narcotics traffic. Perhaps the most notorious gang was the so- 
called Murder, Inc., headed by Louis "Lepke" Buchalter. This was 
not only an interstate but actually an intercountry and intercontinent 
organization obtaining its supplies in China, mostly in the Japanese 
concession in Tientsin, and distributing them from New York 
throughout the country, particularly to the Southwest. At the time, 
we estimated this organization smuggled into this country and dis- 



90 ORGANIZED CRIME EST INTERSTATE COMMERCE 

tributed enough narcotics to supply one-fifth of the entire addict 
population. 

Sometimes big-shot racketeers get into the narcotic traffic by merely 
financing ventures of others. Sometimes they "muscle in" on a lucra- 
tive business built up by lesser criminals. Buchalter was a good 
example. We proved that circumstance in the case where we con- 
victed him, and he got a 12-year sentence on narcotics charges. On 
the other hand, Emanuel "Mendy" Weiss, often considered Buchalter's 
first lieutenant, actually participated directly in the narcotics busi- 
ness for several years. We arrested Weiss when he became a fugitive 
on narcotics and murder charges and he was successfully prosecuted 
with Buchalter for murder by the New York authorities. He was 
convicted on narcotics at the same time. 

Naturally the interest of major racketeers in the narcotic traffic 
is as far removed as possible from overt participation. It may be 
only a small item of their manifold operations. Assembling of com- 
petent evidence against them is a tremendously difficult undertaking. 

Interstate crime operations may take some specialized forms. Be- 
fore the war we had to deal with a situation where the facilities of a 
Chinese tong were being used in the interstate distribution of drugs. 

In the war years, we had to cope with the depredations of bands of 
accomplished robbers and burglars who, from centralized points, 
ranged all over the map robbing and burglarizing legitimate whole- 
sale narcotics stocks. That is still the case today. 

Incidentally, in meeting this problem, we found the interstate flight 
from justice law to be of great help in those cases where it appeared 
the prosecution should be locally on robbery or burglary charges rather 
than for a Federal narcotic offense. 

Organizations of interstate racketeers are the underground railway 
over which passes crime of all sorts in this country. 

In 1947, through breakdown in controls in that country, a tremen- 
dous quantity of cocaine, the output of 17 clandestine factories, be- 
came available in Peru. Many seamen on ships plying between our 
east coast and parts in Peru engaged in smuggling this drug, and the 
aggregate result was that a very substantial amount of cocaine was 
brought in. Within several months, cocaine appeared in the illicit 
narcotic traffic in almost every section of the country. Prior to that 
time, the cocaine traffic had been practically nonexistent for more 
than 15 years. You couldn't find one cocaine case in a thousand that 
we sent to the penitentiary. 

Tremendous efforts by this Government and the Peruvians have 
materially reduced the influx of cocaine. It is just about dried up now. 
The suppression of this traffic has averted a serious crime wave 
because the use of cocaine always presages a crime wave. 

Anyone who reads the daily papers must realize that interstate 
criminals in commercial rackets, of which narcotics is one, number 
among the ranks some of the most dangerous and deadly thugs in 
the country. 

Joseph Sica and Alfred Sica, of California, are hoodlums with 
important underworld connections in the East and in California to 
which State they came some years ago. In 1949 a narcotics case was 
developed against the Sicas principally on the testimony of one 
Abraham Davidian. Early this year while the case was pending for 
trial, Davidian was shot to death while sleeping in his mother's home 



ORGANIZED CRIME IN INTERSTATE COMMERCE 91 

in Fresno, Calif. The reason I mention these cases is that I want 
to lead up to the recommendations that I am making. 

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

One Ignazio Antinori of Tampa, Fla., went to Habana, Cuba, fre- 
quently to obtain narcotics for middle western associates. Their lead- 
er was Joseph DuLuca. Allegedly because he delivered some drugs of 
poor quality and did not promptly make restitution, Antinori was 
killed in Tampa by shotgun fire iii 1940. In 1942, we arrested Du- 
Luca, Antinori's two sons, Paul and Joseph, and several others. They 
were convicted in a trial in which Carl Carramusa, a codefendant 
appeared as a witness for the Government. Carramusa moved to Chi- 
cago to escape possible vengeance by the combine. In 1945, as he was 
repairing a tire in front of his home, he was killed by a shotgun 
blast before the eyes of his 15-year-old daughter. The murder is 
still unsolved. Neighbors who could have furnished information re- 
main silent because of fear. 

Many other such incidents could be cited. 

With the help of our sister services in the Treasury and with the 
fine support of law-enforcement officers throughout the country, we 
have employed all our resources to reduce the internal narcotic traffic, 
With about 2 percent of the Federal criminal law-enforcement per- 
sonnel, we account for more than 10 percent of the persons committed 
to Federal penal institutions. 

Through the United Nations, where I am the United States rep- 
resentative on the Commission on Narcotic Drugs, and through other 
channels of international cooperation, this Government has been ex- 
erting 'every effort to see that the external sources of narcotic drugs 
are eliminated. Right now, we are trying to bring about agreement 
among opium-producing countries, particularly in the Near East, 
to reduce their production to medical needs. We already have an 
agreement with Turkey, Yugoslavia, Iran, and India to limit the 
production of opium to world medical needs. That agreement will 
go to the United Nations Commission and then to the Assembly 
for signature, we hope. The idea is to set up an international monop- 
oly within the United Nations which will allocate the opium re- 
quired to these countries for production. The monopoly will buy it 
and dispose of it. We hope that in that way we can eliminate this 
tremendous opium overproduction particularly in Turkey and Iran. 
The present main source of supply for heroin in this country today is 
Istanbul, Turkey; for opium, it is Iran. Narcotics may come direct 
or by European way-stations. Mexico, an important source of supply 
in war years has happily been reduced in prominence, except for 
marihuana, due to the efforts of its Government to suppress the 
traffic and because alternate supplies are now available from the Near 
East. 



92 ORGANIZED CRIME IN INTERSTATE COMMERCE, 

Where requested, we have assisted foreign police in apprehending 
some of their international traffickers supplying this country with 
drugs. We maintain, in booklet form, a watch list of major inter- 
national narcotic suspects. We distribute this in strategic points 
in this country and abroad. We believe this has served to restrict 
the movements of many of these racketeers and it regularly results in 
the apprehension of some of them. On one occasion, the assistance of 
this list served to break up an international smuggling ring in a 
matter of a few days. 

One of the largest smuggling rings, probably the largest that we 
ever encountered was eliminated through the use of this so-called 
blacklist. The consul in Istanbul at that time telegraphed No. 89 
here, and at that point the police of 12 countries went into action 
and broke up the ring in a very short time. 

What I have said probably forecasts the recommendations I would 
make. The narcotic traffic is a vicious, commercial racket which lives 
on the slow murder of its customers. 

These are the recommendations, Mr. Chairman : 

No. 1. The average prison sentence meted out in the Federal courts 
is 18 months. Short sentences do not deter. In districts where we get 
good sentences the traffic does not flourish. You heard Mr. Avis talk 
this morning about the situation in Louisiana. When you get a good 
judge who metes out appropriate sentences the traffic disappears. 

Both the League of Nations and the United Nations have recom- 
mended more severe sentences as one of the best methods to suppress 
the traffic. 

In many countries that has been very effective. 

No. 2. There should be a substantial increase in the authorized 
strength of the Bureau of Narcotics. I stressed this point before. 

No. 3. Federal law-enforcement agencies dealing with racketeers 
should be provided with the means of protecting Government wit- 
nesses and persons furnishing information under all circumstances. 
The two cases I mentioned before illustrate that point. This might 
mean changes in the appropriation act language of some services. 
Also, the criminal laws dealing with the protection of witnesses* might 
be strengthened. 

No. 4. I submit as worthy of study a proposal that some centralized 
agency maintain a gallery of major interstate racketeers and sys- 
tematically collect, correlate, and disseminate information respecting 
them, a procedure along the lines of the Treasury Department lists of 
major narcotic suspects. We have both a national list and an inter- 
national list. 

Often the operations of modern big-time racketeers are so diverse 
and so extensive geographically that few individual local officers can 
comprehend their magnitude or realize the significance of the small 
segment which is within their ken. A device of this sort which would 
spotlight the operations of a major criminal would prove most help- 
ful. 

We couldn't possibly get along today without those two lists. As a 
matter of interest, the lists first were to have been published by the 
League of Nations, but they found they would have been in difficulty in 
broadcasting pictures and information on suspects. So we undertook 
that work. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 93 

No. 5. We would like to see more of the States set up special State 
narcotic law-enforcement squads as is the case in Pennsylvania and 
California. Also, we would like to see more cities organize special 
police narcotics squads similar to those of Los Angeles and New York. 

The Chairman. Thank you very much, Mr. Anslinger. 

Any questions that I may ask or that Mr. Halley may ask, if you 
feel that answering them would interfere with your work or that the 
answer should be kept confidential, do not hesitate to say so. 

First, Mr. Anslinger, in connection with your first recommendation 
of longer sentences, as you know, we are preparing a study as to the 
length of sentences handed out by the various district courts. You 
find that where you have more severe sentences, you have less traffic 
in narcotics. Do you recommend that the narcotics law be changed 
by Congress to provide for larger sentences, or should it be handled 
by the judicial council going over the matter with various district 
judges, pointing out to them the over-all picture and importance of 
larger sentences from the national viewpoint? 

Mr. Anslinger. There should be a minimum sentence for the second 
offense. The commercialized transaction, the peddler, the smuggler, 
those who traffic in narcotics, on the second offense if there were a 
minimum sentence of 5 years without probation or parole, I think it 
would just about dry up the traffic. 

The Chairman. Many district judges on first conviction give of- 
fenders a suspended sentence in many cases, do they not? 

Mr. Anslinger. That is true. 

The Chairman. But most of the big operators you have have been 
before the courts several times. If you had a larger sentence for the 
second and third convictions, do you think that would help your 
problems greatly I 

Mr. Anslinger. I think it would go a long way toward suppressing 
the abuse of narcotics. Most of these peddlers have an average of 
three convictions, and the third conviction is usually 18 months. If 
they had to serve 5 years on the second conviction, they certainly would 
not try it again. Probably after the first conviction they would not 
risk a second conviction. 

The Chairman. In connection with point 2 of your recommenda- 
tions, I happen to know that many of your agents work long hours 
and do not think about quitting time. They very infrequently have 
time off. They do put in a great deal more work than they are re- 
quired to do, and from what I know about it, I agree that you should 
have a larger authorized strength. I think the same thing is true 
about a good many other enforcement agencies. 

I wanted to ask about the Bureau of the Budget and the appro- 
priation for next year. Has any provision been made for increasing 
your strength in the next fiscal year? 

Mr. Anslinger. The budget allowed us just about what we asked 
for, but it was cut down in the House. Under these limiting amend- 
ments we would not have much more than we have right now. 

The Chairman. The third point is that you simply do not have the 
force or the money to protect your witnesses between the time the case 
is made or the indictment is returned and the trial in the district court 
is instituted. Is that the situation? 

68958— 50— pt. 2 7 



94 ORGANIZED CRIME EST INTERSTATE COMMERCE 

Mr. Anslinger. In these important cases like the Sica case, we tried 
to protect our witnesses, but we just did not have the manpower. 
Where you have an important case like that I think the witness is 
entitled to protection. This man appeared before the grand jury, and 
it wasn't many weeks afterward that he was shot to death in his home. 

The Chairman. You have had in addition to the cases you have 
mentioned here several other similar situations, have you not, Mr. 
Anslinger? 

Mr. Anslinger. Yes, sir ; a number of cases of that kind. 

The Chairman. The fourth point is one which is very interesting. 
That is one of the things that I think our committee may be useful in, 
although such a list should be maintained by the executive enforce- 
ment officers. An over-all picture for the benefit of the enforcement 
officials of the Federal and State Governments would be of great 
benefit not only to you but to the State enforcement officers and to the 
other Federal enforcement agencies, would it not ? 

Mr. Anslinger. The efficacy of that list has been demonstrated so 
many times in our work abroad, and it has resulted in the apprehen- 
sion of so many important racketeers, that if we could do that on a 
national scale with all racketeers I think it would be extremely 
beneficial. 

The Chairman. Would such a list be made public ? 

Mr. Anslinger. No, sir. We distribute these lists only to certain 
police departments, State organizations, of course, nearly all of the 
Federal enforcement agencies. It is a list that should not be made 
public, but certainly the racket fellows should know that there is such 
a list and that they are on it. 

The Chairman. Where, in your opinion, should such list be kept 
if you should compile it, Mr. Anslinger? 

Mr. Anslinger. I prefer to let the committee make a recommenda- 
tion on that. 

The Chairman. Doesn't the FBI file generally contain all of this 
information? That is, does it not include other than things that 
they have jurisdiction of? 

Mr. Anslinger. They have a master file of most all of these fellows. 
Certainly if they have been convicted, they are all in there with their 
fingerprints and photographs and their previous records. We call on 
the FBI for a lot of that information in making up our own lists. 

The Chairman. Mr. Anslinger, would you care to give us any more 
information on the sources abroad of morphine and narcotics at the 
present time? You mentioned Peru, Istanbul, and Mexico. 

Mr. Anslinger. There is a considerable amount of heroin coining 
in from Italian ports. I think that is a transit point for the heroin 
from Istanbul. The same thing can be said about French ports, 
Marseilles, and so forth. Those three countries are the major sources 
of supply. But the trouble is with the overproduction in Turkey and 
Iran, and there we hope to have this agreement signed at the next 
sessions of the Assembly of the United Nations. This is the first agree- 
ment of that kind we have been able to get. The United States Gov- 
ernment has been working on this since 1009.- So in December we 
finally got the producing nations on paper to agree to these allocations. 

We have some trouble with opium coming from India, and the All- 
India Congress has taken action to try to bring down the so-called 
legitimate traffic in opium. For instance, in Bombay or Calcutta 



ORGANIZED CRIME IN INTERSTATE COMMERCE 95 

there are some 500 or 600 opium shops where you can buy opium 
across the counter. It is used there mostly for eating purposes. We 
have been receiving a great deal of that opium here. That is not a 
major source, but as long as they maintain these shops and the sea- 
men can go in and buy opium, 75 cents for three tolas, and get $100 
for it in New York, we are going to have smuggling. At the United 
Nations it is a question that is up for discussion. It is on the agenda. 
at every session. In fact, while India is to get about 6 percent of the 
total world's share of production, as long as they have this tremen- 
dous production in India we do not feel that they are entitled to it 
until they close these shops. 

The situation in Siam is unhappy. It is the only country in the 
world today that still legalizes smoking opium. Through the efforts, 
I would say, of the Treasury Department mostly, all the rest of the 
countries have shut up their opium shops and have prohibited opium 
smoking and legalized over-the-counter sales. 

The Chairman". Mr. Anslinger, do you wish to make any public 
statement about the activity or lack of activity at the present time? 

Mr. Anslinger. I am not in any position to make any statement at 
this time. 

The Chairman. Mr. Anslinger, you are very familiar, of course, 
with the names that customarily appear on the list of alleged big-time 
racketeers and gamblers. The people on those lists are not primarily 
operators in narcotics traffic. Do you find any names of people on 
those lists also on the list of those engaged in narcotics ? 

Mr. Anslinger. Oh, yes, we frequently find those men dipping into 
the narcotics traffic. The list that I think you refer to, the list of 
800 known racketeers in the so-called combine, we have already sent 
to the penitentiary about 200 o* those 800 listed. 

The Chairman. That list of 800 contains the names of racketeers 
well known in other kinds of business, other than narcotics? 

Mr. Anslinger. Yes, sir. 

The Chairman. I think that is all. 

Mr. Halley. You probably will be gratified to know that already 
that list of 800 has served a very valuable purpose in connecting up 
names and activities in the .committee's preliminary investigations. 
Your compilation actually works. I have only one question. Would 
you care to say anything about the form in which the organized crim- 
inal activities about which, you have talked take place? Is there any- 
thing you can say about the structure of the organization, whether it 
is a loose-knit organization or a tight-knit one? I know you cannot 
say too much, but can you publicly give any idea as to the nature of 
any Nation-wide criminal organization that you might have in mind? 

Mr. Anslinger. I would say that all of the members of this com- 
bine 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. 

Mr. Halley. Do the activities in one part of the country occur as a 
result of instructions given in other parts of the country? 

Mr. Anslinger. No ; I do not think it works on that basis. In some 
sections it is pretty well organized in that particular way, but I 
wouldn't say that one section of the country controls another section. 

Mr. Halley. Do they confer together? 



'96 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Mr. Anslinger. They confer together, oh, yes ; talk to each other, 
deal with each other. 

Mr. Hallet. They confine their dealings pretty well to the family; 
is that correct? 

Mr. Anslinger. That has been our experience. They have off- 
shoots. They have associates in other rackets. They make connec- 
tions for persons outside of their own combine. 

Mr. Hallet. When yon say that 200 of these 800 names you men- 
tioned have been convicted, do you mean they have been convicted for 
narcotics violations? 

Mr. Anslinger. Two hundred of them have been convicted. 

Mr. Hallet. The entire group, I understand, include crimes of all 
kinds. 

Mr. Anslinger. Of all kinds. Naturally, the other 600 that we 
have not apprehended are all considered by us to be narcotics suspects. 

Mr. Hallet. You have given an example of people who have been 
murdered after testifying or cooperating with the law. Is that to 
convey the impression that this group enforces its decisions by vio- 
lence ? 

Mr. Anslinger. Unquestionably. 

Mr. Hallet. Thank you. 

The Chairman. Mr. Anslinger, we asked you in executive session 
to release to the public your idea about the size of the narcotics traffic 
in the United States today and also the number of nonmedical addicts. 
What is your estimate of the size of the narcotics traffic in the United 
States? 

Mr. Anslinger. From recent surveys that we have made — and we 
think they can be confirmed, and we are rather conservative about 
this — 1 nonmedical addict to every 3,000 of the population, and that 
is a reduction over a number of years from 1 in every 1,000. I might 
point out that during the First World War in the age group about 
18 to 38, the Army gets all of them, and they rejected 1 out of every 
1,500 for drug addiction. In the Second World War in that age group 
the rejections were 1 in every 10,000, which is a much better figure 
than the one that I have given you about 1 addict in every 3,000 of the 
general population. 

The Chairman. That would be 50,000. 

Mr. Anslinger. Koughly 50,000. 

The Chairman. Can you give an estimate of the amount of money 
involved in this traffic ? 

Mr. Anslinger. That is very difficult because I would say in half of 
the traffic they get their narcotics by diversion through forged pre- 
scriptions and robbing drug stores. We have about 130 drug-store rob- 
beries a month. We catch up with a lot of these robbers and send them 
to the penitentiary. In this district here, about five States, a couple of 
years ago we sent as many as 25 of the robbers to the penitentiary. 
So I would say half of the traffic gets narcotics by forging prescrip- 
tions, stealing from doctors, and other forms of diversion. The other 
half that get their stuff through smuggled sources, sometimes the 
adulteration runs very, very high in some areas. Close to the seaboard 
adulteration now is not running so high because heroin is rather 
plentiful at this time. 

The Chairman. Mr. Harney, do you have anything you want to 
add to Mr. Anslinger's testimony ? 



ORGANIZED CRIME IN INTERSTATE COMMERCE 97 

Mr. Harney. No, thank you. 

The Chairman. Thank you very much, Mr. Anslinger. 
Mr. Foley. Mr. Chairman, I would like to call Mr. U. E. Baughman, 
the Chief of the United States Secret Service as our next witness. 

TESTIMONY OF U. E. BAUGHMAN, CHIEF, UNITED STATES SECRET 

SERVICE 

The Chairman. Mr. Baughman, we appreciate your appearance 
here today. First, Mr. Baughman, how long have you been the head 
of the United States Secret Service? 

Mr. Baughman. Just about a year and a half, Mr. Chairman. 

The Chairman. Prior to that time you were in the Service? 

Mr. Baughman. I have been in the Secret Service just about 221^ 
years. 

The Chairman. Very well, Mr. Baughman, you may proceed with 
your statement. 

Mr. Baughman. Mr. Chairman, the major duties of the United 
States Secret Service are (1) protection of the President and mem- 
bers of his family, (2) the suppression of counterfeiting, and (3) 
the suppression of the forgery and fraudulent negotiation of Gov- 
ernment checks, bonds, and other obligations of the United States. 

The crime of counterfeiting has increased rapidly during the past 
2 years, both at home and abroad. For the period July 1, 1949, to 
May 31, 1950, the Secret Service seized $1,222,317 in counterfeit bills 
and coins, received 1,329 counterfeiting cases for investigation, and 
arrested 511 persons for counterfeiting offenses. 

The counterfeiting of United States currency is not only Nation- 
wide, but is also rapidly becoming world-wide and is increasing daily. 
Occasionally we find that major counterfeiting operations are con- 
ducted on what might be termed a syndicate basis, but in general the 
fact is that most counterfeiting plants are run by small independent 
groups. A typical group would consist of an engraver, a printer, and 
perhaps a financial backer or backers, and one or more distributors. 
The engraver and printer produce counterfeit plates and notes which 
are delivered to the distributors who, in turn, sell the counterfeits to 
the actual passers. Rarely if ever do the individual passers know the 
identities of any principals except for the distributors with whom they 
do business. 

Frequently we find that currency counterfeiters are also impli- 
cated in other major criminal enterprises, such as the narcotic traffic, 
the production and distribution of bogus lottery and sweepstakes 
tickets, the counterfeiting of internal-revenue stamps and the sale or 
purchase of bootleg liquor. Another widespread illicit business dur- 
ing the late war was the wholesale counterfeiting of ration stamps for 
food, gasoline, and other commodities, and our experience has proven 
that many of those who engaged in ration-stamp counterfeiting have 
lately turned to the counterfeiting of currency. 

A good example is found in a major case just completed in Buffalo, 
N. Y. During several months of intensive investigation and under- 
cover work, Secret Service agents arrested 14 principals and 62 others 
involved to a lesser degree, and seized a counterfeiting plant respon- 
sible for the production of $800,000 in counterfeit United States cur- 



98 ORGANIZED CRIME IN INTERSTATE COMMERCE 

rency and $500,000 in bogus Canadian currency. In addition, agents 
seized sweepstakes and lottery tickets, counterfeit postage stamps, and 
established that several of the offenders were among the largest dis- 
tributors of counterfeit OPA ration stamps during the war. This ease 
had its inception in Los Angeles, Calif., spread to New York City and 
culminated in Buffalo, and the counterfeit bills produced by the group 
were passed in most of the 48 States. The counterfeits were very de- 
ceptive and purported to be issued on all 12 of the Federal Reserve 
banks. At least two of the principals in this case were active in the 
narcotic traffic between the United States and Canada. 

Another case involving the widespread circulation of counterfeit 
$20 notes also illustrates the potential value of counterfeit United 
States currency abroad. Secret Service undercover agents arrested a 
known criminal in Georgia and seized $142,000 in counterfeit $20 bills 
which the defendant had planned to send abroad by merchant seamen, 
who would use the counterfeits to buy narcotics, diamonds, and jew- 
elry in the black markets, to be smuggled into the United States. The 
European black markets provide excellent outlets for bogus American 
money, much of which is manufactured in Europe. 

Recently here at home the Secret Service uncoA 7 ered a ring of auto- 
mobile thieves, while investigating a $100,000 counterfeiting case on 
the eastern seaboard. A principal in the counterfeiting case was ar- 
rested in Florida and found to be carrying a quantity of New Jersey 
automobile registration blanks, which he had bought for $2,000 from 
another defendant in New Jersey. As a result, New Jersey authorities 
arrested about 30 persons for stealing automobiles and fraudulently 
registering them with the stolen certificates. 

These cases are merely brief illustrations of the fact that counter- 
feiters are often active in other criminal fields. There are more such 
cases in the Secret Service files, many relating to other organized 
crimes. For example, a few years ago the Secret Service, the Cus- 
toms Bureau and the Royal Canadian Mounted Police combined to 
break up a gang of international gold thieves and smugglers. The 
3-year investigation resulted in the arrest and conviction of five men 
in Buffalo, N. Y., and five others in Toronto, Canada, and revealed 
that they had stolen, sold, and smuggled gold worth $3,000,000 during 
the 3-year period. This was an organized criminal venture which in- 
volved refiners, "fences," smugglers, and distributors, in Canada and 
the United States. 

Another major enforcement problem of the Secret Service is the 
forgery and fraudulent negotiation of Government checks and bonds. 
Frequently the Secret Service arrests organized gangs of check thieves 
and forgers, but as a rule these groups operate locally and not on a 
national scale. Occasionally, however, their operations might extend 
into several States. About a year ago our agents arrested two men 
and a woman who had robbed safes in high schools from coast to 
coast, stealing large numbers of savings bonds which they forged and 
cashed before we caught them in California. 

When counterfeiting is rampant, the Secret Service is seriously 
handicapped in the investigation of forged checks and bonds because 
it becomes necessary to divert many agents who would normally be 
available to investigate forgery cases. Unfortunately, the present 
force of the Secret Service is not commensurate with the work it is 



ORGANIZED CRIME IN INTERSTATE COMMERCE 99 

required to do. Actually there are less than 200 agents available 
to cope with the criminal and noncriminal investigations now on hand 
and those received daily. A brief account of these investigations will 
demonstrate the enormous task faced by these agents. From July 
1, 1949, to May 31, 1950, the Secret Service received for investigation 
35,730 forged checks and bonds. On May 31 there were 17,959 cases 
still pending. During those 11 months our agents arrested 2,235 
persons for forgery. All this is in addition to the heavy load of 
counterfeiting cases which I mentioned earlier, and the backlog of 
pending cases represents more than 100 cases per agent. Last year 
our agents contributed more than 81,000 hours of voluntary uncom- 
pensated overtime and forfeited considerable annual leave in a con- 
scientious effort to reduce the terrific case load. 

It is interesting to note that James V. Bennett, Director of the Fed- 
eral Bureau of Prisons, recently declared that forgers of Government 
checks now represent one of the largest segments of the population of 
Federal penitentiaries, which gives some indication of the accom- 
plishments of the Secret Service in this enforcement field. At the 
same time, our field force is overworked and undermanned. 

The largest office of the Secret Service in New York City has but 
18 agents, with more than 3,000 cases awaiting investigation, aver- 
aging about 180 cases per agent. If all 18 were available for duty 
ever} 7 day, taking no annual or sick leave, and if each closed an average 
of 15 cases per month, within 1 year they could close only the cases 
on hand without taking into account the more than 500 cases received 
monthly by that office. These figures do not fully reflect our problems 
in that one office. New York has always been a center of counter- 
feiting activity, and frequently there are several major counterfeiting 
cases requiring investigation at one time. Counterfeiting investiga- 
tions require weeks and sometimes months of surveillance, and when 
at any one time there are four counterfeiting suspects to cover, which 
is not unusual, all the agents in the New York office, working 7 days 
a week, would not be adequate to maintain surveillance over the 
suspects even though all other investigations received no attention. 
This situation is typical of that in many other offices of the Secret 
Service. 

With the continued upsurge in counterfeiting and the constant flow 
of forgery cases, the biggest problem of the Secret Service is its short- 
age of agents. With an adequate number of men I am sure we could 
keep counterfeiting at a minimum, reduce the tremendous accumula- 
tion of forgery cases, and keep reasonably current with the thousands 
of new cases we receive monthly, which is impossible with our present 
force. 

The Chairman. Mr. Baughman, you say you now have about 200 
agents available to cope with your investigations on hand. Is that 
correct ? 

Mr. Baughman. Yes. 

The Chairman. How many did you have in 1939, in the prewar 
days, or in 1940 ? 

Mr. Baughman. Two hundred and thirty-two agents in 1940, and 
we have 176 agents now in the field to work on counterfeiting, forgery, 
and other types of criminal and noncriminal cases. 

The Chairman. So you had more agents in 1940 than you have now. 

Mr. Baughman. That is correct. Senator. 



100 ORGANIZED CRIME IN INTERSTATE COMMERCE 

The Chairman. Yet you say that as a result of rationing and for 
other reasons, counterfeiting is on the upsurge and has greatly in- 
creased during the last few years. 

Mr. Baughman. That is correct. In 1945 our check load increased. 
It doubled itself from approximately 20,000 to 40,000. 

The Chairman. By 1945 it was double over what it was in what 
period? 

Mr. Baughman. Over the previous year. 

The Chairman. What is your workload today compared with your 
workload in 1940, at which time you had a few more agents than you 
have at the present time ? 

Mr. Baughman. We have today approximately 19,000 cases on hand. 
In 1940 we used to run four or five thousand cases a year, that is, 
pending. 

The Chairman. In other words, it is four or five times as great today 
as it was in 1940, in number of cases. 

Mr. Baughman. That is correct. 

The Chairman. Among these counterfeiters and people dealing in 
counterfeit money, do you find some of the same people involved in 
counterfeiting and things relating to counterfeiting that you find 
involved in gambling transactions of an interstate character or in 
narcotics? That is, are some of the names in all these activities the 
same? 

Mr. Baughman. Not to any extent, to the so-called big-time 
gamblers, the names you hear about or read about, There has been 
information received at times that they have been suspected as the 
financial backers of certain counterfeit plants, but investigation has 
never revealed that that is actually so. 

The Chairman. Thank you very much, Mr. Baughman. We ap- 
preciate your cooperation. 

Mr. Foley. Mr. Chairman, I would like to call Mr. Strubinger, the 
Assistant Commissioner of Customs, as our next witness. 

TESTIMONY OF DAVID B. STRUBINGER, ASSISTANT COMMISSIONER 
OF CUSTOMS, ACCOMPANIED BY CHESTER A. EMERICK, DEPUTY 
COMMISSIONER OF ENFORCEMENT, BUREAU OF CUSTOMS 

The Chairman. All right, Mr. Strubinger. How long have you 
been the Assistant Commissioner of Customs ? 

Mr. Strubinger. About 11 months. 

The Chairman. How long have you been in the customs service? 

Mr. Strubinger. I have been in the customs service since 1939. 
Prior to that I was in the Internal Revenue Service for about 16 years. 
I have had about 29 years' service in the Treasury Department. 

The Chairman. Who is the gentleman appearing with you ? 

Mr. Strubinger. Mr. Chester A. Emerick, the Deputy Commis- 
sioner of Enforcement. 

Mr. Chairman and members of the committee, the Commissioner, 
Mr. Frank Dow, has asked me to present the statement of the Bureau 
of Customs as he is unable to appear personally because of previous 
commitments. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 101 

Included in the principal functions of the Bureau of Customs is 
the prevention of smuggling and the apprehension of persons engaged 
in the smuggling of merchandise into and out of the United States in 
violation of customs laws, Export Control Act, the Neutrality Act, 
and the Atomic Energy Act. 

MEANS EMPLOYED TO COMBAT SMUGGLING OPERATIONS 

Customs searching squads are maintained at all principal seaports 
for the purpose of searching vessels for unmanifested merchandise, 
particular attention being given to smuggled narcotics. To assist in 
the apprehension of smugglers, suspect lists are maintained at sea- 
ports, border ports, and airports, of entry of crew members as well as 
others suspected of being engaged in smuggling. Crew lists and pas- 
senger lists are checked immediately upon arrival of vessels, vehicles, 
or aircraft for suspects and if their arrival is noted they are given 
special attention. 

The Bureau of Customs employs approximately 2,500 customs in- 
spectors at the various customs ports throughout the United States, 
who perform inspectional duties in connection with the arrival of pas- 
sengers and merchandise. The Bureau also employs 800 customs port 
patrol officers, who are engaged in the searching of incoming or de- 
parting vessels, vehicles, aircraft, and trains. These port patrol of- 
ficers also are assigned to guard duty of suspected vessels and to patrol 
duties at ports of their assignment. 

In addition to the customs inspectors and port patrol officers per- 
forming duties as above indicated, there are about 200 customs agents 
who are assigned to criminal investigations. They investigate cases 
relating to smuggling in or out of the country in violation of the cus- 
toms laws, Export Control Act, Neutrality Act, and violations of 
navigation laws. 

In combating smuggling operations the use of paid informers has 
been quite effective. This is especially true on the Mexican border 
where the distances make it impossible to effectively guard the inter- 
national boundary without the assistance furnished by informers. 
Mexico is the chief source of marihuana smuggling into the United 
States and also a source of opium, heroin, and morphine. Every 
known means are employed to prevent and apprehend persons engaged 
in the marihuana and narcotic traffic, both on the borders as well as 
other ports of entiy into the United States. 

At many of the larger ports of entry customs port patrol officers 
operate from radio-equipped automobiles. Radio equipment, espe- 
cially the walkie-talkie type, has been used with excellent results in 
the Mexican border. 

To further combat smuggling operations mobile searching squads 
have been set up at strategic points along the Atlantic and Gulf coasts 
so that even the smaller ports have some protection. 

SMUGGLING OF NARCOTICS 

Most smuggled narcotics originate in the Orient, Europe, the Near 
East, and Mexico. Most of the marihuana consumed in the United 
States originates in Mexico. Seizures in marihuana in amounts 
varying from a few ounces to more than 100 pounds have been made 
on the Mexican border during recent months by customs officers. 



102 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

Prior to World War II smoking opium was almost invariably 
smuggled into the United States at Pacific coast ports with smaller 
quantities arriving elsewhere from the Far East. Subsequent to 
World War II smoking opium made its appearance in Mexico and 
since that time several large seizures of smoking opium manufactured 
in Mexico have been made along and adjacent to the Mexican border. 
The smuggling of cocaine has also been increasing during the last 
2 or 3 years. Substantial seizures of cocaine have been made at New 
York, Charleston, S. C, and Miami, Fla., which is believed to have 
its origin in Peru. The cocaine when seized was being smuggled 
into the United States either by crew members or by passengers or 
seized from illicit dealers subsequent to its illegal importation. 
Heroin, a derivative of morphine, has been seized in smaller quan- 
tities at various places on the Mexican border, as well as at a few 
of the seaports of the United States. 

In this connection it is noteworthy that customs seizures of narcotics 
and marihuana have been increasing tremendously during the last 5 
years. As an example, in 1946, 11,531 ounces of marihuana were 
seized ; in 1947, 15,562 ounces of marihuana were seized ; in 1948, 
24,732 ounces of marihuana were seized, and in 1949 there were 38,086 
ounces of marihuana seized. 

Mr. Chairman, with your permission I would like to depart from 
the text a little bit and give you some data on the fatalities suffered by 
enforcement officers. 

The Chairman, All right, sir. 

Mr. Strubinger. The suppression of smuggling has taken a large 
toll of enforcement officers. In the last 20 years 12 of our officers have 
been killed by smugglers, 6 more were killed while pursuing smugglers, 
and an additional 25 have suffered gunshot wounds. This is just an 
indication of the vicious type of criminal we deal with in going after 
smugglers. 

The Chairman. While you are discussing the increase in the amount 
of marihuana traffic, what percentage of the marihuana that is in- 
tended for this country actually gets seized? Of course you do not 
get it all. That would be a very difficult question, I am sure, but I 
am trying to set at the increase in consumption or the use of mari- 
huana in the United States. 

Mr. Strubinger. We are hopeful that we are seizing the majority 
of it. Actually we have no means of knowing. The thing that worries 
us of course is that our seizures are getting larger and larger all the 
time and we know we do not get it all. It is difficult to make a guess 
at how much is getting by, but as I say, since we are making larger 
and larger seizures, the inference is that a lot of it is getting by. 

The Chairman. I see. You may proceed. 

Mr. Strubinger. In order to further combat the smuggling of mari- 
huana and narcotics as indicated above, the Secretary is recommending 
that funds be provided to employ additional customs personnel at 
strategic points. 

METHODS EMPLOYED IN THE SMUGGLING OF NARCOTICS 

Narcotic smuggling operations on the seacoast of the United States 
are carried on by crew members of vessels as well as by passengers. 
Narcotics are landed usually by concealment on the smuggler's person. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 103 

On occasions narcotics are thrown overboard while the vessel is pro- 
ceeding to a dock and are picked up by confederates. Narcotics have 
also been landed by concealment in ship's laundry or other equipment 
being placed ashore. The use of false compartments in baggage by 
narcotic smugglers is also quite common. As a matter of fact every 
conceivable method is employed by the smuggler to evade detection. 

On the Mexican border narcotics and marihuana are smuggled 
either by means of carrying the narcotics across the international 
border and later being placed in an automobile for transportation to 
destination, or by means of concealment in an automobile and attempt- 
ing to cross the border in the hope of avoiding detection or by crossing 
at a place other than a customs port of entry. If the smuggling opera- 
tion is successful the marihuana and narcotics are then delivered to 
large centers of population throughout the United States where they 
enter the illicit traffic, thereby adding to the problems of the Bureau 
of Narcotics. 

Reports have been received from time to time of the use of aircraft 
m the smuggling of narcotics and other merchandise across the inter- 
national borders. Even as early as the prohibition era aircraft were 
used extensively in the smuggling of liquor from Mexico and Canada 
into the United States and there is no question but what the same 
means are being employed today in carrying out smuggling opera- 
tions. When this country completes its radar screen it, no doubt, will 
make it much more difficult to use aircraft in smuggling merchandise 
and aliens into the United States, if not preventing such use entirely. 

COOPERATION WITH OFFICERS OF THE BUREAU OF NARCOTICS 

Information secured by narcotic agents and customs agents relative 
to smuggled narcotics on board arriving vessels is transmitted to col- 
lectors of customs concerned and joint operations are then carried on 
by the investigative units and collectors' personnel to effect seizures of 
narcotics and arrests of persons involved in the smuggling operations. 
Officers of the Bureau of Customs and Bureau of Narcotics often 
operate jointly in conducting investigations. These investigations 
involve not only the smuggling of narcotics into the United States but, 
on occasions, their distribution in this country. 

COOPERATION RECEIVED FROM MEXICAN AUTHORITIES 

Customs officers stationed along the Mexican border receive the 
assistance and cooperation of Mexican authorities in the suppression 
of smuggling, especially the smuggling of narcotics. An effort has 
been made by Mexican authorities to stamp out the cultivation of 
marihuana and opium poppies. Numerous fields of poppies and 
marihuana have been destroyed by those officials. In spite of this 
assistance the traffic in narcotics and especially marihuana on the 
Mexican border continues. The profit element is so great that the 
smugglers will run the risk of apprehension, imprisonment, and con- 
fiscation of their automobiles and narcotics. 

The Chairman. Mr. Strubinger, what is the situation about the 
domestic production? Do you not have some fields of poppies and 
marihuana in the United States ? 



104 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Mr. Strubinger. Mr. Chairman, that is really the responsibility of 
the Bureau of Narcotics. I think they would know more about that 
than I do. We really do not concern ourselves too much about what 
happens after it gets in the United States unless it is a result of some- 
thing that we feel was a smuggling operation. 

The Chairman. Thank you very much, Mr. Strubinger. 

Mr. Strubinger. Yes, sir. 

The Chairman. Mr. Emerick, do you have anything to add ? 

Mr. Emerick. No, thank you, sir. 

Mr. Foley. I think, Mr. Chairman, Mr. Anslinger probably could 
give you some enlightenment on that question if you want to call him. 

The Chairman. Mr. Anslinger, I think the committee would be 
interested in that. You said something about it when we had an 
executive hearing. Is there any public statement you could make 
about the domestic production of marihuana ? 

Mr. Anslinger. There is a legitimate production of Indian hemp, 
which is one name for marihuana, in Minnesota and Wisconsin. 
There is a hemp industry there which is nourishing. During the war 
it was necessary to put up about 49 plants in 5 States. We were able 
to convince the agency that established those plants to keep them con- 
fined in that hemp-producing area. Iowa, Illinois, Wisconsin, Minne- 
sota, and Indiana had some production. These producers are 
registered under the Marihuana Tax Act. 

In Kentucky, where the seed is grown, where they have the long 
summer, we expect to have about 1,000 registrants there, and we had 
some 3,000 producers. 

The Chairman. How many now ? 

Mr. Anslinger. About three thousand producers of hemp seed dur- 
ing the war. That has been materially reduced since the war because 
hemp production has gone down considerably. 

There isn't very much diversion from those hemp fields. Occasion- 
ally a truck will move in at night, and the farmer will discover it in 
the morning and report it to the authorities. Generally we do not 
have much trouble in that area because the farmers are very alert and 
are very quick to report any suspicious characters to the local sheriff, 
and the sheriffs are all on the job in those territories where there is 
production. 

We have had some so-called illicit production in the East, in Florida, 
through some of the Southern States. We have just about eradicated 
all of the illicit hemp production in this part of the country, the New 
England States. 

The Chairman. Do you have some fields in New Hampshire that 
you destroyed at one time? 

Mr. Anslinger. Some time ago, yes, the local authorities informed 
us of a field up there, some considerable production, and we managed 
to eradicate that. It is rather difficult because the plant reseeds itself. 
Every year you get a new crop coming up. In some places where 
there was illicit production the grower would plant it inside a corn- 
field. Very soon the plants, which reach 15 or 16 feet in height in 
about 3 months, would be discovered. In the Middle West we had 
very good assistance from the WPA squads, particularly in Kansas, 
Nebraska, and that area. They did excellent work in destroying the 
voluntary growth. There is still a lot of that voluntary growth in 
States where there was production for legitimate purposes. It is 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 105 

not grown any longer for medicinal purposes. It has disappeared 
from the Pharmacopoeia. Its medical use was always questionable. 
I think the fact that we have eradicated all of this hemp — incidentally, 
we never got a dollar additional appropriation to do it, but the 
Alcohol Tax Unit helped us out in many sections of the country. It 
did excellent work where we didn't have the manpower. That is the 
reason we are getting this increased smuggling from Mexico, and we 
have called the attention of the Mexican Government to this condi- 
tion. I think if they exert the same effort, which they are trying to 
do, that they have exerted with respect to opium, I think you will 
find a cessation or some diminution of smuggling activities. We do 
get some hemp in the form of hashish from the Near East. There is 
some smuggling, not very much, some from South Africa. In three 
places, French Morocco, French Tunisia, and India, it is sold across 
the counter as hashish. We get some of that smuggling. But we 
have just about taken care of most of the illicit production except in 
the Middle Western States where you have that voluntary growth. 

The Chairman". So the domestic production is not one of your great 
problems. 

Thank you, Mr. Anslinger. 

Mr. Foley. Mr. Chairman, as our last witness I would like to call 
Mr. James Maloney, the chief coordinator of Treasury law enforce- 
ment. 

TESTIMONY OF JAMES J. MALONEY, CHIEF COORDINATOR, 
TREASURY ENFORCEMENT AGENCIES 

The Chairman. Will you come around, Mr. Maloney. Mr. Ma- 
loney, you have had a long and, I am sure, distinguished career with 
the Treasury Department. Will you tell us what your experience 
has been? How long have you been with the Department? 

Mr. Maloney. I have been 30 years in police work. I have been 
with the Treasury Department 20 years of that. 

The Chairman. How long have you been the chief coordinator of 
the Treasury enforcement agencies? 

Mr. Maloney. Approximately 2 years. 

The Chairman. All right, Mr. Maloney, you may proceed. 

Mr. Maloney. Mr. Chairman, the coordination of Treasury law- 
enforcement agencies was established in 1934. The purpose at that 
time was to coordinate the various Treasury activities for the sup- 
pression and prevention of smuggling. This was necessitated because 
of the persistence of a "Rum Row'' for smuggling liquor off our shores 
following the repeal of prohibition. The purpose was to put an end to 
the illegal importation of intoxicating liquors and narcotics. 

In 1036 the Secretary issued instructions extending the scope of 
the coordination system to include all criminal investigations of what- 
ever character for which the Treasury Department is responsible, and 
which require cooperation of other Federal or law-enforcement agen- 
cies. To head up this coordination program an experienced Treasury 
enforcement officer was designated as Chief Coordinator. The Treas- 
ury enforcement agencies are the Alcohol Tax Unit and Intelligence 
Unit of the Bureau of Internal Eevenue, the Bureau of Customs, the 
Bureau of Narcotics, United States Secret Service, and the Intelligence 
and Law Enforcement Division of the United States Coast Guard. 



106 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

Kegular meetings are held in Washington of the supervisory heads 
of the law-enforcement units, presided over by Under Secretary Foley. 

The field is divided into 15 districts, and a supervisory officer of 
one of the agencies is appointed as district coordinator in addition 
to his regular duties. These positions are rotated. The district coor- 
dinators hold monthly meetings, and coordinate their common prob- 
lems. Following each of the field coordination meetings reports are 
furnished to the Chief Coordinator's office, reviewed, and a digest is 
prepared for the Under Secretary, who has direct supervision over 
the Office of the Chief Coordinator. 

This "coordination of effort is not theoretical or imaginary, but a 
practical, workable, and a very real type of cooperation which works 
against the criminal from many different angles. The coordination 
of activities includes, but is not limited to, better utilization of man- 
power, use of airplanes for spotting criminal activities, use of cars 
equipped with two-way radios, the coordination of some 30 well- 
equipped laboratories manned by skilled technicians, who are able to 
make any determination desired by the law-enforcement agencies, 
including chemical and physical tests, as well as the examination of 
questioned documents. 

The results of this program have been highly gratifying. A difficult 
problem for any one of the services immediately becomes a problem 
for all the services in the country or in the district. A fugitive from 
one service immediately becomes a fugitive from all other services. 

The training of the officers of the Treasury enforcement agencies 
is also under the direction of the Chief Coordinator. This training 
was first inaugurated in 1937. Courses are prescribed, classes held, 
and the latest developments in techniques of criminal investigation 
brought to the attention of the officers, as well as the proper and 
legal methods which should be used in their investigations. With 
respect to the latter activity, a comprehensive course on the subjects 
of search and seizure, arrest, conspiracy, evidence, and court pro- 
cedure is given. There have been 459 schools, and approximately 
10,000 employees in attendance. 

The marksmanship training program for all the officers of the 
enforcement agencies, as well as the Treasury guards and White House 
Police, is directed by the Office of the Chief Coordinator. The quali- 
fication requirements, promulgation of safety rules and regulations, 
holding of competitive matches, awards of medals and certificates, 
and all other matters pertaining to the program are directed by the 
Chief Coordinator. 

The Chairman. Mr. Maloney, in other words, if Mr. Anslinger has 
some information which does not directly relate to the work of the 
Bureau of which he is Commissioner but which would be of value to 
one of the other bureaus, then that is handled through the Coordi- 
nator's office? 

Mr. Maloney. Not necessarily, Mr. Chairman. In the field they 
get together out there in groups once a month, and they get so they 
work hot only at the monthly meeting but every day. It develops 
into a one-family transfer of information freely. However, if it is 
something that would be of common interest to the department heads 
it becomes the subject of a meeting in Washington. 

The Chairman. I did not mean information would be passed from 
one department head to the other, but both the department heads and 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 107 

the agencies' units in the field coordinate their work and pass informa- 
tion from one agency to the other which would be of help and interest 
to them. 

Mr. Maloney. And when there is a fugitive from one agency, they 
transfer that information to the other agencies. 

The Chairman. I should think that would be a very useful opera- 
tion of all the agencies under Treasury and I am sure it has been. 

Mr. Halle y. I have no questions. 

The Chairman. Mr. Foley, in that connection what has been done 
and what could be done not only to coordinate all of the bureaus of 
the Treasury Department so that the men in one bureau can have the 
pertinent information that would be helpful to them in another bureau, 
but what steps are being taken to coordinate the information in the 
Treasury Department with the Justice Department or other depart- 
ments that might have an interest in that information? Or would a 
program of that sort be feasible ? 

Mr. Foley. I think a program of that sort is feasible, Mr. Chairman. 
Certainly in our own department we have found that the technique 
of coordination insofar as these six law enforcement bureaus are con- 
cerned that come under our supervision is most helpful. When one 
agency has men in an area where a problem arises and another agency 
might be short of manpower in that area, it is always easy through 
the Coordinator to develop cooperation and obtain assistance for the 
weaker of the agencies in that particular part of the country. 

On the interdepartmental level we have a very good working rela- 
tionship, of course, with the Department of Justice. The Attorney 
General and the assistant to the Attorney General, the Assistant Gen- 
eral in charge of the Criminal Division, and the Assistant Attorney 
General in charge of the Tax Division all of course come very closely 
in contact with me and with Secretary Snyder and with our general 
counsel and with other people in the Department working in this field. 
Whether or not more could be done in that connection I am not in a 
position to say. I do know that when we have interdepartmental 
problems we always have the active help and cooperation of the At- 
torney General and his people, and the same thing applies in the Post 
Office"and in the other departments that have investigating forces. 

The Chairman. We have the Department of the Treasury and the 
Attorney General, which includes, of course, the Immigration and 
Naturalization Service. We have the Post Office Department, which 
has an inspection group. Then the Central Intelligence Agency— the 
CIA— might have information from time to time which would be of 
use to other departments. The intelligence services of the Army, 
the Navy, and the Air Force. What other departments make investi- 
gations? 

Mr. Foley. The Securities and Exchange Commission has corporate 
financial information that it obtains through its work. The Federal 
Communications Commission has information that it gets in connec- 
tion with applications that are made to it for licenses. 

The Chairman. The Federal Deposit Insurance Corporation ? 

Mr. Foley. The banking agencies — the Comptroller of the Cur- 
rency and the Treasury Department, the FDIC and the Federal Re- 
serve Board — all have visitorial powers and are in a position to obtain 
financial information which is exchanged for mutual benefit. I think 
that about covers it. Can you think of any additional agencies 'i 



108 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Mr. Maloney. No other agencies charged with the enforcement of 
criminal statutes. 

I might say, Mr. Foley, that the Treasury is very closely related 
to practically every agency you have mentioned there, and every day 
and every week we cooperate together very closely through our office. 

Mr. Foley. Mr. Maloney represents the Department on Interde- 
partmental Committees that have overlapping functions in connection 
with investigative work. 

The Chairman. If it were possible to formalize the correlation or 
the working together between the departments as well as it is among 
these agencies of your Department, it might be of some assistance and 
some help, Mr. Foley. 

Mr. Foley. I think some attention could' be given to that. 

The Chairman. Particularly as to big-time gamblers or racketeers 
that our committee might be interested in, if there were some central 
coordination where information from each agency pertaining to those 
people could be assembled and gathered for the use of all agencies, 
that might give all of you a better picture of what those people are 
doing. 

Mr. Foley. I think that is what Mr. Anslinger had in mind perhaps 
when he was talking about a central clearing point for lists and 
information. 

The Chairman. Did not Attorney General Clark sponsor at least 
some small effort in that direction between the Department of Justice 
and the Treasury Department sometime back? 

Mr. Foley. We have worked closely with the Department of Justice 
when Attorney General Clark was the head of that Department and 
also under Attorney General McGrath. 

The Chairman. Thank you, Mr. Foley. 

Mr. Foley. Thank you very much. 

The Chairman. Thank you, Mr. Maloney. 

Mr. Foley, do you have any other witnesses to present? 

Mr. Foley. No. That was our last witness that we had on our 
program. If you want to call on any of the other representatives 
of the Department that might be here, I am sure that they would 
be glad to volunteer any information. 

Mr. Woolf, would you come forward, please. 

TESTIMONY OF W. H. WOOLF, CHIEF, INTELLIGENCE UNIT, 
BUREAU OF INTERNAL REVENUE 

The Chairman. Mr. Woolf, do you have any observations that 
would be of assistance to the committee? We have had several con- 
ferences with you which have always proved helpful. 

Mr. Woolf. You mean observations from my point of view or from 
your point of view ? 

The Chairman. We would be glad to have it both ways, Mr. Woolf. 

Mr. Woolf. It would appear that the cooperation of the various 
State officials would be extremely helpful. The so-called racketeers, 
gamblers, and so forth are, no doubt, well known to the State officials 
in their respective States, and these officials should be in a position 
to render valuable assistance in your undertakings. I would, there- 
fore, vigorously seek the cooperation of the law-enforcement officers 
of the various States. 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 109 

The Chairman. I think that is a very worth-while suggestion. Of 
course, we have taken steps to endeavor to get the cooperation of the 
law-enforcement officers of the various States, and I might say that 
most of them have expressed a willingness to come through with full 
cooperation. 

Do you have any other suggestions from your point of view ? 

Mr. Woolf. We are, of course, much interested in the work which 
is being done by your committee, and the Intelligence Unit, as well 
as the entire Bureau of Internal Revenue, is anxious to cooperate and 
assist in every way practicable. We are restricted to a certain extent 
in furnishing confidential information pertaining to tax matters, due 
to regulations, and so forth. However, plans are being worked out 
by members of your committee with Mr. Foley and other Department 
officials to carry out the instructions contained in Executive Order 
10132, relating to the inspection of returns by your committee. 

The Chairman. You have certainly cooperated fully with the com- 
mittee, Mr. Woolf. 

Mr. Foley, on behalf of the committee, I want to thank you and 
these officers who have come up to testify before this committee. The 
statements that have been presented show that they have spent a 
great deal of time in considering information which would be of use 
to the committee. I also want to express to you our deep apprecia- 
tion for the fine and whole-hearted cooperation you have given us 
up to this point. 

Mr. Foley. Thank you very much, Mr. Chairman. We shall do 
everything on our part to further the work of the committee as you 
go on. 

The Chairman. The committee is now adjourned until further 
notice. 

(Whereupon, at 4: 10 p. m., the committee adjourned subject to the 
call of the Chair.) 



G8958— 50— pt. 2 8 



INVESTIGATION OF ORGANIZED CRIME IN INTERSTATE 

COMMERCE 



THURSDAY, JULY 6, 1950 

United States Senate, 
Special Committee To Investigate, 
Organized Crime in Interstate Commerce, 

Washington, D. C. 

The committee met, pursuant to call of the chairman, at 11 a. m., in 
room G-16, the Capitol, Senator Estes Kefauver (chairman) pre- 
siding. 

Present: Senators Kefauver, Hunt, and Wiley. Senator Thye. 

Also present: Rudolph Halley, chief counsel; Harold G. Robinson, 
associate counsel; and Alfred Klein, assistant counsel. 

The Chairman. The committee will come to order, please. The 
committee is delighted this morning to have with us Gov. Luther W. 
Youngdahl, distinguished Governor of the State of Minnesota, who 
will testify on a matter in which the committee is greatly inter- 
ested. We are glad also to have Senator Thye, the senior Senator 
from the State of Minnesota, with the committee, and we will be 
very glad to have you introduce your distinguished Governor, Sen- 
ator Thye. 

Senator Thye. Mr. Chairman and other members of this com- 
mittee, it is indeed a pleasure for me to sit with you here as a member 
of this committee this morning and also to introduce our distinguished 
Governor from the State of Minnesota. Gov. Luther W. Youngdahl 
has been recognized in Minnesota as a man willing to stop at noth- 
ing to fight for good government. The Governor has had 16 years 
on the judicial bench, resigning from the State supreme court as 
one of its associates to file for Governor, and as Governor of the 
State of Minnesota he has a record most commendable. It is a 
pleasure for me this morning to introduce to you, sir, Governor Young- 
dahl, of Minnesota. 

The Chairman. Governor Youngdahl, will you come around ? The 
Chair wishes to say I have had the pleasure of serving in the House 
of Representatives with your brother, now deceased, and I always 
enjoyed knowing and serving with him. 

Governor, will you hold up your hand and swear the testimony 
you will give this committee will be the whole truth and nothing but 
the truth, so help you God ? 

Governor Youngdahl. I do. 

TESTIMONY OF HON. LUTHER W. YOUNGDAHL, GOVERNOR OF THE 
STATE OF MINNESOTA 

The Chairman. You may proceed, sir. 

Governor Youngdahl. Senator Kefauver, Senator Thye, and ladies 
and gentlemen, if it is agreeable to you, Senator, I will read for the 

111 



112 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

record my statement and then I would like to discuss informally 
several propositions in connection with this problem, if it is agreeable 
to you, and answer any questions which I may be able to answer 
relating to the Minnesota problem. 

Senator Kefauver and members of the committee, at the outset I 
want to express my thanks for the opportunity to appear before your 
committee. I am glad to say that law-enforcement officers and citi- 
zens generally in our State appreciate the efforts you are making to 
expose and eliminate the gambling syndicates and other organized 
crime. I feel that legislation which now is pending or which may be 
advanced when you complete your study will be helpful in the fight 
against crime, as will the increased efforts of the Federal law-enforce- 
ment agencies. Cooperation of the Federal agencies is needed if our 
local and State law-enforcement agencies are to be completely suc- 
cessful. Organized crime has grown to such proportions, provided 
such opportunities for gain and acquired such power through political 
connections that many municipal and State governments find it diffi- 
cult and in some cases impossible to dislodge the rackets. Even the 
most earnest of local law-enforcement officials can hardly be expected 
to deal adequately with the huge gambling and crime syndicates, whose 
operations are spread over many States and directed in most cases 
from some distant city. 

Law enforcement formerly was largely a matter for the local gov- 
ernment and essentially it still is in most respects a job for local gov- 
ernments. But as society has become more complex and the number 
of persons resorting to law violation for profit has increased, there 
has developed more and more need for the State and Federal Gov- 
ernments to take a strong hand in law enforcement to assist the local 
governments. Now, with the big crime syndicates grown to such 
power that in many places they have been able to thwart the efforts 
of local law enforcement officials and even in some cases challenge 
State governments, it is imperative that the Federal Government, both 
through legislation and administration, take a vigorous role in eradi- 
cating this growing menace. Only with Federal, State and local gov- 
ernments working together as a team can we hope to curb and even- 
tually eliminate the big crime syndicates. 

The case is not hopeless. We can win the fight against organized 
crime if we make a systematic effort to do so. We can stamp out the 
illegal rackets if (1) we seek consistently to fill our law-enforcement 
agencies with competent, honest and courageous men, (2) we give our 
enforcement officers adequate tools with which to work, (3) law-en- 
forcement officers of all three levels of government work together in 
a coordinated attack on the racketeers and (4) the people see the seri- 
ousness of the menace in organized crime and corruption and support 
actively the officials who are trying to improve conditions. 

I have been asked to give a report on our experience on one phase 
of this problem in Minnesota, that having to do with slot machines, 
for such value as it may be to your committee or others in preparing 
for a systematic attack on organized crime. 

I long have believed that operation of slot machines should be wiped 
out. In my years on the bench, I had frequent opportunity to see the 
evil consequences that result from the racket. The lure of a possible 
jackpot induces many to play who can ill afford to do so and families 



ORGANIZED CRIME IN INTERSTATE COMMERCE 113 

often have gone hungry or poorly clad as a result. I saw all this. 
I saw, worst of all, that children were playing the slot machines and 
that many, while acquiring the gambling habit, were losing respect 
for law and government. I saw operators of the machines reaching 
out, in my State and in other States, and, wherever possible, corrupting 
law-enforcement officers through bribery and other means to get per- 
mission to operate. I saw, as most investigators of organized crime 
have observed, that permitting the slot machines to operate soon 
leads to other forms of gambling and other forms of organized crime. 

"We had many laws on our books in Minnesota framed to prevent 
gambling. Operating slot machines under numerous opinions had 
been declared gambling. Yet slot machines were in wide use. 

Shortly after I took the oath of office as Governor in January 1947, 
I found that, although we had many statutes prohibiting gambling, 
5,058 operators of various types of businesses paid a Federal tax of 
$100 each on 8,328 slot machines, classed by the Government as gaming 
devices, or gambling devices, for the fiscal year ending June 30, 1947. 
In other words, 5,058 firms or individuals were paying $832,800 a year 
for the privilege of operating the machines. That many at least were 
running slot machines. How many more, if any, were running slot 
machines without payment of the Federal tax no one could say 
definitely. 

I found from the Federal tax payments that there were only four 
counties among the 87 in Minnesota that showed no operators paying 
the $100 tax which the Government requires. All the other counties 
had slot machines, the report indicated. Some of the counties had 
10 to 15 slot machines for each 1,000 of population. In one county, 
there were 18 machines for each 1,000 of population, or one for every 
55 persons. 

No very general or vigorous effort was being made to enforce the 
laws against slot machines. Some of the law enforcement officers 
thought the machines were not doing too much harm and were rather 
hesitant about taking on new difficulties. Many who earnestly wanted 
to enforce the laws could not get the necessary cooperation from other 
law-enforcement officers or were discouraged by the inadequacy of the 
weapons furnished them. Said one sheriff: 

I pinch two places for slot machines here in my county. The cases come 
up after many weeks, and the operators are fined $100. Meanwhile, they go 
right on running, and before I can get them back before the courts again thev 
have made so much money that the $100 is only a drop in the bucket, nothir»' p 
more, in fact, than a small business expense. 

It seemed clear that the laws against gambling on our books, for one 
reason or another, had been ineffective. A stronger weapon would 
be needed, I decided, if we were to be successful in the effort to wipe 
out the slot machines. 

After some study, I asked the legislature to pass a law 7 requiring can- 
cellation of business licenses for possession of slot machines and other 
gambling devices. Losing business licenses would constitute so great 
a threat, I reasoned, that a proprietor wouldn't dare to have the slot 
machines around. In other words, the desire for profit, which prompts 
a fellow to put in the slot machines, would be used to induce him to 
tajse them out. The penalty for possessing the machines, closing up 
his'business, would entail such a loss that no man in his senses would 
consider it worthwhile to take the brief return from the slot machine*" 



114 ORGANIZED CRIME IN INTERSTATE COMMERCE 

In other words, we proposed to make possession of the machines un- 
profitable. 

The proposal, as might be expected, started a veritable storm. 
Persons profiting from the machines descended upon the legislature 
en mass and sought by every device to kill the bill or draw its teeth. 

I decided to carry the fight to the people. I wanted to get the 
measure passed, but I wanted even more to see if the people generally 
would support a constructive move of this character when presented 
with the facts. I arranged for two radio networks of 15 stations and 
twice a week reported to the people the progress of legislation on 
this bill. 

I said to the people : "This is a fight to protect the earnings of fami- 
lies. It is a fight for the welfare of youth. It is a fight to give boys 
and girls a decent environment. It is a fight to maintain respect for 
law. How can we expect our young people to grow up respecting law 
and government if officials, sworn to uphold the law, allow rackets 
like this to run without interference?" 

Parents, school teachers, and citizens generally soon began to rally 
in our support. 

Thanks for your efforts for the slot machine bill, 
wrote one teacher. 

Children in many towns are being encouraged to throw away their last nickels 
on these machines. Not long ago, a fourth grader in my school stole $20 to get 
money to play the machines. Keep up the fight against the machines. 

A mother wrote : 

Thank you for trying to make Minnesota a better and cleaner place in which 
to bring up our children. 

A miner wrote : 

I work hard for my money. I hate to see those slot machines take away so 
many people's hard earned money. I want to thank you for what you are doing. 

A newspaper poll showed that 70 percent of the people, 76 percent 
in farming communities, 77 percent of the women, favored the pro- 
posal advanced. 

By the way, just a month ago the most recent poll showed the 
greatest percentage of people since this campaign commenced favor- 
ing the elimination of slot machines, some 73 percent of the people of 
Minnesota, showing increasing support for this program after it had 
been in operation for several years. 

Impressed, the legislators passed the slot-machine bill by a big 
majority, 98 to 9 in the house and 58 to in the senate. 

Most of the machines vanished overnight. 

I called a meeting of law-enforcement officers and officials in the 
State when our 1947 legislative session was over, explained our plans 
and purposes and indicated that I expected all enforcement officers 
to enforce the law uniformly. With that the few remaining slot 
machines quickly disappeared. Our State has been free of the one- 
armed bandits since. A few attempts have been made to evade the 
law, but we have been able to thwart such efforts. 

Our whole law-enforcement problem has been eased and conditions 
have been improved in community after community since the slot 
machines were driven out. We have been able to get these results, I 
think, partly because we insisted at the outset that we would do every- 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 115 

thing possible to have the laws enforced and partly because the new 
slot-machine law provided an effective weapon with which to combat 
this racket. A will on the part of law-enforcement officers to enforce 
the laws is essential, whether we are working with new weapons or old 
laws. 

I have reported in some detail our experience in Minnesota, for our 
State is fairly typical of many of the States, and our experience may 
be helpful in considering problems of the other States. Law enforce- 
ment is a big subject and embraces vast complexities, as you gentle- 
men know only too well, and I will not attempt to map out a program 
and say, "this is what we need." I will make only a few, mostly 
rather general, suggestions growing out of our experience. 

I feel that increased efforts are needed to obtain and retain compe- 
tent, honest and courageous law-enforcement officers, particularly in 
the local governments, where so much of our law-enforcement work 
naturally centers, and in the State agencies having to do with law 
enforcement. I think that we should consider whether or not there 
isn't need for providing greater compensation for workers in many 
fields of law enforcement and endeavor, through cooperation of the 
State and local agencies, to provide better facilities for training. I 
should like to see chiefs of police placed under civil service with pro- 
visions that will protect their tenure while they continue to give good 
service. I think that standards would be raised by such steps and the 
people would come in time to regard their local officers with the 
respect with which the FBI men are held. As I suggested before, 
one of the greatest ingredients in law enforcement is personnel. We 
must have men who are competent and honest and possessed of a wil 1 
to enforce the laws. Without this all systems will fail. 

I am particularly concerned about the necessity of a search for new 
weapons which will strengthen the hands of our law-enforcement, 
officers. I am sure that this, too, is one of the things that concerns 
your committee and that after you have completed your investigation 
you doubtless will have some recommendations for legislation that 
will increase the effectiveness of our law-enforcement machinery. }[ 
would suggest that in seeking to eradicate the big rackets that havo 
developed in slot machines and other organized gambling, Congress 
and the State legislatures, in their respective fields, consider the ad- 
vantage of penalties that, if imposed, would far outweigh the illegal 
gains which might be obtained from the rackets. It is the opportunity 
for huge profits that lead so many to go into these rackets. It seems 
to me that we must adopt a plan of dealing with such cases that will 
make it clear there can be no profit. When a man can steal millions 
from his fellowmen through one of these rackets and then go to jail 
for a year or two and be free to go out and enjoy his ill-gotten gams, 
there is no sufficient deterrent to keep others from following the same 
path. I have no specific plan for implementing the proposal I am 
making, and I recognize that difficulties may be encountered in work- 
ing it out. But I think it is an approach to the problem that ought to 
be helpful. If a way can be found to make the probable penalties and 
losses outweigh the prospect of gain, a blow will have been struck at 
the heart of the problem. 

I think that the pending proposal to prohibit the interstate shipment 
of slot machines will help very much to curb this racket. It will help 



116 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

even in the States that have slot-machine laws on the books, in giving 
greater impetus to the continuing enforcement of that law. 
= I believe that the bill prohibiting transmission of betting informa- 
tion on races over interstate communications systems should be passed. 
I recommended to our legislature in 1947 that the State of Minnesota 
pass a law making it illegal to use the telegraph, telephone or other 
means of communication to transmit bets or wagers of information 
regarding betting or any other illegal transaction. 

Our States can do much to strengthen the hand of the local law- 
enforcement officers, and many have provided facilities and developed 
effective programs that give real help to sheriffs and police officers. 
Governors in most of the States can exercise considerable influence 
on local law enforcement. A governor, in my State and in some of the 
other States, has power to remove a sheriff or county attorney if he 
fails to enforce the laws. A governor in such States thus often can 
eliminate laxity in law enforcement when local officials fail to act, I 
think it would be a good plan to extend this power so that local police 
officers likewise might be removed for failure to enforce the laws. The 
proposal was discussed at the recent National Governors' Conference, 
and I found considerable support for it. 

I think the States well may take the lead in efforts to obtain better 
training for law-enforcement officers and in supplying new tools 
which may be needed to make their work more effective. A group of 
the attorney generals of the States now is studying our Minnesota 
slot-machine law with the possibility of recommending its adoption 
in their States. Our attorney general told me not long ago he had 
sent a copy of our law to some 14 attorneys general of the Midwest 
group of States who were interested in bringing into being similar 
programs in their States. 

A detailed study by officials of the States interested in law en- 
forcement probably would turn up a number of other avenues of 
attack on the rackets that would be helpful. 

I will not attempt to discuss the work of the Federal law-enforce- 
ment agencies, but would like to make one comment on it, I think that 
the people generally in my State appreciate the fine work which 
these agencies have been doing over the years and would welcome any 
new steps which you may consider necessary and helpful in meeting 
new problems, such as those presented by the growth of the big syn- 
dicates of organized crime. While much of our law enforcement 
naturally must be carried on by our local agencies, we recognize that 
there are many special fields in which the Federal Government well 
may supplement our local efforts or in some type of cases carry the 
whole burden. 

I wish to make one further point, If our law-enforcement officers 
are competent and honest, if we equip them with adequate weapons 
to combat crime and Federal, State, and local agencies work together in 
coordinated attack, one thing more still is needed, as I have indicated, 
for complete success in law enforcement. Efforts of our law-enforce- 
ment officers must have public support, It is incumbent upon all of us 
to remember that law enforcement must be a concern of the people 
as well as the officials and that, given the facts, the people will support 
honest and courageous law enforcement, I have reported in some 
detail our fight against slot machines because I want everyone to see 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 117 

that the great rank and file of our citizens want honesty. The people 
in Minnesota didn't want slot machines. It is the same in most com- 
munities. I think the bulk of the people in almost any community 
want decency and humanity and will support measures to curb the 
racketeeers. 

All of us, officials and citizens alike, must have a part in the fight 
for law enforcement if we are to have any complete success. I some- 
times think that we get as good law enforcement as we are willing to 
fight for. The task is not always easy, but the stakes are high. My 
concern over law enforcement is based chiefly on a conviction that 
we must do everything possible to protect our boys and girls and that 
we must preserve in them a profound respect for the sanctity of law, 
for this, I think, is the very foundation of democratic government. If 
we have youth who are strong and reliant and have respect for law 
and government, the Nation will be strong and able to meet with 
confidence all the problems that lie ahead. While there are threats to 
our freedom and security from without, there are none so serious as 
those that might come from within, from our own people, if we let 
lawlessness increase and respect for law and government decline. 

The Chairman. Senator Youngdahl, the committee wishes to thank 
you for this very factual and inspiring statement. Do you have some 
other matters that you wish to add ? 

Governor Youngdahl. Yes, thank you, Senator. I would like to 
leave a copy of our slot-machine law with the committee, if I may. 

The Chairman. This will be filed as a part of the record. 

(The document referred to was marked "Exhibit No. 17," and 
appears in the appendix on p. 260. ) 

Governor Youngdahl. I would like to explain briefly that the law 
defines gambling devices as "slot machines, roulette wheels, punch 
boards, number jars, and pinball machines which return coins or slugs, 
chips, or tokens of any kind, which are redeemable in merchandise or 
cash." So the definition is quite comprehensive. It includes not only 
slot machines, but these other types of devices. 

The law provides, significantly, the intentional possession or willful 
keeping of a gambling device upon any licensed premise is cause for 
revocation of any license under which the licensed business is carried 
on upon the premises where the gambling device is found. The State 
doesn't have to prove that the device was used. Merely possession of 
it is sufficient to constitute grounds for revocation of the license. 

When we were considering this bill there was some objection on the 
part of certain people and some lawyers, indicating violence to the 
due process clause because of the fact that the procedure provided for 
under this slot-machine law is that tlv^re shall be an order to show 
cause gotten out by the issuing authority calling upon the supposed 
violator to show cause why his license should not be revoked, and if 
evidence was presented to indicate there was willful possession of this 
gaming device, the issuing authority would then revoke the license. 
The right of review would be had to the violator under certiorari to 
the higher court. We agreed to the inclusion of a provision, instead 
of a writ of certiorari, that there might be a right of appeal de novo 
before a jury, if requested, in the district court so that none of the con- 
stitutional rights whatever of the supposed violator are prejudiced. 

I have just one or two comments and observations, Senator and mem- 
bers of the committee, if I may make them. 



118 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

When I was prosecuting back in 1922 and 1923 in the criminal court 
at Minneapolis during prohibition days, I had occasion to notice quite 
a substantial difference between the ordinary law enforcement officer 
of the metropolitan area and the Federal law enforcement officer, be- 
cause during those prohibition days the Federal agents would gather 
the evidence of a violation of the prohibition law and instead of prose- 
cuting their cases in the Federal courts, they would bring them over to 
the criminal court at Minneapolis and prosecute them there. As 
assistant city attorney it was my responsibility to present the evidence. 

Now, without any reflection at all upon these men (we used to call 
them "flatfoot" in those days) because we have made considerable 
progress since those days, I noticed a substantial difference between 
the manner in which the cases were prepared by the Federal agents 
and some of those untrained local officers. Many times the local 
officers did not even have a prima facie case. Many times some of 
them didn't know what constituted a prima facie case. I noticed 
invariably that the Federal agents always had their cases well pre- 
pared. They were well trained. You always felt a sense of confidence 
that their cases would not be thrown out of court. 

During the three decades that have transpired since that time a 
considerable change has occurred in the law-enforcement machinery 
of the metropolitan areas. Many of these officers are now getting 
regular training under Federal Government, under the FBI men, and 
many of them in different sections of the country have been placed 
under civil service. There is a vast difference. 

Just the manner in which some of these people pay their Federal 
stamps indicates that they still have a much more profound respect 
for the Federal law enforcement officer than for the local officer, 
because both with respect to gambling and in respect to bootlegging 
it is indicated that they will pay the Federal stamps and yet feel 
perfectly free in many cases to violate the laws in the local areas. 
They don't seem to be so much concerned about the local enforce- 
ment officers. My contention is that we ought to eliminate the 
cleavage as far as the respect is concerned that the people have for 
the law-enforcement officers. I think we can do that by training 
these local law enforcement officers, giving them more training, plac- 
ing them under civil service. There is not reason at all, it seems 
to me, why there should not be engendered the same respect for the 
local enforcement officer as there is for the FBI agent or the Federal 
enforcement officer. 

Of course, you always have the local officer close in the home environ- 
ment. So often he has his eyes on the next election instead of on 
the next generation. So often he is afraid of his job. Instead of 
having the intestinal fortitude to enforce the law and see to it that 
he has good government in his community, he winks at the law and 
walks right by the place that openly flouts the law. Part of the 
responsibility is in the people themselves. 

I think the governors have a responsibility, too, not only gov- 
ernors, but all executive officers from the top down. Each of us 
has a responsibility because no matter how many laws we put on 
the books and no matter how effective this antislot machine law is, 
unless it is backed up by a continuing, relentless pressure on the part 
of the chief executive officer insisting that the laws are going to be 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 119 

obeyed, you are going to have laxity and you are going to have some 
of these violations. 

I think it is illustrated in the story that comes out of ancient China 
of the sage and the cynic. The cynic came to the wise man and said, 
"What have I got in my hands?" He had his fists closed. The 
wise man said, "You have a bird." Then he asked him, "Is it dead 
or alive?" thinking that he would surely trap the wise man because 
if he said "alive," the cynic would crush the bird dead in his hands, 
and if he said "dead," the cynic would open up his hands and permit 
the bird to fly away. But the wise man responded, "As you will, my 
son, just exactly as you will." 

I think we are getting just exactly the kind of law enforcement in 
the United States today as we will. There isn't any community in 
the country that cannot have decent law enforcement if it wants it 
badly enough. There isn't any State in the country that can't have 
it if it wants it badly enough. There is a price you have to pay for 
it. A governor who stands up and fights for a slot-machine bill pays 
a price. He gets a lot of abuse. He gets kicked around considerably. 
He has to discipline himself that it is worth while, that we are fighting 
for something important in these days — I think as important as 
building up a military machine — and 1 am for it in these days as 
most of our people are for it — is strengthening our country within. 
If we show to the dictators that we not only give lip service to de- 
mocracy, but we believe in it, we believe in it to the extent that we 
are willing to go all the way in enforcement and let the chips fall 
where they may, then I think the dictators are going to hesitate much 
more, much longer before they attack us. What they are telling their 
people is that we are weak and flabby, that we are going to fold up 
overnight, that we have no respect for the laws or the rules of the 
game. What is happening in certain parts of the country gives 
them good reason to be able to sell that kind of piopaganda to their 
people. 1 don't think there ever has been a time when the work that 
this committee is doing is as important as it is right now, to create 
a wholesome respect for the law, not only so far as our future gen- 
erations are concerned but so far as the strength and stability of our 
country are concerned in fighting this battle that we are struggling 
with today. 

That is my story. 

The Chairman. Thank you, Governor. 

Senator Hunt ? 

Senator Hunt. Governor, I, too, would like to compliment you on 
your very forthright and strong statement and incidentally to com- 
pliment you on the splendid job you have done in Minnesota along this 
line. 

I would like to ask you a question. You speak of the high regard 
in which Federal law-enforcement officials are held, and I dare say you 
have never seen a slot machine that did not have above it the $100 
permit by the Government for operation of that machine. Would 
you recommend to this committee and would it be helpful to the 
various States if such legislation were passed that forced the Fed- 
eral Government to discontinue this practice of going into States 
where slot machines are not legal and selling a permit for them to 
operate \ That is what they do. 



120 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Here is what perhaps you have had and I think every other gov- 
ernor has had: Once a year this information is given out by the 
Internal Revenue Department in the various States, that there are 
1,800 or 2,000 or 1,000 slot machines operating in the State. That 
immediately gives the impression that law enforcement is lax and that 
it will be all right for anybody else who wants to start operating slot 
machines, to do so. I think it is a very bad influence and I think some- 
thing ought to be done to stop it and I wonder if you agree with me. 

Governor Youngdahl. I agree with you wholeheartedly, Senator 
Hunt. I think it is an anomaly where the Federal Government comes 
into States where it is an obvious violation of the law and collects this 
$100 excise tax almost implicitly giving permission, you might say, 
to the people in the States to operate the machines. I think it is 
wrong. I would like to see that changed. 

Senator Hunt. Might I ask you, do you not think the same situa- 
tion prevails with reference to this $25 Federal permit to sell liquor 
in any State in the Union ? 

Governor Youngdahl. When I became Governor the record showed 
that there were 1,000 people apparently bootlegging in my State, be- 
cause 1,000 of them were buying the $25 liquor stamp even though 
the laws of the State of Minnesota made the selling of liquor by these 
individuals illegal, because they did not have a hard liquor license to 
sell liquor in the State of Minnesota. We published a map of those 
1,000 stamps in the State at the time the legislature was meeting. It 
had an electrifying effect upon the sheriffs and the officials in the 
counties. We indicated to the sheriffs by letter to each one of them 
just where those stamps were in their communities, and within half a 
dozen months the number was brought down to less than 100. I think 
the same thing applies there, too. I think it is wrong in principle for 
the Federal Government to come in and collect any money for the 
operation of an activity that is made illegal in the State. 

Senator Hunt. Then you would recommend to this committee that 
we recommend such legislation ? 

Governor Youngdahl. I would. 

Senator Hunt. One other question : Do you find that it is difficult 
to keep down law violations by all people when certain clubs, certain 
associations, and certain societies are allowed to maintain slot ma- 
chines in their establishment in order to operate the club or the organ- 
ization or the society ? 

Governor Youngdahl. Very much so, Senator Hunt. When I 
had this law enforcement conference, one of the county attorneys of 
the State posed the question : "Mr. Governor, what would you think 
if there was a charge made against an organization of veterans for 
maintaining a lottery and half the members of the jury were service 
people? Do you think there would be any chance of getting a con- 
viction?" 

I said. "Mr. County Attorney, do you in considering whether or not 
to present a case to the grand jury whether or not you can get a con- 
viction or whether you have enough evidence to go to the grand 
jury to sustain the charge?" 

"If we are going to get uniform law enforcement," I said to these 
sheriffs and county attorneys, "It has to apply to every one alike, no 
exceptions. As long as the law states there are no exceptions, there 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 121 

can be none if yon are going* to have decent and vigorous and effective 
Jaw enforcement," 

I agree that the minute you open the door to the slightest extent, as 
far as these clubs and other organizations are concerned, you are go- 
ing to make the job that much tougher. 

Senator Hunt. That is all, Mr. Chairman. Thank you. 

The Chairman. Senator Wiley? 

Senator Wiley. Governor, as a neighbor of yours, I congratulate 
you on your fine statement. 

I feel with you — I believe I understood part of your statement to 
this effect — that it is incentive or the big take that makes this kind of 
racket profitable, is it not? 

Governor Youngdahl. Yes; that is right. 

Senator Wiley. Have you given any thought to the remedy to the 
situation that, for instance, the Federal Government has produced by 
permitting the machines to operate in States like yours? Have you 
thought that it would be applicable at all to arrange to see that there 
wasn't such a big "take" in the game? 

Governor Youngdahl. I think that has to be one of the considera- 
tions of your committee, Senator, to find some means to take the "take" 
away, to take the profit away. That is one of the ways you can do it. 

Senator Wiley. In a lot of private homes they have these machines. 
Is there any way you can regulate that? 

Governor Youngdahl. I might say here, when you pose that ques- 
tion, some folks will immediately say when you conduct a drive of 
this kind, "Mr. Governor, aren't you fooling around with penny-ante 
stuff? Aren't people always going to gamble? They have gambled 
since the days of Adam, and they are always going to gamble," 

Of course, people are going to gamble, and they always probably 
will commit burglarlv and robbery. Because we cannot eliminate all 
these offenses immediately is no reason why we should not continue to 
reach for maximum enforcement. The real danger is not the gambling 
that goes on in private homes. The danger is the corruption of public 
officials, the illicit profit that is involved in the racket that destroys 
the very base of decent government. They cannot operate at all with- 
out the approval of some of these public officials and law-enforcement 
officers. As long as that is the situation, I think the only answer is 
intensive enforcement. 

Senator Wiley. You have anticipated one of my questions, so I will 
not go ahead and ask it. You brought out in this last statement of 
yours that the take, the incentive, so to speak, is of such significant 
nature that it is ready to reach out and corrupt public officials to main- 
tain its life. That is what you mean, is it not ? 

Governor Youngdahl. I might illustrate that : In a small commu- 
nity in Minnesota this activity occurred before we passed a slot- 
machine law. A public examiner disclosed the situation where $11,000 
was paid over by one of the racketeers supposedly to go either to the 
sheriff or county attorney to fix him so there would be no prosecution. 
The intermediary did not turn the money over. He pocketed it himself 
instead. That was brought out. During the progress of the prosecu- 
tion he took his life and that ended that little story. 

But when $11,000 was paid over in that small community for pro- 
tection, it indicates the extent of that racket as it reaches out. 



122 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Senator Wiley. In your investigation seeking to remedy this sick- 
ness, what did you find out as to its interstate character? 

Governor Youngdahl. I can only speak in a general way, Senator. 
I don't propose to speak with too much authority on the detailed ex- 
tensiveness of the interstate character of this racket, but we did dis- 
cover that it reached far across State lines and that there were con- 
nections far beyond Minnesota in this racket. We were satisfied of 
that. 

Senator Wiley. Did they have headquarters in St. Paul, in the 
Middle West, the middle western slot-machine racket? 

Governor Youngdahl. I am not so sure about that. I know that 
our State was divided up into several districts, and we could spot the 
chief racketeers in each of those districts, and we believe they had 
connections elsewhere. 

Senator Wiley. Did you find out that the slot-machine racket was 
joined up with any other racket ? 

Governor Youngdahl. We were convinced that they reached out 
into all forms of crime. 

Senator Wiley. You told of the interesting instance where you in- 
troduced a bill and pressure was brought, but apparently you people 
countered that pressure very effectively so that in the senate there 
wasn't even one vote against the passage of the bill that prohibited 
slot machines. Did you on that particular occasion have any oppor- 
tunity to weigh and evaluate the forces that were for it? 

Governor Youngdahl. Yes; very much so. The polls that have 
been taken by our local newspapers indicate that, too. This recent 
poll which indicates that 73 percent of the people of Minnesota are 
opposed to the return of slot machines indicates the strongest support 
we have had since the beginning of this drive. By the way, this is 
one of the polls that has proved to be fairly accurate, Mr. Senator. 
It was broken down to show that 90 percent of the people in the rural 
areas were against slot machines. Good old salt-of-the-earth people, 
down-to-the-earth people who have no ax to grind were almost unani- 
mous, as much unanimous as you can get it. Ninety percent of them 
were opposed to slot machines. The percentage was lower as it got 
around the cities where you had a little more superficiality and where 
the rackets would be more apt to thrive. 

Senator Wiley. They would rather gamble with the earth, the 
sunshine, and the rain. That is the biggest gamble we know of. 

Governor Youngdahl. That is right. 

Senator Wiley. I want to ask just one or two other questions. You 
said 73 percent. Here is what I am getting at : Who constituted the 27 
percent and were you able to analyze that percentage and find out 
who it was that was really putting on the pressure for it? 

Governor Youngdahl. It was broken down to show that in the age 
bracket between 21 and 30 years of age there was less support for the 
elimination of slot machines than as folks grew a little older in life 
find became more mellow and understood some of the decent values. 
Unfortunately in the lower-age brackets we have a little more diffi- 
culty getting support for this program. That to me proves the very 
worth of it. And the need of such program. 

Senator Wiley. Where were these machines manufactured? 

Governor Youngdahl. I couldn't answer that question, Senator. 

Senator Wiley. Who headed up the ring ? 



ORGANIZED CRIME IN INTERSTATE COMMERCE 123 

Governor Youngdahl. I wouldn't be able to answer that question. 

Senator Wiley. Have you any idea as to the amount of take in 
Minnesota? 

Governor Youngdahl. Yes. We roughly estimated it was a $6,- 
000,000 to $8,000,0.00 industry a year in Minnesota. One writer last 
week in one of the current magazines indicated that the net profit 
last year was $6,000,000,000 from the racket. 

Senator Wiley. Nationally ? 

Governor Youngdahl. Nationally, yes. 

The Chairman. From slot machines? 

Governor Youngdahl. No, $6,000,000,000 net profit from all gam- 
bling activities, Senator. 

Senator Wiley. Did you have any evidence indicating any attempt 
to corrupt legislators ? 

Governor Youngdahl. Yes. Well, about 2 weeks before the legis- 
lature adjourned and this bill was passed in the closing hours of 
the legislative session, one of the political writers wrote a pretty 
strong article indicating that there was some monkey business going 
on around along the lines you suggest, and then they ran for cover. 
No one dared vote against it then. We had evidence that there was 
some of that going on. There isn't a political campaign that goes 
on in my opinion but that the sub rosa are involved in it somewhere 
in support of the kind of officials that they think they can influence 
in their own behalf. 

Senator Wiley. At that time was it required by the law before 
you passed your law that they have municipal permits or licenses 
as well as State permits or licenses? 

Governor Youngdahl. No, it was not. 

Senator Wiley. No municipal? 

Governor Youngdahl. No. 

Senator Wiley. Just State ? 

Governor Youngdahl. Permits for what ? 

Senator Wiley. For operating slot machines. 

Governor Youngdahl. We did not have any permit system in Min- 
nesota. The law simply prohibited all forms of gambling, including 
slot machines. The slot-machine law was an enforcement measure to 
require the forfeiture of licenses where the case was proved. We did 
not permit the operation of the machines, you see. 

Senator Wiley. To make that clear, at the time you passed the 
statute that you particularly referred to here it was illegal to op- 
erate slot machines in Minnesota. 

Governor Youngdahl. Surely. You see, it had not been enforced. 
The law had been on the books for 50 years, half a century, but 
everybody took it for granted that it is impossible to enforce the law. 
It obviously was impossible until we came along with this enforce- 
ment measure which was very effective because they just did not 
want to take a chance on losing their licenses. You have somewhat 
of a similar law in Wisconsin, Senator, only ours was a little stronger 
than yours. Yours has worked very well itself. 

Senator Wiley. When you get a little farther West you need a 
little stronger law. 

Senator Hunt. Mr. Chairman, if the Senator has completed his 
interrogation, I would like to ask another question. 

Do you have a sales tax in Minnesota ? 



124 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

Governor Youngdahl. No, we do not have. I have indicated I am 
against it. 

Senator Hunt. I would like to make the comment that in my own 
State when we were able in certain localities to cause temporary 
stoppage of gambling, we noticed immediately a considerable appre- 
ciation in the collection of sales tax, which indicated without question 
of doubt that that money that had been going into those sources was 
now going into the proper channels of trade where it should go. 

Governor Youngdahl. Hardly a day goes by but that we don't get 
some evidence of that, Senator, where someone will come up to me 
and say, "Mr. Governor, I was vehemently opposed to you on this 
thing, but now I am getting more money for groceries and for clothing 
and for the family.'' There are many evidences of that. 

The Chairman. Senator Thye, do you have any questions? 

Senator Thye. No, Mr. Chairman, I have none. It has been very 
interesting. 

The Chairman. Is there anything else, Senator Hunt? 

Senator Hunt. No. 

The Chairman. Mr. Halley ? 

Mr. Halley. I have no questions, Mr. Chairman. 

The Chairman. Governor Youngdahl, I am glad that you brought 
out the obvious fact that law enforcement depends upon local effort. 
I know there has been some fear on the part of some people that this 
committee might be in the position of recommending taking over on 
behalf of the Federal Government the duty and the prerogative of 
local law-enforcement officials. You, of course, know and anyone 
familiar with the effort of this committee knows that that is not our 
purpose. We want to try to encourage local law-enforcement officers 
and to be of any help to them that we can. 

You stated that with proper diligence on the part of the local 
citizens in backing up their local law-enforcement officers you could 
clean up any community that you set out to do. How does that fit 
in with your recommendation that Congress should pass a bill pro- 
hibiting the transportation in interstate commerce of slot machines? 

Governor Youngdahl. I suppose I should include in that statement 
that it contemplates the cooperation of the State and Federal Govern- 
ments as this team which I spoke of that must work together. 

The Chairman. Do you think that such a law as passed the Senate 
and which I think was voted on adversely by the House Interstate 
and Foreign Commerce Committee a few days ago, would help you 
in your effort to continue good law enforcement in the State of 
Minnesota ? 

Governor Youngdahl. I think it would be a very definite help. 
It would be right along the line of Senator Hunt's suggestion of the 
inconsistency of the Federal Government collecting this $100 tax and 
then still interested in the problem of law enforcement. If the Fed- 
eral Government as a matter of policy says there shall not be this 
interstate shipment of the machines, I think it would tremendously 
bolster up enforcement problems in all the States, including even 
those States that have a slot-machine law. I am very much in favor 
of it and I sincerely hope the Congress will pass such a law. 

The Chairman. That is, if the State determines that it doesn't 
want slot machines, then supplemental legislation by the Federal 
Government to prohibit their shipment in interstate commerce you 



ORGANIZED CRIME IN INTERSTATE COMMERCE 125 

feel would not be a taking over of the prerogative of the State but 
would be assisting the States in its efforts. 

Governor Youngdahl. That is right. I still think, by the way, 
that Minnesota, even if the law is not passed, is still going to keep slot 
machines out of the State. 

The Chairman. Your effort would be more difficult. 

Governor Youngdahl. It would be a little harder ; yes. 

Senator Hunt. You mean while you are Governor. 

Governor Youngdahl. It would have been self-serving for me to 
have added that, Senator. I am glad you said it. 

The Chairman. Governor Youngdahl, the committee is very grate- 
ful to you for appearing and giving us the benefit of your experience 
in the State of Minnesota. I know I speak for the committee in 
complimenting you and the officials of your State on a job well done. 

Senator Wiley. Including the action of the electorate in electing 
him, too. 

Governor Youngdahl. Thank you very much, Senator, and I ap- 
preciate this opportunity. 

The Chairman. Mr. Peterson, will you come around, please ? Mr. 
Peterson, I take it we can get started with your testimony and then 
we will have to recess for lunch and answer the call of the Senate 
fairly shortly. I do not think you have been sworn. Do you sol- 
emnly swear the testimony you will give this committee will be the 
whole truth and nothing but the truth, so help you God ? 

Mr. Peterson. I do. 

TESTIMONY OF VIRGIL W. PETERSON, OPERATING DIRECTOR, 
CHICAGO CRIME COMMISSION, REPRESENTING THE AMERICAN 
MUNICIPAL ASSOCIATION 

The Chairman. Mr. Peterson, you are the operating director of 
the Chicago Crime Commission? 

Mr. Peterson. That is right. 

The Chairman. Mr. Peterson, how long have you been operating 
director of the Chicago Crime Commission ? 

Mr. Peterson. About 8y 2 years. 

The Chairman. The Chicago Crime Commission, as I understand 
it, is a voluntary association supported by contributions of the inter- 
ested citizens ; is that correct ? 

Mr. Peterson. That is correct. It is a civic organization. 

The Chairman. Prior to being operating director of the Chicago 
Crime Commission, you were associated with the Federal Bureau of 
Investigation ? 

Mr. Peterson. That is correct. I was with the FBI about 12 
years. 

The Chairman. What position did you hold with the FBI when 
you left? 

Mr. Peterson. When I left the FBI, I was in charge of the Boston 
office. 

The Chairman. Do you call that the agent in charge ? 

Mr. Peterson. That is right, special agent in charge of the Boston 
office of the FBI. 

68958 — 50 — pt. 2 9 



126 ORGANIZED CRIME IN INTERSTATE COMMERCE 

The Chairman. You have had experience with the FBI in most of 
the sections of the United States in the matter of Federal law enforce- 
ment ? 

Mr. Peterson. In a considerable number of sections, not in every 
section. 

The Chairman. What sections have you been stationed in? 

Mr. Peterson. I was in charge of the Boston office 4 years. Before 
that, St. Louis 1 year, before that Milwaukee 2 years, and then I 
worked in Chicago for 2 years, in New York City, Florida, Philadel- 
phia. That covers it I think, mostly, 

The Chairman. I might say to you, Mr. Peterson, that the Director 
of the FBI, Mr. Hoover, and Mr. Nichols, the Assistant Director, have 
spoken very highly of your work with the Federal Bureau of Investi- 
gation and also with the Chicago Crime Commission. In the opinion 
of at least the chairman of this committee, you are outstanding in the 
work that you have done in your experience and you are well qualified 
to be of service to the committee in telling us not only the matters about 
the situation in Chicago but in other sections of the country. 

As I understand it, today you are testifying on behalf of the Ameri- 
can Municipal Association. 

Mr. Peterson. That is correct. In fact, prior to last December I 
had conferences with several mayors that were having difficulties with 
the organized crime problem. In some instances they felt some organ- 
ized gangs were attempting to take over local governments. As a 
result of that, I was requested to appear before the American Munici- 
pal Association at its annual meeting in Cleveland. They then asked 
me to come here as their representative. 

The Chairman. The president of the American Municipal Associa- 
tion, I believe, was Mayor Morrison of New Orleans last year? 

Mr. Peterson. That is correct. 

The Chairman. And this year who is the president? 

Mr. Peterson. I believe Mr. Newton from Denver. 

Senator Wiley. Mr. Chairman, I would like to ask a question there. 
Is your testimony going to apply to gangs, as you say, attempting to 
take over local government? 

Mr. Peterson. The principal purpose of my testimony is first to 
show the growth and development of some of the major gangs and the 
connections between these major gangs and many other sections of 
the country. I haven't gone too much into the government angle, 
although I may cover that somewhat in the testimony. 

Senator Wiley. It will define the activity of the gangs, so it does 
not just cover gambling and slot machines? 

Mr. Peterson. Oh, no. 

Senator Wiley. It goes into the major crimes and the effect upon 
the lives of the citizens in the various communities, and so forth? 

Mr. Peterson. Of course, the significance of the organized-crime 
problem is its effect on government. In other words, as the distin- 
guished Governor just mentioned a few moments ago, there is very 
seldom any political campaign in his area in which the racketeering 
elements — and, of course, gambling is very lucrative — do not attempt 
to make political contributions and that sort of thing. The signifi- 
cance of that is that it then means that successful candidates who 
depend upon that particular revenue for their election to office then 



ORGANIZED CRIME IN INTERSTATE COMMERCE 127 

must listen to the racketeering or criminal elements with reference 
to law-enforcement policies, and some of the law-enforcement officials 
then are under the control of your law violators. In other words, the 
law violators dictate law-enforcement policies and control certain law- 
enforcement agencies. I think that is one of the real significant points 
of the entire organized-crime problem. 

The Chairman. Mr. Peterson, before you start your formal state- 
ment I thought we should have a further word about the American 
Municipal Association. As I understand it, its membership represents 
about eleven or twelve thousand communities — cities or local com- 
munities. Is that true? 

Mr. Peterson. I believe it represents 10,300 municipalities and 
cities. 

The Chairman. At their meeting last year where you made a report, 
I believe it was, in Cleveland, Ohio. 

Mr. Peterson. That is correct. 

The Chairman. At that meeting the American Municipal Associa- 
tion passed by unanimous vote a resolution stating that they felt 
that this was a matter in which in some instances they needed the 
cooperation of the Federal Government in helping them in their law- 
enforcement problems, and they asked for an investigation by some 
Federal agency or by Congress. Is that not true ? 

Mr. Peterson. Yes, sir. 

The Chairman. I might say that that resolution was one of the 
reasons that I happened to file the resolution in the early part of this 
Congress. 

Mr. Peterson, you may proceed for about 15 minutes and then we 
will recess until 2 : 30. 

Mr. Peterson. In the first place, in order to have an understanding 
of organized crime in America today, it is necessary to review the 
growth and development of some of the major criminal gangs of 
approximately three decades ago. The real beginning, of course, is 
much earlier, but many of the most important criminal gangs oper- 
ating throughout the country today stemmed from the major gangs 
operating in Chicago and New York City, in particular, about 30 
years ago. 

For convenience, we might refer to the New York mob as the Frank 
Costello gang and the Chicago gang as the Capone syndicate. 

Naturally, this constitutes an oversimplification of the problem, but 
it really is surprising when there is a full realization of the tremen- 
dous influence these two organized gangs still wield throughout the 
Nation today. 

For the sake of clarity, I am going to review very briefly the Capone 
syndicate. 

On May 11, 1920, Big Jim Colosimo was killed in gangland fashion 
in Chicago. He had risen to power and influence through the opera- 
tion of a string of brothels to become the vice lord of the first ward 
and had married one of the most prosperous madams of the district. 
He became the operator of a restaurant known as Colosimo's, which 
last located at 2136 South Wabash Avenue. Colosimo's Restaurant 
had become nationally famous. Several years before he was killed, 
Colosimo had imported to Chicago a bodyguard by the name of John 
Torrio. Some sources claimed that Torrio, who had already estab- 



128 ORGANIZED CRIME IN INTERSTATE COMMERCE 

lished himself as a tough gangster in New York, was sent to Colosimo 
by Frank Uale. All of you remember him undoubtedly. He was a 
ruthless gang leader in New York City. That is spelled U-a-l-e or, 
commonly, Y-a-l-e. 

When Colosimo was killed in 1920 there was some justification for 
the claim that Torrio had imported Frank Yale to commit the murder. 
Regardless of the truth of that allegation, it is definitely known that, 
upon the death of Colosimo, John Torrio became the lord of Chicago's 
underworld. 

As an interesting sidelight, at the time Colosimo was killed in Chi- 
cago, a United States Senate Judiciary hearing was in progress relat- 
ing to the Sterling-Sims bill which was designed to prohibit the inter- 
state transportation of racing information. On May 10, 1920, testi- 
mony was given before the Senate Judiciary Committee to the effect 
that Chicago was the center of race-track information for the entire 
United States. 

On May 12, 1920, the press reported that the Chicago headquarters 
for race information for the entire United States was located in the 
office of the General News Bureau operated by Mont Tennes at 431 
South Dearborn Street, Chicago. In 1950 the Chicago headquarters 
for Continental Press, which disseminates racing-news information 
throughout the United States, is located at 431 South Dearborn Street, 
Chicago. Conditions haven't changed too much in the last 30 years 
insofar as that situation is concerned. 

When Torrio became the leader of Chicago's underworld upon the 
death of Big Jim Colosimo on May 11, he selected, as his chief lieu- 
tenant, Al Capone, then 23 years of age. Capone had already estab- 
lished himself as a tough gunman with the Five Points gang of New 
York City. The headquarters for the Torrio mob was at the Four 
Deuces, 2222 South Wabash Avenue, Chicago. The first floor con- 
tained a saloon, cafe, and the office of Torrio. The second and third 
floors were devoted to gambling and the fourth floor to prostitution. 
Torrio even actually envisioned a vice monopoly for the entire county. 
In particular, he became entrenched in a Chicago suburb called Burn- 
ham, 111., with the assistance of John Patton, who became known as the 
boy mayor of Burnham. Among the earlier subordinates of Torrio 
was Jack Guzik, who was later to become the business manager of the 
gang during the heyday of its operations, and he has asserted a con- 
siderable amount of influence in Chicago up until the present time. 

On April 1, 1924, there was virtually an armed invasion of Cicero, 
111. Through Edward Vogel, plans were made for the underworld 
organization headed by Torrio to elect its ticket in the mayoralty 
election. During the past three decades, until the present time, 
Edward Vogel is known as the slot-machine king of Cook County, 
and throughout that period has been an important member of the 
so-called Capone syndicate. On the date of the election April 1, 
1924, the Torrio-Capone gang manned the polls with machine guns. 
There was a considerable amount of violence, and Frank Capone, a 
brother of Al, was killed during a gun battle between the hoodlums 
and the police. Charlie Fischetti, one of the leading gangsters in 
America today, was present with Frank Capone and other hoodlums 
during the time the election violence was in progress. Charles 
Fischetti, a cousin of Al Capone, continued to grow in stature in 
the syndicate until the present time, when he is unquestionably one 



ORGANIZED CRIMEl IN INTERSTATE COMMERCE 129 

of the most important underworld characters in the Nation. Fol- 
lowing the 1924 election, Cicero became the headquarters for the 
Torrio-Capone combination, and an influence of the members of this 
organization has been strong until the present time. 

In April 1924 a raid was made on a brewery — Sieben Brewery — 
operated by John Torrio and his gang. Torrio was arrested and 
so were numerous other individuals. They were indicted. Some- 
time later Torrio was sentenced to serve 9 months in the Du Page 
County Jail and received a $5,000 fine. But just before he began 
serving his sentence he was ambushed and shot. He was taken to 
the Jackson Park Plospital in Chicago, where he recovered. After 
his recovery he served his jail sentence and then he abdicated his 
underworld throne in Chicago to Al Capone. As I will show you 
later, he then became tied up with Costello in New York. 

On April 7, 1925, the press reported a raid on the headquarters of 
the Torrio-Capone gang, which was then located at 2146 South 
Michigan Boulevard. Arrested in this raid were John Patton, Kobert 
Larry McCullough, Joe Fusco, Frank Nitti, and others. The police 
recovered records which revealed that John Torrio, John Patton, Al 
Capone, and Jack Guzik, together with others, were operating an 
efficient illegal organization which was engaged in operations netting 
millions of dollars a year. 

Mr. Halle y. Mr. Peterson, some of the names that you have just 
mentioned are still operating ; are they not ? 

Mr. Peterson. That is correct. In other words, I am paving the 
way to show that these men are still prominent — not all of them. 
Nitti, of course, has committed suicide, and John Patton, of course, 
is an old man, but these other people that I am mentioning — most 
of them — are active today. Of course, Torrio is no longer active. 

Mr. Halley. Isn't Patton active in Florida? 

Mr. Peterson. Up until 1941 his name appeared as one of the stock- 
holders of some of the dog tracks down there. He is still apparently 
active. The stock is in his son's name at the present time, James 
Patton; and Robert Larry McCullough, for example, whom I men- 
tioned here, has been the chief of police of the Miami Beach Kennel 
Club down there to help them maintain law and order, I guess. I 
don't know. 

The Chairman. Mr. Peterson, you have notes that you are follow- 
ing. I wish it were possible to have copies of these notes for the bene- 
fit of the press. I know it is very difficult for them to follow this. 

Mr. Peterson. Unfortunately, I was under such pressure in trying 
to get ready; in fact, I just finished dictating it yesterday before I left 
and I didn't have extra coj>ies. I have the one extra copy that I gave 
to your committee here. 

The Chairman. I wonder if during the lunch hour, from the point 
where Mr. Peterson leaves off, copies could be made. It would be a 
pretty fast mimeographing job. 

Mr. Klein. I don't think it could be done, Senator. 

Mr. Halley. Mr. Peterson also explained that there are some names 
in the statement that he has there that he would not want to make 
public, but will give the committee privately. The committee should 
know that Mr. Peterson made every effort to have a copy of his state- 
ment that could be made public in the committee's hands by yesterday, 



130 ORGANIZED CRIME IN INTERSTATE COMMERCE 

so it could be mimeographed, but lie found that the pressure of work 
was such that he just could not do it. It is quite a long statement, and 
it is understandable that he couldn't do it ; but he did try to do it. 

(Discussion off the record.) 

The Chairman. Mr. Peterson, we will recess at about 12 : 25 if you 
can find some place where you can stop. 

Mr. Peterson. I will be glad to do that. There is just a little bit left 
leading up to the background of the Capone gang here, and then per- 
haps that would be a good breaking off point. 

The Chairman. All right, Mr. Peterson. 

Mr. Peterson. After John Torrio left Chicago about 1929 is when 
Al Capone became the ruler of Chicago's underworld. One of the early 
bodyguards of Capone was Louis (Little New York) Campagna. 
Campagna originally came from New York City, and at first it is 
claimed that he hung around Taylor and Halsted Streets in the old 
"bloody twentieth" ward in Chicago. Torrio had built up power for 
his organization of gangsters, and this was taken over by Capone and 
became even more powerful as time elapsed. On February 14, 1929 — 
I am sure you are all familiar with the St. Valentine's Day massacre 
in Chicago. Apparently, Capone gangsters intended to kill Bugs 
Moran, Willie Marks, and Ted Newberry, all of whom were North 
Side underworld leaders. The investigation conducted by the police 
revealed that until 3 days before the massacre Guzik had been holding 
daily long-distance telephone conversation with Al Capone in Florida. 
Jack Guzik was then the business manager of the illegal empire con- 
trolled by Capone. Among the numerous individuals sought by police 
as suspects — and they were just suspects — were Tony Accardo, Claude 
Maddox, and Tony Capezio. 

The activities of the Capone gang consisted principally of illegal 
liquor racket, gambling, and allied activities such as dog racing. The 
Capone gang was vitally interested in a track in Chicago known under 
two names, namely, the Laramie Kennel Club. In connection with the 
investigation of the St. Valentine's Day massacre in Chicago in 1929, 
testimony was taken concerning the sale of a machine gun. The ven- 
dor of the gun testified that he had sold a machine gun to Edward J. 
O'Hare, who was then manager of the Hawthorne Kennel Club and 
who actually became the czar of dog racing for the Capone syndicate. 

The Chicago Daily News on April 30, 1929, stated, reporting the 
testimony : 

Three witnesses supplied the testimony regarding the machine-gun deal through 
the Cicero police with the Capone dog track, which was owned by John Patton, 
boy mayor of Burnham, and Jack Guzik, business manager for Capone. * * * 

In the autumn of 1931 Al Capone was brought to trial in Federal 
court for income-tax evasion. Capone's bodyguard at that time was 
Phil D'Andrea, who, true to form, appeared in court with a concealed 
weapon and was sentenced by a Federal judge to 8 months in jail for 
contempt of court. Phil D'Andrea, as you know, was recently—in 
1943 — convicted with other Capone gangsters in the movie extortion 
case. When Capone was committed to Federal prison, Frank Nitti 
became the head of the Capone gang. At the time Capone went to 
prison the following individuals had grown in stature within the 
Capone organization and were powerful members of the Capone syn- 
dicate: Frank Nitti, Louis (Little New York) Campagna, Paul Ricca, 



ORGANIZED CRlMEi IN INTERSTATE COMMERCE 131 

Phil D'Andrea, Jack Guzik, Tony Accardo, Charles Fischetti, Ed- 
ward Vogel, Hymie (Loud Mouth) Levin, Ralph Capone, Tony Ca- 
pezio, Ralph Pierce, Murray Humphreys, Frank Maritote, alias Frank 
Diamond, Nick Circella, alias Nick Dean, Lawrence Imburgio, Charles 
Gioe, Anthony (Mops) Volpe, William Niemoth, and Sam (Golf 
Bag) Hunt. Most of these individuals are still important members 
of the Capone syndicate in 1950. Numerous others have grown to 
power and have become influential within the organization. The op- 
eration of the gang has been extended to many places in the United 
States, and important alliances have been made from time to time 
with the powerful underworld leaders in other parts of the country, 
particularly with members of the so-called Frank Costello gang in 
New York. 

That gives a brief background of the beginning of the Capone 
syndicate. 

The Chairman. Mr. Peterson, I think we will interrupt your 
statement at this point. 

For the information of the press and others here, the committee 
will continue with Mr. Peterson's statement at 2 : 30 this afternoon in 
this room, but his statement will be interrupted at 3 : 15, at which 
time Mr. William Brown, the president of the Pioneer News Service, 
will testify. Mr. Brown has been here since yesterday and wants to 
go back home tonight. 

The committee will stand in recess until 2 : 30. 

(Whereupon, at 12 : 25 p. m., the committee recessed until 2 : 30 p. m. 
the same day. ) 

AFTERNOON SESSION 

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

The Chairman. The committee will come to order. 

Mr. Peterson, will you continue with your testimony, please ? 

FURTHER TESTIMONY OF VIRGIL W. PETERSON, OPERATING DI- 
RECTOR, CHICAGO CRIME COMMISSION, REPRESENTING THE 
AMERICAN MUNICIPAL ASSOCIATION 

Mr. Peterson. In the early 1920's while the Torrio-Capone organi- 
zation was flourishing in Chicago, the principal underworld leader 
in New York City was Arnold Rothstein. He was frequently referred 
to as the master mind of the underworld. He financed many impor- 
tant underworld leaders in their activities, and among those who were 
close to Rothstein and who benefited from his financial assistance were 
Frank Costello, Eddie Costello, a brother of Frank, George Uffner, a 
dealer in narcotics who was closely associated with Charles "Lucky" 
Luciano and Dandy Phil Kastel. 

The Chairman. Mr. Peterson, at that point, that is a statement of 
fact, and how do you know that ? 

Mr. Peterson. Through our files and through research. That in- 
formation, of course, has been a matter of public record over a long 
period of time. 

The Chairman. You do have factual data to back up every state- 
ment of fact that you make before the committee ? 



132 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Mr. Peterson. That is right. 

During World War I Kastel was engaged — as a matter of fact, he 
has been convicted — was engaged in many illegal operations. He was 
once charged with the time-worn badger game. He was tried and 
acquitted of that charge and was represented by Rothstein's attorney. 
Until 1921 Kastel had operated a bucket shop under the name of 
Dillon & Co., which it was claimed resulted in swindling clients out 
of approximately a half million dollars. He was convicted and sen- 
tenced to prison. When Kastel came out of prison he became a partner 
and associate of Frank Costello. Kastel, incidentally, was also a 
friend of Nickie Arnstein. 

During the 1920's and the early 1930's Frank Costello numbered 
among his associates such individuals as Louis Lepke Buchalter, Dutch 
Schultz, Arnold Eothstein, Joe Adonis, Owney Madden, and Willie 
Bioff, who incidentally testified at the moving-picture extortion trial 
that Costello was a member of the conspiracy through which he and 
George Brown had obtained control of the stage-hands' union. 

As a sidelight, from 'about 1922 to 1931 Joe Masseri was the head 
of the underworld activities of what is frequently called the Mafia. 
He was known as Joe the Boss, and was head of the Italian lotteries 
and similar illegal activities. One of his lieutenants was Charles 
"Lucky" Luciano, who allegedly succeeded him as head in about 1931. 

From 1928 to the early 1930 ? s one of the most powerful gangs operat- 
ing New York City and on the East coast was composed of the follow- 
ing individuals : Frank Costello, Joe Adonis, Benjamin "Bugsy" Siegel, 
John Torrio, the abdicated king of the Capone syndicate, Dutch Gold- 
berg, Abner "Longie" Zwillman, Meyer Lansky, Charles "Lucky" Lu- 
ciano, Moe Sedgwick, alias Little Moe, Jack Levenson, Charles Haim, 
and Louis Pokrass, and a number of others. Most of those activities 
of course were in the bootlegging field. Benjamin "Bugsy" Siegel, 
Meyer Lansky, and Charles "Lucky" Luciano were said to be the en- 
forcers for the gang and they engaged in terrorizing tactics as en- 
forcers. As I said before, until the repeal of prohibition the principal 
activities of this group were related to the illegal liquor traffic. Many 
of them remained in the same field following prohibition. Many of 
the group of course were big-time operators in the field of gambling. 
As early as 1932 Joe Adonis, Frank Erickson, and others were promot- 
ing a big sweepstakes operation. In 1933 Adonis sent his representa- 
tive to Chicago to help reorganize the Manhattan Brewery. The rep- 
resentatives of Joe Adonis remained in the Chicago area for about 4 or 
5 months in connection with the reorganization. Torrio had previ- 
ously been connected with this brewery during prohibition. It was 
claimed that Joe Adonis had an interest along with members of the 
syndicate. It thus appears that as early as 1933 there was a close 
collaboration between the Joe Adonis-Frank Costello mob in New 
York and the Capone syndicate in Chicago. As previously indicated, 
Frank Costello, Joe Adonis, John Torrio, and other members of the 
gang gained control of legitimate liquor business. At one time they 
succeeded in having their representative placed at the head of State- 
wide trade associations and through their influence they were able to 
have their representative elected to the liquor code authority under the 
old NRA. During this period the Capone syndicate 

The Chairman. Mr. Peterson, what was the State-wide association? 

Mr. Peterson. That was a liquor association. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 133 

The Chairman. I mean the one before that, the tourists' association. 

Mr. Peterson. No, it was a State-wide trade liquor association. I 
have the details of that in our files which I can make available to you. 

The Chairman. Is that the name of the syndicate ? 

Mr. Peterson. No, that was not the name. That is a generalization. 
I have the exact name of the association in our files which I will make 
available to you if you want it. 

The Chairman. Thank you. 

Mr. Peterson. During this period the Capone syndicate was vir- 
tually in control of dog racing throughout the Nation. The New York 
group was also interested in this racket, and at a single session of one 
legislature they claimed they spent the sum of $100,000 in an effort to 
secure favorable legislation. 

In 1930 Costello and his lieutenant, Dandy Phil Kastel, were asso- 
ciated with Irving Haim. Kastel received large sums of money for 
the promotion of William Whitely liquors in the United States through 
the Alliance Distributors, which was controlled by Irving Haim. In 
1934 Costello obtained the agency contract for Whitely brands which 
he transferred to Alliance Distributors, of which Irving Haim was 
the principal owner. In 1937 

The Chairman. Mr. Peterson, what are the Whitely brands ? 

Mr. Peterson. That is the King's Kansom Scotch. That was what 
it was. There again there are documents in connection with hearings 
held in New York concerning that matter. 

In 1937 Haim negotiated the purchase of this J. J. Turney & Son, 
Ltd., holding company of William Whitely & Co., distillers. The 
purchase was made in the name of Irving Haim and the money was 
obtained from a New Orleans bank on notes secured by Irving Haim, 
Phil Kastel, Frank Costello and William Helis. Dandy Phil 
Kastel and Frank Costello were also engaged in large-scale slot- 
machine activities. In New York the company was known as the 
True-Mint Co. When Mayor LaGuardia conducted his campaign 
against the slot-machine operations of Costello and Kastel in New 
York, they negotiated with officials of Louisiana and began large- 
scale slot-machine operations there. In Louisiana they organized the 
Pelican Novelty Co. together with a number of subsidiary companies, 
one of which was the Bayou Novelty Co. They began operations in 
Louisiana in 1934, and it is claimed that the first year of their activi- 
ties there netted them about $800,000. Although the purpose of per- 
mitting the slot machines originally was allegedly for charity, it is 
also claimed that charity received only about $G00. 

Getting back to the Capone syndicate, 1 think it might be important 
briefly to give you a brief background of some of these individuals who 
are now the leaders of the Capone syndicate. 

Charles Fischetti is one of the most important members of the 
syndicate at the present time. As a matter of background, he is a 
cousin of Al Capone and has been an important member of the syndi- 
cate for the greater part of three decades. He owns a home, in addi- 
tion to his address in Chicago at 6471 Allison Road, Miami, Fla., Alli- 
son Island. He also maintains a residence address at 3100 North 
Sheridan Eoad in Chicago, where his brothers, Rocco and Joe, live. 
He has been arrested numerous times. In addition to maintaining close 
contact with various prominent members of the syndicate in Chicago, 



134 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

he has associated with John and Fred Angersola, usually referred to 
as John and Fred King, from Cleveland. This association recently 
has taken place in Florida. However, that association began before 
that time, where both the Fischettis and the Kings have spent a large 
amount of time recently. On the west coast Fischetti has associated 
with Jack I. Dragna, one of the most powerful underworld leaders in 
that area. He has also been known to maintain close relations with 
some of the individuals who have been prominently identified with 
the underworld on the east coast. 

His brother, Rocco Fischetti, sometimes known as Ralph Fisher, 
has also been a member of the Capone syndicate since the late 1920's. 
He has been in charge and control of some of the largest gambling 
establishments in Lake and Cook Counties. For a number of years 
Rocco Fischetti and a man by the name of Jim Bettinus operated the 
notorious Rock Garden Club in Cicero, 111. Following a grand jury 
investigation in 1943 this establishment moved to Lake County where 
they controlled the Vernon Country Club, one of the most elaborate 
establishments in that area. Following the grand jury investigation 
there they moved back into the Chicago area. 

Gus Liebe has served as the manager of many of their establish- 
ments, those that are controlled by Rocco Fischetti. 

Tony Accardo, frequently regarded as one of the leading members 
of the syndicate, resides at 1431 Ashland Avenue, River Forest, which 
is a very choice residential suburb of Chicago. He has also resided 
at 9199 Collins Avenue, Surfside, Fla., just north of Miami. Since 
Frank Nitti committed suicide in 1943, Tony Accardo has frequently 
been considered the leader of the Capone syndicate. In 1946 James 
M. Ragen, who was then part owner and manager of Continental Press, 
made a signed statement to the State's attorney in which he alleged 
that Tony Accardo, Murray Humphreys, and Jack Guzik, all of them 
members of the syndicate, attempted to muscle him out of 40 percent 
of the proceeds of the Continental Press, a racing information news 
service covering the entire United States. Ragen was then ambushed 
and shot on June 24, 1946, and later died. The Capone syndicate 
then formed its own racing news information service which was 
called the Trans- American Publishing & News Service, Inc. Accardo, 
as I mentioned before, was one of the alleged plotters of the St. 
Valentine's Day massacre in 1929. He was picked up, arrested, follow- 
ing that. In 1931 the crime commission named him as a public enemy. 
He has been arrested in Chicago on numerous occasions. In con- 
nection with the Federal parole of Paul Ricca, "Little New York" 
Campagna, Charles Gioe, and Phil D'Andrea, Accardo was indicted in 
Federal court in Chicago. He had visited Ricca and Campagna in 
Leavenworth Penitentiary under the pretext that he was an attorney 
and used the name of Joseph Bulger, a Chicago attorney. 

Tony Accardo has operated gambling places in Chicago in partner- 
ship with both Harry Russell and Dave Russell, and he has also been 
a partner of Lawrence Imburgio. Among his other partners in gam- 
bling enterprises is John Patrick Borcia, whose activities extended 
from Chicago to California, where he has been operating the Primrose 
Bar, which incidentally is a hangout for hoodlums. Early in 1950 the 
Los Angeles Police Department was seeking Jack I. Dragna, one of 
the most notorious gangsters on the west coast. A confidential address 
book was seized from Dragna's principal lieutenant, Giroloma Adamo, 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 135 

alias Mo Mo. This book contained the addresses and names, in many 
instances the private telephone numbers, of some of the leading under- 
world characters in the Nation. Among the names contained in this 
book was that of Tony Accardo, together with his residence address 
in River Forest, 111. The book also contained the name of Joe Bat- 
ters, which is the name frequently used by Accardo. Tony Accardo's 
brother, Martin L. Accardo, has recently resided at 1217 Granada 
Boulevard, Coral Gables, Fla. He is a felon, having been sentenced 
to the Federal penitentiary to serve iy 2 years for violation of the 
National Prohibition Act in 1932. 

Paul Ricca, 812 Lathrop Avenue, River Forest, 111., is frequently 
considered the top ranking member of the Capone syndicate. Since 
his parole from Federal penitentiary in 1947 he has naturally kept in 
the background. Paul Ricca, together with several other members 
of the Capone syndicate, including John Roselli, of the west coast, 
and Louis Kaufman on the east coast, conspired to extort a million dol- 
lars from the movie industry. They were convicted in Federal court 
in New York City in 1943. 

Senator Wiley. What did you say they did to the movie industry ? 

Mr. Peterson. They conspired to extort a million dollars from the 
movie industry. They were convicted in Federal court in New York 
City in 1943. * 

The Ch airman. That is the so-called Bioff -Brown case. 

Mr. Peterson. That is right. They were also mixed up in that case. 

In 1910 a temporary injunction was granted to George McLane on 
the petition that hoodlums were attempting to take over the financial 
affairs of the Bartenders and Beverage Dispensers Union, Local 278, 
in Chicago. Named in the injunction were Louis Romano, president 
of the union, Frank Nitti, Murray Humphreys, Louis "Little New 
York" Campagna, Fred Evans, and Paul Ricca. At that time McLane 
alleged that he had been told previously by some of the gangsters, 
namely Frank Nitti, Paul Ricca, and Louis Campagna, that they 
wanted to take over control of the union in order to loot the treasury. 
In 1943 

Senator Wiley. What was the result of that ? 

Mr. Peterson. I think the union was thrown into receivership. 
There was also an indictment returned at that time and when the case 
went to trial, George McLane then took the witness stand and said he 
refused to testify on the ground — he exercised his privilege. I don't 
know whether it was on the ground of self-incrimination, but it was 
on some ground, and of course the whole case blew up because the case 
depended quite largely on the testimony of George McLane. 

Senator Wiley. Were there subsequent developments? Who is in 
charge of the union now? 

Mr. Peterson. I think a man by the name of Crowley is the business 
agent of the union at the present time. He, incidentally, was shot in 
Milwaukee a couple of years ago. 

Senator Wiley. He got shot or was shot. 

Mr. Peterson. I think he was shot in connection with a union elec- 
tion out there. 

Senator Wiley. How many years ago was that? 

Mr. Peterson. Time goes fast. I would have to check. I think it 
was 2 or 3 years ago. 



136 ORGANIZED CRIME IN INTERSTATE COMMERCE 

The Chairman. You say that happened in Wisconsin ? 

Mr. Peterson. I am not sure. They were holding the election in 
Milwaukee. I think he was shot in Chicago, as a matter of fact. I 
am not positive about that. I would have to check on that. 

Senator Wiley. Anyway he wasn't a Wisconsin citizen. 

Mr. Peterson. That is right. I give you a clean bill of health on 
that. 

In 1943 the newspapers charged the Nitti-Ricca-Campagna com- 
bine had cleaned out the treasury of the Retail Clerks International 
Protective Association, Local 1248. Max Caldwell, alias Max Pollack, 
an ex-convict, had been in charge of the union funds. A union repre- 
sentative testified that out of $910,000 collected by Caldwell as the 
union representative, he could find only about $62. Pollack associated 
with numerous other members of the Capone syndicate, and it was 
customary for him to take them on airplane trips from Chicago to 
Miami. Max Caldwell incidentally is presently located in Miami. 

Senator Wiley. What union was that ? 

Mr. Peterson. That was the Retail Clerks International Protective 
Association, Local 1248. Caldwell was then kicked out of the union. 

Senator Wiley. Did they ever recover any of it ? 

Mr. Peterson. No ; not to my knowledge. 

Senator Wiley. That was before the Taft-Hartley Act, in 1943. 

Mr. Peterson. Yes ; it was in 1943. 

Paul Ricca, among other property, has a summer estate located 
near Long Beach, Ind., worth about $75,000. He is supposed to have 
a farm in Kendall County, 111., about 1,100 acres there, which has 
been managed or was during the war by Francis Curry. Ricca fre- 
quently has used the name of DeLucia, and the owner of record of 
the property in Long Beach, Ind., is in the name of Nancy DeLucia. 
In 1943 Ricca had a suit pending against the tenant and owner of a 
downtown building for personal injuries suffered during an elevator 
fall. At the time of the accident Ricca was in the company of Charles 
Fischetti and Joseph Fischetti. Ricca apparently was born in Naples, 
Italy, about 1899. It is claimed that he served in the Italian Army 
during the First World War. His first employment upon coining 
to Chicago was that of a waiter in a coffee shop on Halstead Street and 
later as a waiter in a restaurant on Wabash Avenue near Harrison, 
where Frank Nitti and other hoodlums frequently gathered. Nitti 
was attracted to Ricca, so the story goes, because of his intelligence 
and induced him to work at the Lexington Hotel which was a Capone 
gang headquarters, as a confidential aid to Nitti. From that time on, 
Ricca became influential in the inner circles of the Capone organiza- 
tion. It is stated that Ricca came to this country about 1920 and that 
his name in Italy was Magleo or Maglio. Frank Costello of New 
York has admitted having an acquaintanceship with Ricca several 
years ago. 

Louis "Little New York" Campagna, 2927 Maple Avenue, Berwyn, 
111., also has farms in Berrien Springs, Mich., and Fowler, Ind. 

Campagna was one of the early bodyguards for Al Capone. At one 
time it was believed that he would eventually succeed to Al Capone's 
shoes, although he never actually gained that status. Unquestionably, 
however, he is one of the top ranking members of the syndicate and has 
operated within the inner circle of that organization for almost three 
decades. On July 10, 1936, the Chicago press carried an article to 



ORGANIZED CRIME IN INTERSTATE COMMERCE 137 

the effect that Frank Nitti, State Representative James J. Adduci, and 
Louis "Little New York" Campagna had been placed under police 
surveillance as leaders of the revived Cammora to control gambling,, 
bootlegging, and all other rackets in Chicago. The three named were 
under investigation following the murder of State Representative 
John M. Bolton, who was killed on July 4, 1936. Campagna was one 
of those restrained in that order that I mentioned a few moments ago 
from looting the treasury of the Bartenders and Beverage Dispensers 
Union, Local 276 in 1940. Campagna was convicted in Federal court- 
in New York City again with Paul Ricca and John Roselli from Cali- 
fornia and Louis Kaufman from the East, and others. Again that 
was the movie extortion plot. Campagna was paroled from the Fed- 
eral penitentiary on August 13, 1947, together with Paul Ricca and 
Charles Gioe. They were later returned to the penitentiary. How- 
ever, they were subsequently released as a result of court action stwdj 
are presently on parole pending appeal. At least, they were, the last 
that I inquired. The Circuit Court of Appeals for the Fifth District, 
New Orleans, has ordered that Campagna and Gioe be returned to the 
penitentiary, but there is still further legal action pending. Cam- 
pagna has made a fortune from gambling activities in Cook County. 
He has been affiliated in gambling activities with Willie Heeney, an 
important figure in Cicero, Joseph Corngold, alias Fifke, of the El 
Patio gambling establishment, 5914 West Cermak Road, Cicero. 

Senator Wiley. Did they return what they made on Federal in- 
come tax returns ? 

Mr. Peterson. I believe there was testimony introduced in the con- 
gressional hearings with reference to the parole a year ago. I don't 
recall the exact figures, but I believe that Ricca admitted in testimony 
there that he got between $50,000 and $100,000 a year. This is from 
recollection. I don't remember the exact testimony. I think Cam- 
pagna indicated that he got around $200,000 as his share. 

Senator Wiley. What did their tax returns show ? 

Mr. Peterson. I don't know. 

The Chairman. The testimony you refer to was before the Hoffman 
committee? 

Mr. Peterson. That is right. I am giving this from memory as 
far as what they testified to, but that is my recollection. 

Senator Wiley. Did the Federal Government take any action for 
the collection of back taxes ? 

Mr. Peterson. Prior to the time they were released I think there 
were back taxes on the part of Campagna and Ricca to the extent of 
about $500,000, as I recall. They settled it for about 20 cents on the 
dollar. That was before the paroles. They settled for around 
$100,000. That was at the time when all this mysterious money was 
dumped in on Eugene Burnstein's desk in Chicago and they paid off 
these so-called back tax claims. That was prior to the time they were 
released from the penitentiary. 

Senator Wiley. What year was that ? 

Mr. Peterson. 1947. 

That was in testimony before the Hoffman committee. Mr. Lahey 
said that Heeney testified that "Little New York" Campagna got 60 
percent out of this joint I mentioned and Corngold got 15 percent, 
That is out of Cicero gambling joints. That was their testimony. 
Thank you. 



138 ORGANIZED CRIME 1 IN INTERSTATE COMMERCE 

Tony Capezio, "Tough Tony," resides also in River Forest, 111., 1048 
Ashland Avenue, and has been considered a member of the Capone 
mob since about 1929. During the Dillinger investigation, inciden- 
tally, he was one of the principal contacts with "Baby Face" Nelson, 
the most notorious killer of that gang. He is about 47 years of age 
and resides with his wife, Marie Capezio at the above address. Ca- 
pezio's wife Marie is the sister of Frank Nitti, former head of the 
Capone mob. Tony Capezio was one of the suspects in the St. Val- 
entine's Day Massacre in Chicago in 1929 and was also a suspect of 
the murder of Mike DePike Heitler. He was a brothel house owner, 
and I think he was killed around 1930. 

Senator Wiley. You say Ricca was born in Italy. Are the rest of 
them American citizens? 

Mr. Peterson. I think they are all citizens within my knowledge. 
Some of them may not be, but I don't know. Our files would probably 
show whether they are or not. 

Capezio has also been closely associated with John I. De Biase 
alias Johnny Bananas, of the Twenty-eighth Ward in Chicago, who 
has been very powerful there. Tony Capezio's wife is part owner of 
the Orchid Flower Shop, at 2408 West Chicago Avenue. My rec- 
ollection is that Campagna's wife is also a part owner of that shop. I 
would have to check that, however. 

He is also allegedly owner of a cocktail lounge and there have also 
been allegations, which have not been proved, that he has an interest 
in a currency exchange. For the past 20 or 25 years Capezio has 
been a friend of Claude Maddox, an important syndicate member who 
has operated primarily in Cicero, 111. He has been arrested with 
Claude Maddox as well as with Rocco De Grazio, Fred Rossi, and 
others. Allegations were made a number of years ago that — these 
were public allegations, never proven — that Maddox and Capezio were 
active in attempting to control Local 705 of the Teamsters and Chauf- 
feurs Union. Capezio has been engaged in big-time gambling opera- 
tions in Chicago. 

Jack Guzik, another member of the syndicate, was the business 
manager of the Capone sjmdicate or was called such during the hey- 
day of Al Capone's regime in Chicago. He has been prominently 
identified with big-scale gambling by James M. Ragen up until recent 
years. In 1946 it was alleged in a statement made by James M. Ragen 
to the State's attorney that Guzik, together with Tony Accardo and 
Murray Humphreys as representatives of the Capone syndicate were 
attempting to muscle into the Continental Press. Jack Guzik was very 
close to Al Capone until the time he died. Jack Guzik's son-in-law, 
Frank Garnet, has been very prominently identified with the distri- 
bution of juke boxes in Illinois and recently in California. Guzik's 
brother-in-law, Louis Lipschultz, has been active in Cook County. 
About 1948 Louis Lipschultz, according to the chief of police of 
Cicero, 111., contacted him and offered him $100,000 to permit gambling 
to operate in Cicero. The offer was turned down. Lipschultz at that 
time said he was merely a spokesman for friends. In 1936 Lip- 
schultz 

The Chairman. Did he admit making the offer ? 

Mr. Peterson. It was just between Lipschultz and the chief of 
police. *I don't think he was ever confronted by anybody with it. The 



ORGANIZED CRIME IN INTERSTATE COMMERCE 139 

offer was turned down. The chief of police made the statement that 
he made that offer to him. 

In 1936 Lipschultz, who was then residing at 4342 Ogden Avenue, 
pled guilty to income tax evasion in Chicago court and was fined 
$500 and paid $7,000 in a compromise settlement. In the in- 
come tax hearing there it was claimed that Lipschultz then received a 
gross income of $107,111 from the Harlem Tavern in Stickney, 111., 
the Stockdale Saloon in Forest View, and the old Hawthorne Kennel 
Club, which was known as a Capone syndicate enterprise. Jack 
Guzik's father was naturalized on November 5, 1898, at which time 
he was apparently 10 or 11 years of age and received his naturaliza- 
tion when his father became a citizen. Jack Guzik himself was 
charged with evasion of income tax for the years 1927, 1928, and 1929. 
The Government alleged that Guzik's income amounted to approxi- 
mately $1,000,000, necessitating a payment in the amount of $250,000 
for the years mentioned. In the prosecution of this case the Federal 
Government produced evidence showing that Guzik then had an in- 
terest in numerous gambling houses in Cicero and Chicago, that he 
owned stock in the Hawthorne Kennel Club which operated as a dog- 
racing track. On November 20, 1930, he was found guilty and sen- 
tenced to a term of 5 years in the Federal penitentiary and fined 
$7,500. Until recent years Guzik has been associated with Hymie 
"Loud Mouth" Levin in gambling enterprises. Levin was an impor- 
tant cog in the Capone organization during the heyday of Al Capone. 
Guzik has also been associated with Frank "Chew Tobacco" Ryan, 
Rocco Fischetti 

The Chairman. What was that last name? 

Mr. Peterson. He is commonly known as Frank "Chew Tobacco" 
Ryan. He is a well-known gambler in Chicago for the past probably 
30 years, I guess, and his last name is Ryan. Rocco Fischetti, Sam 
Hunt, and Murray Humphreys also. All of those are well-known 
syndicate members. 

Gus Alex in recent years has become an important figure in the 
syndicate and has been particularly close to Jack Guzik. He is the 
son of a restaurant owner. He has been arrested on numerous occa- 
sions but has never been convicted or retained in jail for any length 
of time. In 1944 Gus Alex, age 30 years, 4000 West Washington 
Boulevard, was arrested, together with Willie Niemoth, in connection 
with the shotgun wounding of Robert Bock. The arrest was merely 
one on suspicion, and they were released. In 1943 Gus Alex was re- 
putedly the owner of a gambling establishment at 2136 South Mich- 
igan Avenue, in which dice, roulette wheels, and other gambling was 
conducted. In 1944 it was alleged that Gus Alex, Hymie Levin, Gus 
Liebe, and others were connected with the notorious gambling estab- 
lishment called the Dome at 7466 West Irving Park Road. Alex is 
unquestionably clos3ly associated with the top-ranking members of the 
syndicate. In 1944 the chief of the Cook County Highway Police had 
Alex under surveillance at which time he visited the home of Tony 
Accardo, in River Forest, 111. 

Edward Vogel has also been known as the slot-machine king of 
Cook County. He has been associated with Capone gangsters for the 
greater part of three decades. On October 1, 1926, he was indicted, 
together with Al Capone, the mayor and chief of police of Cicero, 



140 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

111., and many others. They were charged in a Federal indictment 
-with having conspired to violate the prohibition laws. It is claimed 
that Vogel, among other contacts, did have one George "Babe" Toffen- 
elli, who was the trouble-shooter for Ed Vogel on the south side in 
connection with slot-machine activities for a number of years. Vogel 
has been the secretary and treasurer of the Apex Cigarette Service, 
Inc., 1010 George Street, Chicago. 

The Chairman. What is that company ? 

Mr. Peterson. That company has the cigarette-vending machines 
where you put in 20 cents and get out a package of cigarettes. 

The 'Chairman. Is that still operating? 

Mr. Peterson. Yes. This company was chartered in Illinois in 
December 1937. Vogel also has connections with certain other legiti- 
mate enterprises that I can give you in more detail perhaps at a later 
time. 

Senator Wiley. What is the estimated amount of money he has in 
those enterprises ? 

Mr. Peterson. Of course, in the Apex Cigarette Service Co. he is 
one of the principal owners as I understand it, but I can't give you an 
estimate of the amount of money involved in the enterprises. He is 
supposed to have — I did have the figure on this one company. I might 
possibly have it here on a legitimate enterprise. I do not seem to 
have it with me. On one legitimate thing I think his income was 
supposed to have been $10,000 a year. 

The Chairman. You can get the information and furnish it to the 
committee later. 

Mr. Peterson. That is right. 

Another important member is Murray Llewellyn Humphreys, alias 
J. Harris, known as "The Camel," 7710 Bennett Avenue. Without 
any question he is one of the leading members of the syndicate. He, 
together with Tony Accardo and Jack Guzik, have attempted to muscle 
into the Continental Press according to a statement made by James M. 
Ragen in 1916, and you will recall that shortly thereafter Ragen was 
ambushed and shot and later died. Murray's first conflict with the 
law occurred in 1918 when he was arrested as John Humphreys on a 
charge of burglary. On a plea of guilty to petit larceny he was sen- 
tenced to the house of correction for 6 months. Since that time 
Humphreys has been arrested on numerous occasions in connection 
with labor racketeering, gambling, and vice activities. Among the 
various Capone hoodlums with whom Humphreys has been arrested is 
Ralph Pierce, who was also a defendant in the movie-extortion trial 
involving Capone syndicate members. 

Humphreys has also been involved in kidnaping. In 1922 Hum- 
phreys was associated with the Meadowmoor Dairy. It was also 
alleged at that time that Humphreys and other hoodlums were at- 
tempting to muscle in to a milk-drivers union. In 1932 it was alleged 
that Humphreys and others were attempting to dominate the teamsters 
union. In March 1933 Humphreys and Charles Fischetti were taken 
into custody for questioning with reference to the murder of the 
secretary of the Hoisting and Portable Engineers Union, local 569. 
Of course, both denied any implication and they were released. On 
May 2, 1933, the chief investigator for the State's attorney's office 
described Humphreys as public enemy No. 1 and the czar of business 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 141 

rackets in Chicago. It was alleged by the State's attorney's office that 
Humphreys through his control of certain labor unions had forced 
the cleaning and dyeing industry and the laundry industry to pay 
tribute to him. On June 27, 1933, Humphreys was indicted by the 
Federal grand jury in Chicago on a charge of income-tax evasion. On 
July 28, 1933, Humphreys, Al Capone, and 22 others were indicted by 
the Cook County Grand Jury on charges of conspiracy to control the 
cleaning and dyeing industry and the carbonated beverages and linen 
supply industries, through kidnapings, strikes, bombings, and acids. 
Seventeen of the defendants were found not guilty and the charges 
against Humphreys, Al Capone, and others were stricken off with 
leave to reinstate by the prosecutor's office. On October 27, 1934, 
Humphreys pleaded guilty to income-tax evasions and was sentenced 
to serve 18 months in the Federal penitentiary and was fined $5,000. 

Later in a hearing before the United States Board of Tax Appeals 
beginning in January 1939 to determine the amount of income tax and 
penalties owing by Humphreys, testimony was given that in addition 
to the income received from various sources Humphreys received 
$50,000 ransom paid by the milk wagon drivers union for the release 
of Robert C. Fitchie in 1931. The United States Government was 
insisting that this $50,000 be included in Humphreys' income-tax re- 
turns. Humphreys was also one of those against whom an injunction 
was issued in 1940 that I mentioned a short while ago to the Bartenders 
and Beverage.Dispensers Union, Local 278. He was later indicted in 
connection with this matter, but not convicted. 

In 1941 he had an interest in the Individual Towel Co. which at 
that time had a $45,000 annual contract with the Chicago Board of 
Education, resulting in action by the State's attorney's office. In 
recent years Humphreys has been associated with Guzik, "Little 
New York" Campagna and many other prominent members of the 
Capone syndicate. As of 1940 he was an executive of the Midwest Oil 
Corp. which apparently was dissolved about 1941. He also has been 
associated with important racketeers in various parts of the country. 
I mentioned a short while ago the records recovered by the Los Angeles 
Police with reference to Jack I. Dragna and his lieutenant, Mo Mo 
Adamo. Among the secret names and addresses of underworld char- 
acters found in that address book was that of Humphreys, who was 
listed as J. Harris, 7701 Bennett Avenue, Chicago. That is the name 
that his private telephone number also was listed under. 

The Chairman. Mr. Peterson, are you at a place where you can 
pause for the time being ? 

(Mr. Peterson's testimony was interrupted while the committee 
took testimony from William P. Brown, Clayton, Mo. Mr. Brown's 
testimony is included in part 4 of the committee's hearings.) • 

The Chairman. Mr. Peterson's statement will take approximately 
4 or 4}/2 hours more and he has to leave at 5 o'clock tomorrow after- 
noon; so, much as the committee hates to work overtime and any- 
body else hates to work overtime, we will have to go on for 30 minutes 
this afternoon. 

The committee is very much interested in your full statement, Mr. 
Peterson. We will resume in about 5 minutes. 

(Brief recess.) 

The Chairman. All right, Mr. Peterson, if you will carry on. 

68958—50 — nt. 2 10 



142 ORGANIZED CRIME IN INTERSTATE COMMERCE 

FURTHER TESTIMONY OF VIRGIL W. PETERSON, OPERATING DI- 
RECTOR, CHICAGO CRIME COMMISSION, REPRESENTING THE 
AMERICAN MUNICIPAL ASSOCIATION 

Mr. Peterson. The next individual of importance in the Capone 
syndicate is Ralph Pierce. He was indicted also by the Federal grand 
jury in New York City with Paul Ricca, Phil D"' Andrea, Nitti, and 
the others in connection with the movie extortion. Pierce, incidentally, 
was one of those acquitted. He was indicted for kidnaping in Chi- 
cago in 1929, and that case was nol-prossed. He was also one of 
those arrested in 1935 as a suspect in the murder of Thomas Malloy, 
boss of the motion-pictures operators' union in Chicago. He was 
also arrested in 1943 as a suspect in the Estelle Carey murder case 
in Chicago and in 1945 was arrested for questioning in connection 
with the murder of James "Red" Forsythe, a notorious hoodlum. He 
was released in each of those instances. Pierce has been known as a 
bodyguard for Murray "The Camel" Humphreys and is an associate 
of Sam "Golf Bag" Hunt, both of whom are stalwarts in the Capone 
organization. In the past he has spent a large amount of time at 
Russell's Silver Bar, 400 South State Street, Chicago, operated by 
Harry Russell, a big shot in the gambling set-up in Chicago and more 
recently in Florida. 

Another individual is Fred Evans, 5000 Marine Drive, Chicago, who 
was sometimes regarded as the financial brains of the Capone gang. 
He is an associate of many of the most important memoers of the 
Capone outfit, including Nitti, deceased leader of the gang, Murray 
Humphreys, Paul Ricca, and Louis Campagna. He, Evans, was 
indicted with these men and Louis Romano and Thomas Panton in 
1940 on a charge of conspiracy in the bartenders' union that I men- 
tioned previously. He was not convicted. Evans was born in No- 
vember 1898 in St. Louis, Mo. It is claimed that he graduted from the 
school of architects and engineering at the university. In 1923 he 
operated a garage at 1214 Jackson Boulevard, Chicago, with Mur- 
ray Humphreys. In 1924 he began operating the Evans Co., at 311 
Curtiss Street. Information was received some years ago that Evans 
was one of several hoodlums who were attempting to gain control of the 
dry-cleaning industry. It was claimed in particular that Evans had 
muscled into the Ruby Cleaners, 2801 West Montrose Avenue, Chi- 
cago. In 1947 it is known that Evans claimed to be the owner of 
the establishment. Information was also secured to the effect that 
Humphreys was a partner of Evans in this enterprise. From 1934 
to 1937 Evans was connected with the Equipment Loan & Discount 
Corp. 

On August of 1937 this corporation was merged with the Security 
Discount Co., 1000 North La Salle Street, Chicago, which Evans 
was operating at late as 1947. 

Another important figure in the Capone syndicate, going away 
back to the beginning, was Rosso De Grazio, alias Rocco De Grasse, 
alias Rocco De Grazia, and his brother, Andrew De Grazio, who were 
operators of the Lumber Gardens, 1(51 North Twenty-fifth Street, 
Melrose Park, 111. Wide open gambling operations have taken place 
at this establishment for many years. They recently just built a 
large addition to it. A few years ago Rocco and Andrew De Grazio 



ORGANIZED CRIME IN INTERSTATE COMMERCE 143 

were indicted in Federal court in connection with a narcotics charge. 
In 1935 when Rocco De Grazio was convicted of income-tax evasion 
he admitted he was operating 18 handbooks, many of which were in 
Melrose Park, HI., and he paid $1,200 per month for protection. In 
1931 Rocco De Grazio was the leader of the Capone organization in 
the north and west suburban sections of Chicago. In connection with 
De Grazio's income tax evasion case, when he was being charged with 
income-tax evasion, Federal agents seized him at his home at 1049 
North Elwood Avenue, Oak Park, 111., in 1934. The Government 
claimed then that De Grazio had an income over $97,000 in 1929, 
$51,000 in 1930. In 1946 Rocco De Grazio was believed to have an 
interest in Rocco Fischetti's Vernon Country Club, a lavish gambling 
establishment at Deerfield, 111. In recent years in addition to operat- 
ing the Lumber Gardens in Melrose Park, he has been in control of 
the syndicate's football pool operations in Cook County. 

Nicholas De Grazia, 121 Twenty-second Avenue, Melrose Park, 111., 
has been another important figure in the Capone syndicate's gambling 
operations. As early as 1932 the press reported that Rocco, Andrew, 
and Nick De Grazia were in control of slot machines for the syndicate 
in the western suburbs. On September 25, 1932, a doorman to a road 
house located on Lake Street west of Mannheim Road was killed. 
The owner of this place would not allow slot machines in his place and 
the press alleged that the slaying was intended to intimidate the road 
house owner. On December 22, 1943, Nick De Grazio appeared as a 
witness for a defendant in a rape case. He admitted he operated a 
pool hall owned by his brother and that he was a poker dealer. The 
De Grazios are important figures in the Capone organization. 

Sam "Golf Bag" Hunt, whose real name is Samuel McPherson 
Hunt, has been closely associated with many prominent members of 
the Capone syndicate including Murray Humphreys, Ralph Pierce, 
Jack Guzik, Charles Fischetti, and others. Beginning in 1943, follow- 
ing the gang killings of Danny Stanton and Martin "Sonny Boy" 
Quirk, Sam Hunt became the generalissimo of Chicago's -South Side 
gambling racket. An important lieutenant of Hunt on the South 
Side is Hyman Gottfreed. 

Hunt has been prominently identified with the underworld as a 
gunman for many years. As an interesting sidelight as to how 
he got the name, in May 1930 Sam Hunt was arrested in the State's 
attorney's office as a member of a shotgun squad that kidnaped and 
wounded a man at Berwyn and Ashland. Hunt was found at the 
scene with a discharged shotgun in a golf bag. He had been pulled 
off the automobile that was carrying the victim away. Although 
indicted on a charge of carrying concealed weapons, the case was 
nolle prossed by the State on April 10, 1931. He was arrested many 
times afterward on a charge of carrying concealed weapons. Once 
in 1933 he received a sentence of 1 year in the House of Correction 
on a concealed weapons charge. Hunt has been arrested by the police 
on several occasions following gang slayings but has never been 
successfully prosecuted. In 1942 Hunt was involved in an automo- 
bile accident. An argument followed and the driver of the car was 
shot and killed. Hunt was wounded. Hunt was indicted for mur- 
der and his chauffeur, Hyman Gottfreed, alias Hy Godfrey, was in- 
dicted as an accessory. After four trials, Hunt was found not guilty 
on January 11, 1943. As of 1944, Sam Hunt was allegedly an official 



144 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

of the Drexel Wine & Liquor Co., Thirty-ninth and Cottage Grove 
Avenue. At that time he lived at 1722 East Seventieth Street, Chi- 
cago. As of 1941 he was vice president of the Cook Oil Co. As of 
1944 he had addresses at 2233 East Sixty-eighth and 1722 East 
Seventieth Street, Chicago. His draft card in 1944 which was found 
on him when he was arrested carried the address of 5123 University 
Avenue. In 1946 Hunt had an interest in a tavern at Sixty-third 
and Cottage Grove Avenue, Chicago. 

Another individual who has come to the forefront particularly 
in recent years in Sam "Mooney" Gincanna, 1147 Wenonah Avenue, 
Oak Park 7 111. In February 1945 he was arrested with Tony Ac- 
carclo, top-ranking man of the syndicate, and one Daniel Beneduce, 
of 4259 Gladys Avenue, Chicago, as suspects in a kidnaping. They 
were released on February 14, 1945, Gincanna gave his age as 36 
years and his residence address as 2822 Lexington, Chicago. He 
was born in Chicago July 16, 1908. About two decades ago he was 
a member of the notorious "42 Gang." He has a long criminal record. 
His last sentence being pronounced October 30, 1940, for violation of 
the Internal Revenue Act. He was given a conditional release from 
the Federal prison at Terre Haute, Ind., in December 1942. When 
he registered for the draft in World War II Gincanna gave his occu- 
pation as that of a salesman for the Central Envelope & Lithograph- 
ing Co., 426 South Clinton Street, Chicago. This company inciden- 
tally is owned by his brother-in-law, M. R. DeTolve, president of 
the company. He was rejected for military service. He has operated 
handbooks on the North Side of Chicago and has been the owner 
of the Boogie Woogie Club, 1709 West Roosevelt Road, Chicago. He 
is known as a gunman and dangerous. As I said before he has been 
associated in business activities with Tony Accardo. 

Ralph O'Hara is a man who, when the Capone organization formed 
a Nation-wide news service for racing information in competition 
with the Continental Press, was virtually the manager of the service. 
This organization was known as, as I said before, I believe, the Trans- 
American Publishing & News Service, Inc. On June 13, 1947, O'Hara 
publicly announced with reference to the Trans-American "We are 
going out of business. It has been a losing proposition and we can't 
continue it * * *." 

O'Hara was formerly associated with Thomas Malloy in the moving- 
picture operators union. He was indicted by a Federal grand jury 
in Chicago in January 1935 as a result of a perjury committed before a 
grand jury investigating the income tax of Malloy. On July 30 r 
1931, O'Hara was indicted by the Cook County grand jury on a charge 
of conspiracy. It was alleged that from June 1, 1928, to the date of 
indictment, O'Hara had conspired with others to get applications 
for moving-picture operators through the department of moving pic- 
ture operators and gas and electricity of the city. No witnesses could 
be produced and the case was then dismissed. In 1922, O'Hara was 
business agent for the Chicago Federation of Musicians. He was 
closely associated with "Big Tim" Murphy, a notorious gang leader. 
When Big Tim Murphy was sent to Leavenworth Penitentiary after 
conviction in a mail robbery case, the press reported that O'Hara was 
collecting $500,000 in an effort to secure the release of Murphy from 
prison. Murphy was sentenced in April 1933. At that time O'Hara 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 145 

was working for Thomas Malloy in the Motion Picture Operators 
Union, which the press described as a $750,000-a-year racket. On 
March 2, 1933, Ralph O'Hara shot and killed Fred Oser in the office 
of the Motion Picture Operators Union, 506 South Wabash Avenue, 
Chicago. O'Hara was then indicted but won a directed verdict on 
June 7, 1933. On February 4, 1935, Thomas Malloy was shot and 
killed in one of our gang killings in Chicago. The press alleged that 
he was killed by the Capone gang in order to take over the Motion 
Picture Operators Union. A short time later Ralph O'Hara became 
head of the Motion Picture Operators Union of Chicago, Local 110. 
In recent years O'Hara and his wife spent some time in some of our 
big hotels down in Chicago. 

Another important individual who apparently has had a falling out 
after the Moving Picture Operators Union, but his name should be 
remembered, is Nick Circella, alias Nick Dean. He was implicated in 
the million-dollar movie-extortion case along with the other Capone 
gangsters. He has been released from Federal penitentiary. He has 
a brother, August Circella, who has been proprietor of gambling estab- 
lishments in Chicago. In recent years August Circella owned and 
operated the Gold Coast Lounge, on North Rush Street. Book- 
making operations were in progress there under his ownership. Sev- 
eral years ago August Circella was one of the owners of the notorious 
Colony Club on Chicago's North Side. This was a night club which 
featured big-time gambling. Circella has recently been interested in 
an air-conditioning unit for which he owns the patent rights. 

Phil D'Andrea, who supposedly is in bad health now, formerly the 
bodyguard for Al Capone, was convicted along with the other Capone 
gangsters. Released on parole in 1947. At the time Capone was prose- 
cuted for income-tax evasion he was sentenced for contempt of court 
for carrying weapons in the Federal courtroom. He served 6 months 
on that charge. In 1932 he was arrested at the Planters Hotel with 
Frank Rio, Capone's Philadelphia cellmate, Paul Ricca and Michael 
Costello. In recent months he has been living in California, I believe 
it is Tarzana, Calif. I think he has a rilling station out there. 

We reach Al Capone's brothers, Ralph, John, Albert, and Matthew — 
Ralph and John have been the most active insofar as racketeering 
activities are concerned. Ralph Capone, brother of Al, was born in 
Italy in 1894 and brought to the United States when he was about a 
year old. He claims that he is a citizen. During the 1920's and 1930's 
Ralph Capone was associated with Al in the operation of gambling 
houses, houses of ill fame, illegal liquor traffic, and other forms of 
racketeering in Chicago and Cicero. Ralph Capone spends a large 
amount of time in Mercer, Wis., where he is said to own a tavern and 
summer resort. On April 29, 1926, Ralph Capone and Charles 
Fischetti were arrested in Cicero, 111. On May 27, Al Capone, Ralph 
Capone, Charles Fischetti, and other individuals were charged with 
conspiracy to violate the National Prohibition Act in Chicago. He 
has been arrested on numerous occasions which include one by the 
New Orleans police in 1928, by the Memphis, Tenn., police in Febru- 
ary 1928. In 1929 the Federal grand jury charged Ralph Capone 
with failure to pay income taxes — November 1, 1929. There were four 
counts in the indictment. Another Federal indictment was returned 
on January 31, 1930, growing out of his efforts to swindle, cheat, and 
defraud the United States Government. During the court hearings 



146 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

the Government produced evidence showing that Ealph Capone main- 
tained five separate accounts at the Pinkert State Bank, Cicero, 111., 
under the names of Ralph Capone, James Costello, Jr., James Carson, 
James Carter, and James Carroll, and that he had deposited in these 
accounts approximately a half million dollars. 

The defense attorney represented Ralph Capone as a race-horse 
man and bookmaker. On May 8, 1930, the Federal prohibition agents 
raided the Cotton Club, 5340 West Twenty-second Street and the Mon- 
marte Cafe, 4835 West Twenty-second Street, both Cicero, 111., and 
alleged that these places were owned by Ralph Capone. Ralph Ca- 
pone surrendered on May 9, 1930, through the advice of his attorney, 
Joseph Lustfield. In May 1931 Ralph Capone was allegedly operating 
the Casanova Club, 1025 North State Street, Chicago, 111. With refer- 
ence to the Federal income-tax violation Ralph Capone received a 
sentence of 3 years in a Federal penitentiary and a $10,000 fine in one 
case, a similar sentence in a second case and a year in the Cook County 
House of Correction and a $10,000 fine in the third indictment. Ralph 
Capone's conviction was upheld when the case was appealed. He re- 
turned to Chicago after having served his Federal sentence on Febru- 
ary 27, 1934. Although he was not officially implicated in the movie 
extortion case the Chicago press reported on June 29, 1942, that the 
president of the Chicago Motion Picture Operators Union was to 
testify in New York City on the following day regarding statements 
made by him concerning payments made by the union to the Capone 
syndicate. It was said that the syndicate maintained an iron-hand 
control over the Chicago union and that the president of the union 
had been handing envelopes containing money for a long period of 
time to Nick Circella alias Nick Dean, and later to Ralph Capone. 

On February 20. 1943, it was reported that Abraham Teitlebaum, 
Ralph Capone's attorney, had advised the United States marshal 
that Ralph Capone might surrender in order that a subpena could 
be served on him with reference to the New York extortion trial. It 
appears that he did proceed to New York City and was grilled by the 
grand jury in connection with that case. About 1930 it was rumored 
that Ralph Capone then owned an interest in the Grand Central 
Surety Co., a bail bond company which signed bonds for numerous 
well known hoodlums in Chicago, such as Tony Accardo and other 
members of the Capone syndicate. In recent years Ralph Capone has 
been very influential in the vicinity of Lyons, 111. He has exerted a 
considerable amount of political influence there. 

John Capone, another brother of Al Capone, at one time resided at 
5400 South Park Boulevard. It is stated that John Capone married 
an ex-dancer from Atlanta. John Capone is a v friend of Pete Tremont, 
big-shot policy racketeer on Chicago's South Side, and is also a friend 
of Joe Fusco of Gold Seal Liquors. Inc. Fusco was very closely affili- 
ated with Al Capone many years ago. Some time ago it was claimed 
that John Capone was a salesman for the Citizens Beer, Joliet, 111., 
a brewery which makes beer that is sold by the Canadian Ace Brewing 
Co., formerly the Manhattan Brewing Co. In recent months John 
Capone has been associated with Herman Kiefus, who has been very 
active in gambling activities on the South Side. On July 18, 1932, 
John Capone, then 29 years of age, was arrested with his bodyguard 
who at that time was Rocco Fischetti. The arrest occurred at Wabash 
Avenue and Congress Street. At the time of the arrest $4,300 in 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 147 

cash was found on the person of John Capone, who claimed he had 
been spending most of his time in Florida and denied any knowledge 
about the Capone syndicate. 

Albert Capone, another brother, has had his name legally changed 
in Miami to Albert John Rayola. He has resided at 1927 North 
Normandy in Chicago. There is no indication he has been active in 
rackets in Chicago and in fact indications are to the contrary. How- 
ever, he is a friend of Willie Heeney, one of the old time Capone 
syndicate operators in Cicero. 

* Matt Capone formerly operated a tavern called the Hall of Fame, 
4839 Ogden Avenue, Cicero, 111. John Larisen, a gambler and a doper 
of race track horses was shot and killed in the Hall of Fame tavern a 
few years ago. Matt Capone became a fugitive for a time and later 
the case was dismissed against him with reference to this murder. 

Other members of the Capone family include Maf alda, a sister, who 
is married to John Maritote, who is a brother of Frank Maritote, 
commonly known as Frank Diamond, who was also involved in the 
million dollar extortion plot on the movie industry. Frank Diamond 
was sentenced to the penitentiary in 1943. 

Joseph Peskin, alias Sugar Joe Peskin, 7625 Essex Avenue, Chicago, 
111., has been associated with members of the Capone syndicate and 
is one of the biggest juke box operators in Chicago. His company is 
known as the Universal Automatic Music Corp., 150G East Sixty- 
seventh Street, Chicago, 111. During the prohibition era Peskin oper- 
ated the J. P. Food Distributors, Inc., 4416 South State Street, which 
was ostensibly a wholesale grocery but actually was used to buy corn 
sugar and other products needed in the manufacture of alcohol. When 
Peskin and others were indicted for conspiracy to violate the national 
prohibition law the Government contended that Peskin during that 
time was furnishing 100 stills with corn sugar for alcohol and it is 
alleged that a million dollars worth of corn sugar had been sold to 
alcohol manufacturers by Peskin. In connection with these activi- 
ties Peskin was associated with individuals who were known to be 
close to the Capone syndicate. 

Sometime after 1933 Peskin entered the juke-box business. In 
September 1941 Peskin was arrested on charges of disorderly con- 
duct growing out of a slugging of Lionel M. Nathan, who had been 
employed by Peskin. Sometime prior to September 21, 1941, Lionel 
Nathan and Albert Chapman, also an employee of Peskin, had left 
Peskin's employ and formed a partnership. They bought 150 juke 
boxes which they distributed and took about 70 spots away from 
Peskin. Nathan was then slugged in front of his home at 6747 Clyde 
Avenue, Chicago. Nathan blamed Peskin for the slugging but later 
repudiated same, and the case was dismissed. Peskin admitted to the 
police, however, that he had made a threat to Nathan that he would 
"cut his throat" but claimed he meant it only in a business way. Peskin 
at the hearing denied the assault and stated : 

This thing is bum publicity for me and no good for the industry. These men 
did work for me and did take some spots away from me. This is not allowed by 
the union, and with the union's help I have gotten back all 50 of the 50 spots they 
took. 

With reference to juke boxes generally in Chicago, the Loop area 
has been controlled by the Century Music Co., which was originally 
under the domination of Denis Cooney ; Capone's syndicate vice man- 



148 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

ager of the first ward. Later Fred Morelli, once Cooney's bookkeeper, 
then became head of Century Music Co. In 1941 the press reported 
that on the North Side and in the northwest suburbs the juke-box 
industry was under the control of Eddie Vogel, an important Capone 
syndicate member. In order to prevent juke-box operators from steal- 
ing each other's customers they formed an association known as the 
Illinois Phonograph Owners Association, and officers of this associa- 
tion several years ago were Danny Pallagi, associated with Fred Mo- 
relli of the Century Music Co., Joseph Mahoney, associate of Eddie 
Vogel and Joseph Peskin. As late as 1946 Joe Peskin was reported 
to be the juke-box-syndicate boss of Chicago. When an attempt was 
made to start in business in competition with the syndicate it would 
fail, because the new operators could not get a union label on their 
machines from the electrical workers' union. In 1947 it was esti- 
mated that Joe Peskin of Universal Automatic Music Corp. had about 
900 juke boxes placed on location. These boxes were in Chicago — 
except in the first ward, where the Century has the monopoly — Cicero, 
Argo, Calumet City, in Illinois, Hammond, Indiana Harbor, and 
Whiting. In 1947 on financial records Peskin listed the name of his 
company as the Chicago Automatic Music Co. In 1948 Peskin was a 
distributor of juke boxes under the name of the Automatic Music 
Instruments Co. in States of California, Nevada, and Washington. 
It was claimed that this territory was secured through the assistance 
of Frank Garnet, a son-in-law of Jack Guzik, the one-time business 
manager of the Capone syndicates operations. Frank Garnet has 
also been operating juke boxes as a distributor in Los Angeles. Pes- 
kin's principal office for juke-box distribution in southern California 
is located at 2663-67 West Pike Boulevard, Los Angeles, where he did 
business under the name of J. Peskin Distributing Co. 

Another important syndicate man is Rocco De Stef ano, alias Rocco 
Nicholas De Stefano. He allegedly owned a home at 5352 LaGorce 
Drive. I am not sure whether that is in Miami or Miami Beach, Fla. 
Until November 24, 1947, at which time he apparently sold the home 
and transferred title to Joseph P. Bergl. 

De Stefano has come into prominence recently as an affiliate of 
such well-known members of the syndicate as Joe Fusco, vice president 
of Gold Seal Liquors, Jack Guzik, and Charles and Rocco Fischetti. 
De Stefano controls a chain of retail liquor stores in which Fusco is 
supposed to have an interest or did have an interest. 

Rocco De Stefano and others were indicted February 24, 1936, in 
Cook County on robbery charges wherein the loot was totaled at 
$75,000. On May 29, 1936, the charges against De Stefano were nolle 
prossed on the grounds that there was not sufficient evidence of 
identity as to the robbery but that he probably did assist in disposing 
of the stolen goods. This evidence was not considered sufficient to 
sustain a conviction. In July 1938 Rocco De Stefano, his father, 
Michael, and others were arrested by the State's attorney's police 
for failure to pay over $14,000 in sales taxes for 15 months. It was 
further charged that the operation of the United Liquor Stores, Inc., 
the company had failed to pay the State sales tax since 1934 and 
owed a delinquency of $50,000. On August 21, 1941, the State's 
attorney of Chicago charged that Rocco De Stefano together with 
Harry V. Russell, prominent handbook operator, Peter Tremont, 
policy operator, Patrick Manno, policy operator, Max Caldwell, Mil- 



ORGANIZED CRIME IN INTERSTATE COMMERCE 149 

ton Schwartz, and Maurice Margolis, had helped spend $910,000 
looted from the treasury of local 1248, Retail Clerks Protective Asso- 
ciation, union funds. No indictments were returned, however, and no 
further action was taken. Rocco DeStefano has had his name linked 
with that of Guzik, Charles and Rocco Fischetti, and other hoodlums 
as being friends of these persons. 

Peter G. Tremont owns property in Miami Beach with Ralph 
Buglio and was associated with Max Caldwell. He is one of the big- 
shot policy racketeers on Chicago's South Side. In 1942 he was 
indicted along with other important members of the policy racketeers, 
namely, Julius Benvenuti, Edward Jones, George Jones, McKissick 
Jones, Pat Manno, Julian Black, and numerous others by the Cook 
County Grand Jury. This indictment charged conspiracy to operate 
a policy game. 

On June 17, 1942, there was a finding of "not guilty" as to Tremont 
and other individuals indicted. Peter Tremont has operated in Chi- 
cago the Silver Wheel, the Ditto Wheel, and the Rome Wheel. He 
is a big automobile dealer on Chicago's East Side, too. I have the 
address in some of my other notes here. 

Pat Manno, alias Patrick J. Manning, has been in the policy racket 
in Chicago for many years. He was indicted by the Cook County 
Grand Jury on January 30, 1942, as I mentioned a few moments 
ago, with others for conspiracy to operate policy rackets. He was 
found not guilty on June 17, 1942. The Texas Times Herald, Dallas, 
Tex., on December 19, 1946, linked Pat Manno with others in an effort 
by Chicago gangsters to take over $14,000,000 annual gambling and 
racket concession in Dallas County. Dallas authorities never arrested 
Manno, although others were arrested. It was charged by the State's 
attorney's office in Chicago on August 21, 1941, that Pat Manno to- 
gether with the others that I mentioned a few moments ago had 
attempted to loot or actually spent a large amount of that $910,000 
from the Retail Clerks Protective Association. On September 18, 
1925, Pat Manno was arrested on a charge of disorderly conduct 
and placed on probation for 1 year. It is understood that Pat Manno 
has been in association with a number of nationally known gangsters 
at hotels in Miami Beach, Fla., during the past season, and that 
Manno also owns a residence at 5812 Pinetree Drive, Miami Beach, 
Fla., which is in his wife's name, Dorothy Manning. Pat Manno 
also has listed as his permanent address 1439 North Franklin Street, 
River Forest, 111. 

Lawrence Imburgio, alias Hindu, is the brother of Joseph Im- 
burgio Bulger, former mayor of Melrose Park, 111. You will recall 
that Bulger's name was used by Tony Accardo in gaining entrance 
to the Federal penitentiary to visit Capone mobsters whose parole cre- 
ated a national sensation. As a result, Accardo and attorney, Eugene 
Bernstein, were indicted by the Federal grand jury. Lawrence Im- 
burgio, while himself not active recently, was reputed to be a muscle 
man in the Capone mob, was very active in helping the gang muscle 
into union rackets and later represented the Capone syndicate in the 
operation of handbooks. He was in partnership in one gambling joint 
with Tony Accardo. On June 26, 1931, Lawrence Imburgio was 
arrested in a roadhouse near Wheaton, 111., in company of Claude Mad- 
dox, Tony Capezio, Rocco De Grazio, and Doc Stacey. At that time 
they were charged with violation of the National Prohibition Act. 



150 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

Last reports were to the effect that Imburgio was suffering from 
Burger's disease, which has incapacitated him. 

Lester A. Kruse, alias Leslie Kruse, alias "Killer" Kane, has been 
actively associated with members of the Capone syndicate and has 
also been prominently identified with racing news service activities. 
In March 1943 Lester Kane, who gave his address at that time as 
2437 Greenleaf, was arrested with Ralph Pierce, 6514 South Morgan 
Street, for questioning in connection with the murder of Estelle Carey. 
Estelle Carey was once the dice girl employed by Nick Circella, alias 
Nick Dean. 

The Chairman. What did you say about Lester Kruse just a minute 
ago? 

Mr. Peterson. Lester A. Kruse, alias Leslie Kruse, alias "Killer" 
Kane, has been actively associated with members of the Capone syndi- 
cate and has also been prominently identified with the racing news 
service activities. 

The Chairman. Is that the same person mentioned by Mr. Brown 
that he bought his stock from? 

Mr. Peterson. I was under the impression that that was who it 
was. I would hate to say that definitely, but it could very well be. 
This Lester A. Kruse, the fellow I am talking about, on April 26, 1940, 
a Federal grand jury returned three indictments before Federal 
Judge James A. Wilkerson, naming Western Union and 18 gamblers 
and horse-race-news distributors as operators of schemes to take over 
the lucrative racing information business abandoned by Moe Annen- 
berg. Named in the first indictment were Arthur V. McBride, of 
Cleveland, head of Yellow and Zone Taxi Cab Co.'s of that city; 
James M. Ragen, Sr., Lionel C. Lance, formerly of Chicago and now 
operating in Cleveland, a nephew of Mont Tennes ; Thomas F. Kelley, 
Cleveland, a brother-in-law of McBride and former Baltimore man- 
ager of Nationwide ; Thomas J. Ryan ; alias Frank Walsh, New York 
City, formerly in charge of Consolidated News Service, then operat- 
ing in Hoboken and New York ; Morris Wexler, alias "Mushy" Wex- 
ler, of Cleveland, associate of McBride; Russell Brophy, Los Angeles, 
son-in-law of Ragen; Alfred Goodman, Chicago, former Nation-wide 
representative in Houston, Tex.; William G. O'Brien, alias William 
Keough, Chicago, former Nation-wide representative in the South- 
east with headquarters in Miami; William Molasky, St. Louis, in- 
dicted with Annenberg on tax charges, formerly associated with 
Pioneer News Service in St. Louis ; Morris Kopit, St. Louis, gambler 
and associate of Molasky. 

These persons were charged with conspiring to violate the Federal 
lottery laws by distributing price lists across State lines. The Gov- 
ernment interpreted pari-mutuel betting odds and racing results as 
lottery price lists and alleged these defendants conspired to decen- 
tralize Nationwide News Service and take over its business through 
the formation of Continental Press Service of which Arthur McBride 
was then director. Western Union provided the technical equipment. 

The second indictment alleged that four men, Frank J. "Chew 
Tobacco" Ryan, Hymie "Loud Mouth" Levin — I think that should 
have been Jack — Harry "Greasy Thumb" Guzik, the owners of the 
400 Club at 29 West Randolph, and Maurice L. Goldstein operated an 
unlicensed radio-broadcasting station in violation of the Federal 
Communications Act in 1934. Specifically this broadcasting station 



ORGANIZED CRIME IN INTERSTATE COMMERCE 151 

was said to be a highly technical wire-tapping service, sending out 
radio signals. 

The third indictment named Edward M. Dobkin, Cornelius J. 
Sullivan, James Rossi, alias James Ross, all Chicago gamblers, and 
charged them with receiving Continental Press News and distributing 
it from the Victoria Hotel to numerous bookies. 

The Federal grand jury returned an indictment charging the follow- 
ing violated the Federal Communications Act: Jack Guzik, 7240 
Louella ; Leslie A. Kruse, alias Kane, 5206 Oakton Street, Niles Center ; 
Maurice L. Goldstein, alias M. L. Goldie. 

The offense charged in the indictment was described as follows : 
Guzik and Kruse financed a scheme whereby miniature broadcasts 
were used to carry racing information to the 81 Club and so on. 

I am inclined to think that is the same fellow. 

The Chairman. Mr. Brown? 

Mr. Shenker. Mr. Brown isn't here. Mr. Brown left before the 
name was mentioned, or I would have had him stay. It is my im- 
pression that the man he bought it from is Arnold Kruse, but I 
wouldn't say for sure. 

Mr. Peterson. This man's name is Lester A. Kruse. I don't know 
whether the "A" stands for Arnold or not. I can check it through 
our files. 

The Chairman. Will you check it? 

Mr. Peterson. I will be glad to do that when I get back. 

The Chairman. Would you say Mr. Annenberg and Mr. Molasky 
were jointly indicted on income-tax evasion? 

Mr. Peterson. No. On the income-tax evasion I am inclined to 
think they were on that. I would have to check that, though. This 
doesn't have to do with income tax, however. This has to do with 
allegedly setting up this racing news service to take over the old 
Annenberg regime. This is back in 1940. 

The Chairman. I think you either told me or you stated somewhere 
that Mr. Annenberg and Molasky were indicted for income-tax 
evasion. 

Mr. Peterson. I think that may be correct, but I don't know that I 
have that. I have that in another paper here, I am sure, but I do not 
have it with me. 

The Chairman. All right. Then that is the same Mr. Annenberg 
that gave Mr. Molasky 22^ shares of Pioneer News Service for $1, 
I believe. You may proceed, Mr. Peterson. 

Mr. Peterson. In 1944 information was received that Leslie Kruse 
lived at 4300 Marine Drive. He was also alleged to be the owner of 
the Turf Club, Touhy and Western Avenues, a gasoline station across 
the street from the Turf Club, and a two-flat building in Skokie, 111. 
In 1948 investigators observed Gus Liebe and "Killer" Kane on duty as 
floormen at 4819 West Roosevelt Road where three dice games were 
being operated. Gus Liebe has been a manager for numerous gam- 
bling joints. Lester Kruse is the officer of the Nu-Way Beer Coil 
Service, 635 North Kennedy Avenue. 

Charles Gioe, a well-known member of the Capone syndicate, who 
was also indicted in the movie extortion trial and convicted, lived at 
the Seneca Hotel, Chicago, and had an office in a building at 145 North 
Clark Street before he went to the penitentiary. He was released on 
parole in 1947 and it is still pending. He is still on the outside, but 



152 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

the litigation is still pending as to whether or not he will have to return 
in accordance with the decision of the court in New Orleans. 

Ralph Buglio, who owns property in Miami Beach, together with 
Peter G. Tremont and others, is also a well-known syndicate gangster. 
On February 11, 1933, Frank DeMere, 26 years of age, residing at 7118 
South Seeley Avenue, Chicago, was shot outside the Plantatian Cafe, 
a Black and Tan restaurant at Fifty-first and Michigan Avenue, Chi- 
cago. Ralph Buglio, who was referred as a former Capone gunman, 
was sought for the shooting. The police learned that Ealph Buglio 
and DeMere had been in the Plantation Cafe just prior to the shooting. 
DeMere approached Buglio and asked him to go outside for a confer- 
ence and a few minutes later the shooting occurred. In January 1937 
DeMere had shot and killed William Stanley, a Negro, after Stanley 
had slain Frank Buglio, a brother of Ralph. 

Iu 1922 indictment No.' 27678 was returned by the Cook County 
grand jury charging Ralph Buglio, Abe Rosenthal, and Mary Duff 
with burglary. On September 16, 1922, probation was granted to the 
defendants. Ralph Buglio's name was also mentioned in connection 
with the gang killing of Maurice Enright. It appears in this case that 
the killers borrowed the automobile, in which they were transported to 
the place of the killing, from Buglio. This killing was in connection 
with the street-cleaners union. 

Joe Fusco, designated several years ago as a public enemy, during 
the prohibition era was a principal lieutenant in the Capone syndi- 
cate, handling the manufacture and distribution of illicit beer. He is 
presently suspected of being the respectable front in the liquor indus- 
try for the syndicate. He is vice president and general manager of the 
Gold Seal Liquors, Inc. He is also a stockholder and director of the 
Citizens Brewing Co., of Joliet, 111., in affiliation with other members 
of the Capone mob. It has been stated that the syndicate owns or 
controls at least 17 percent of the retail liquor stores in Chicago. That 
is merely an estimate, of course. In addition, Fusco admits ownership 
of three other wholesale distributing houses for liquor. On June 12, 
1931, Fusco was indicted with Al Capone and other members of the 
Capone mob in Federal court, totaling 69 defendants, charged with 
liquor conspiracy. The indictment was dismissed after Al Capone was 
convicted of income-tax evasion and sentenced to the Federal peni- 
tentiary. On June 7, 1934, when he was arrested, he was in the com- 
pany of Matt Capone, Ralph Capone, brothers of Al, and Denis 
Cooney, who was a powerful figure in the Capone syndicate. 

Harry Russell, proprietor of the Silver Bar, 400 South State Street, 
Chicago, is a big-time gambler with affiliation with some of the most 
important members of the Capone syndicate. Several months ago 
it was alleged that Harry Russell had "muscled'' into the S. & G. 
Syndicate, Miami Beach, Fla. Harry Russell, together with his 
brother Dave Russell, operated a handbook at 186 North Clark Street, 
Chicago. At one time Tony Accardo, the top-ranking member of the 
syndicate, was in partnership with him. 

Another man in the syndicate, Ralph Cavaliera, alias Armie, 2815 
Dickens Avenue, Chicago, was a close associate of Dago Lawrence 
Mangano at the time of Mangano's death in 1944. Mangano was an 
important figure in the Capone syndicate. At the time of Mangano's 
death he was riding in a car owned by Cavaliera. Information has 
been received to the effect that Cavaliera has operated as a front man 



ORGANIZED CRIME IN INTERSTATE COMMERCE 153 

for the Capone syndicate and operated Barbout games in the Halsted- 
Blue Island area. He lost an arm in an automobile accident several 
years ago, which gives rise to his nickname "Armie." 

The Cicero contingent of the Capone syndicate is one of the most 
important. Cicero has long been the headquarters for the Capone 
gang. Among the most important syndicate members operating out 
of Cicero at the present time are Joseph Aiuppa, Claude Maddox, 
Joseph Corngold, and Willie Heeney. 

Joseph Aiuppa, alias Joe O'JBrien, is allegedly one of the owners 
of the Taylor Manufacturing Co. in Cicero, 111. This company 

The Chairman. Mr. Peterson, where is Cicero with reference to 
Chicago ? 

Mr. Peterson. Cicero is southwest of Chicago, approximately 8 
miles. 

The Chairman. It is a separate municipality ? 

Mr. Peterson. A separate municipality. It begins at Cicero Boule- 
vard or Avenue, which is about 48 blocks west. Then it is further 
south. I believe it goes farther north than Koosevelt Road. 

The Chairman. How large a city is it? 

Mr. Peterson. About 70,000 people. It is a pretty good, substantial 
city. 

The Chairman. Some of these fellows have been city office holders 
in Cicero ? 

Mr. Peterson. Oh, yes. Going back again a long time in 1924, that 
is when I think I mentioned this morning they actually took over 
the town out there in an election, manned it with machine guns, and 
that sort of thing. That is when Frank Capone was killed. Just 
recently, however, in 1948, John C. Stofel became the village presi- 
dent out in Cicero and was doing a very excellent job. He is a promi- 
nent businessman. He appointed, as chief of police, Joseph Horejs. 
Joseph Horejs was put in by Stofel for the purpose of enforcing the 
law. He did an excellent job for a few months, and then there was 
so much pressure brought that Stofel was forced to resign. They 
forced the chief of police out, as a matter of fact. They changed 
the ordinance to read differently than it had before, which took 
his control over the chief of police. So Stofel resigned rather than 
keep the responsibility, powerless to act. Now, of course, nobody 
can prove that that was the Capone syndicate, but there was certainly 
a lot of influence there on the part of people who didn't want the 
town closed up. That is very obvious. 

The Chairman. How long before you will come to another chapter ? 

Mr. Peterson. I can quit any time. 

The Chairman. It is very interesting and most useful. I see you 
have about three more pages on Chicago. 

Mr. Peterson. I said that Joseph Aiuppa was allegedly one of the 
owners of the Taylor Manufacturing Co. in Cicero. This company 
manufactures or supplies gaming-house equipment to gambling houses 
throughout the Nation. It ships a considerable amount of equipment 
to Nevada and other places. Claude Maddox, a public enemy and the 
member of the Capone syndicate, is also allegedly associated with 
Aiuppa in the Taylor Co. In other words, they get you coining and 
going. They manufacture the equipment and then operate it. On 
July 5, 1945, Joe Aiuppa was fined $50 on a charge of accepting horse- 
race bets, by a j ustice of the peace in the Willow Springs court. Aiuppa 



154 ORGANIZED CRIME IN INTERSTATE COMMERCE 

and two others were arrested for operating a handbook in the Post 
Time Tavern, 4824 Cermak Road, Cicero. Ainppa was also arrested 
in connection with the slaying of James D. Larrisen, on April 7, 1944, 
in the tavern of Matt Capone. Recently Ainppa has been allegedly 
operating the Tnrf Club and Paddock Lounge, Cicero, gambling joint. 
He is considered to be one of the right-hand men of Tony Accardo, 
who is now rated as one of the real big shots in the syndicate. 

Claude Maddox has been a prominent member of the syndicate for 
many years. It will be recalled that both Maddox and Tony Accardo 
were both sought as suspects in connection with the St. Valentine's 
Day massacre in February 1929. Maddox originated from St. Louis, 
Mo., where he was convicted for burglary on August 5, 1919. The fol- 
lowing year he was convicted for robbery in St. Louis, Mo. He has 
been considered one of the most important syndicate members in 
Cicero for many years. 

Willie Heeney has likewise been prominently identified as a member 
of the Capone syndicate for a long time. He has been the part owner 
of the El Patio gambling place at 5914 West Cermak Road, together 
with Joe Corngold. "Little New York" Campagna admitted having an 
interest in and receiving huge sums of money as his share from the 
proceeds of this establishment. I believe Willie Heeney admitted 
that "Little New York" Campagna got C>() percent and Corngold got 
15 percent from the Cicero "joints." Heeney was arrested in 1926 as 
a suspect in the murder of an assistant State's attorney in Chicago. 
Willie Heeney was known to be a contact man for the Capone syndi- 
cate with St. Louis hoodlums. In fact, Heeney was prominently 
mentioned in the congressional investigation of the parole of Paul 
Ricca and other members of the Capone mob. 

In fact, it was brought out that Heeney was one of the men who 
handled the contact with State Senator Brady and Attorney Paul 
Dillon of St. Louis on behalf of efforts to obtain paroles for Ricca, 
Campagna, Gioe, and D'Andrea of the Capone gang. 

Another member, John Patrick Borcia — that I believe I mentioned 
briefly before — alias John Borcy, has been very closely associated with 
many prominent members of the Capone syndicate. He is a close 
friend of Tony Accardo, and was also closely associated with Nick 
Circella, alias Nick Dean, one of the Capone gang members con- 
victed in the extortion case. Borcia has a criminal record and was 
paroled May 14, 1941, from the Auburn State Penitentiary in New 
York. In recent years he has operated the Primrose Path, 1159 North 
Clark Street, Chicago, and in recent months has operated a place 
called the Primrose Bar in Los Angeles. The premises on which 
the Primrose Bar in Los Angeles is located were previously owned b}^ 
Jack Dragna, notorious west coast gangster who operated a vice 
resort upstairs. It is known that a burglary gang has hung around 
the Primrose Bar in Los Angeles. Information has been developed 
indicating that gunmen who have been involved in some of the shoot- 
ings on the west coast have hung around Borcia's establishment in Los 
Angeles. 

Anthony De Lordo, another Chicago hoodlum, is reported to have 
been in Florida and to have been in contact there with Sam H. Taran. 
In fact, information has been received that after the $70,000 fire at 
the Tavern Distributing, Inc., records and appliance division in 



ORGANIZED CRIME IN INTERSTATE COMMERCE 155 

Miami, on June 15, 1947, Anthony De Lordo actually tried to con- 
tact Sam Taran by telephone. Taran was finally located in Brainerd, 
Minn. De Lordo was named by James Egan, the payoff man in the 
gang killing of Martin (Sonny Boy) Quirk, which killing occurred 
on September 18, 1943, as having been implicated with John Joseph 
Williams and others in the killing. That case went to trial and all 
they had was Egan's confession, and there was an acquittal in the case. 

Another individual who should receive the attention of the com- 
mittee is Joseph Epstein, a big betting commissioner in Chicago who 
has been very close to Virginia Hill, the girl friend of Benjamin 
(Bugsey) Siegel of the New York mob for many years. Epstein was 
formerly the head of a group usually referred to as Stern & Horwick, 
which maintained gambling offices at 10 North Clark Street and 720 
North Wabash Avenue. The other members of this group included 
Edward Stern and S. J. Horwick. In December 1940, when the attor- 
ney general — that is, the attorney general of the State of Illinois — 
secured an injunction against bookmakers in the State of Illinois, it 
appeared that Joe Epstein was then connected with Edward Stern, 
Jack Terman, Julius Horwick, and James Moncli. During the hey- 
day of the Capone regime James Moncli was one of the big shots in 
Al Capone's gambling empire in Chicago, although in recent years 
he has not been very important. Joseph Epstein has continued to 
furnish Virginia Hill with large sums of money over a period of years. 
Information was received in May 1949 to the effect that Epstein had 
been sending Virginia Hill three or four thousand-dollar bills every 
week or two through the manager of a hotel in Mexico City. It was 
also understood that Epstein visited Mexico City in the early part of 
1949, where he met Virginia Hill at the Acapulca. It will be noted 
that Epstein is a big betting commissioner ; and, in view of the fact 
that Virginia Hill has been so closely identified with Benjamin (Bug- 
sey) Siegel of the New York mob and Allen Smiley, Epstein assumes 
some importance with reference to the Nation-wide gambling set-up. 

Other big betting commissioners in Chicago include Edward M. 
Dobkin, who has maintained offices at 325 West Madison Street, Chi- 
cago,, as well as at other addresses. Dobkin has been a betting com- 
missioner for many years. In fact, as far back as 1931 he testified in 
connection with a case that he was a commission man and that when 
business was good he handled from $25,000 to $50,000 a day in bets. 
On April 26, 1940, the Federal grand jury in Chicago returned three 
indictments in which 18 gamblers and horse-race-news distributors 
were charged with operating a scheme to take over the lucrative racing- 
information business abandoned by Moe Annenberg. I think I went 
into that case just a few minutes ago. 

That scratches the surface on Chicago. 

The Chairman. Thank you very much, Mr. Peterson. The com- 
mittee will meet in the morning at 10 o'clock in room 457 of the Senate 
Office Building, when Mr. Peterson will resume his testimony. 

We stand in recess until 10 o'clock in the morning. 

(Whereupon, at 6 :05 p. m., the committee recessed until 10 a. m. 
Friday, July 7, 1950.) 



INVESTIGATION OF OKGANIZED CRIME IN INTERSTATE 

COMMERCE 



FRIDAY, JULY 7, 1950 

United States Senate, 
Special Committee to Investigate 
Organized Crime in Interstate Commerce, 

Washington, D. G. 

The committee met, pursuant to recess, at 10 : 25 a. m., in room 457 
Senate Office Building, Senator Estes Kefauver, chairman, presiding. 

Present : Senators Kefauver, Hunt, and Wiley. 

Also present : Rudolph Halley, chief counsel ; Alfred Klein, assist- 
ant counsel. 

The Chairman. The committee will come to order. 

Mr. Peterson, you may resume your statement. 

FURTHER TESTIMONY OF VIRGIL W. PETERSON, OPERATING 
DIRECTOR, CHICAGO CRIME COMMISSION, REPRESENTING THE 
AMERICAN MUNICIPAL ASSOCIATION 

The Chairman. Let me ask you, Mr. Peterson, have you finished a 
general description of conditions in the Chicago area and are you 
passing to another phase of your testimony ? 

Mr. Peterson. That is correct. Of course there are a lot of other 
names in Chicago that are important that I have not touched upon, 
but I have covered in generally. 

The Chairman. Of course, we cannot go into everything pertaining 
to Chicago in this hearing. We will have other hearings, and we 
will be in touch with you quite often in the future, Mr. Peterson. 

Mr. Peterson. I will be very glad to help you. 

The Chairman. I did want to ask you one particular question. 
Will you tell us whether there is any overlapping of Chicago activi- 
ties into adjacent territory such as northern Indiana? We have had 
some complaints about crime conditions in some of the northern In- 
diana cities and towns. 

Mr. Peterson. In Lake County, Ind., there is located a very well 
known place called the Big House, that is operated by William Gard- 
ner and William J. "Sonny" Sheetz. That is a notorious place 
in Lake County. Sonny Sheetz. one of the best-known gambling- 
house operators in that area, has some connections with the Capone 
syndicate. For example, a relative of Sonny Sheetz was the care- 
taker on the farm of Little New York Campagna in Indiana when 
Campagna was spending some time in Federal prison. In 1048 it 

157 

689o8— 50— pt. 2 11 



158 ORGANIZED CRIME IN INTERSTATE COMMERCE 

was reported that the Big House took in approximately $9,000,000 
that year. So it is a big establishment. 

Another individual there, in addition to William Gardner and 
Sonny Sheetz in Lake County, is a fellow by the name of Harry 
Hymes, who has controlled the race-horse wire service in that county, 
and there have been allegations, which we have never proved, that 
there is a tie-in between him and the Capone syndicate. That is, alle- 
gations were particularly prevalent a couple or 3 years ago when there 
was a killing in Lake County over the wire service. 

The Chairman. Do these people live in Indiana or do they live in 
Chicago? 

Mr. Peterson". As far as I know, they live in Indiana. 

The Chairman. What towns and cities are they ? 

Mr. Peterson. The Big House is at Indiana Harbor. It ties in 
with Gary, Ind., as well. If my recollection is correct, I think Wil- 
liam Gardner is from Gary, Ind. He is tied up with Gary. 

The Chairman. Do you have any questions at this point, Senator 
Hunt? 

Senator Hunt. No ; I have none. 

The Chairman. All right, Mr. Peterson, you may carry on. 

Mr. Peterson. Leaving Chicago, I want to discuss very briefly 
some of the figures in New York City. 

The Chairman. Before you leave Chicago, is Paul Kicca also lo- 
cated in Long Beach, Ind.? 

Mr. Peterson. Paul Ricca has a home at Long Beach,. Ind. I 
mentioned that yesterday. He has a $75,000 home there which was 
partially destroyed by fire a few years ago. 

The Chairman. Does he operate in Indiana ? 

Mr. Peterson. I don't have any information to the effect that he is 
operating illegally in Indiana, but I wouldn't say that he is not. I 
don't have any definite information to that effect. 

The Chairman. All right, Mr. Peterson. 

Mr. Peterson. Frank Costello, the most influential underworld 
leader in America, has his 79 Wall Street Corp., in New York City, 
lucrative gambling-house interests in Louisiana, oil properties in 
Texas, oil and gas leases of the Kingwood Oil Co. in Oklahoma City, 
Okla., tremendous political power, public relations and publicity men, 
a personal attorney and enormous wealth — all acquired or made pos- 
sible through an association of several decades of some of the most 
notorious criminals in America, namely, Charles "Lucky" Luciano, 
panderer and narcotics tradesman; Meyer Lansky and Benjamin 
"Bugsy" Siegel, who headed a mob known as the Bug and Meyer mob 
of executioners ; Louis Lepke Buchalter, head of Murder, Inc. ; Dutch 
Schultz, the racket king who lived and died through violence; John 
Torrio, who founded the notorious Capone syndicate in Chicago; 
Abner "Longie" Zwillman, big-time racketeer; Joe Adonis, one of the 
biggest racketeers in America; Owney Madden, known as Owney the 
Killer; and scores of others who became wealthy and powerful solely 
through defiance of local, State, and Federal laws. Costello has con- 
tinued to associate and enter into partnerships with foremost racke- 
teers, ex-convicts, and swindlers. He remains at the top of the list of 
America's underworld leaders. 

George Uffner, 419 East Fifty-seventh Street, New York City, is a 
close associate of Frank Costello and Frank Erickson, another Cos- 



ORGANIZED CRIME IN INTERSTATE COMMERCE 159 

tello lieutenant, In the 1920's Frank Costello, George Uffner, Waxey 
Gordon, Philip "Dandy" Kastel, Jack Diamond, Eddie Diamond, and 
a host of other underworld characters were on the payroll of Arnold 
Rothstein, often described as the mastermind of the underworld. 
George Uffner was an associate of Charles "Lucky" Luciano and was 
once a member of the Diamond gang. When Arnold Rothstein was 
killed in November 1928 the police arrested George Uffner and Charles 
"Lucky" Luciano along with Thomas Walsh and questioned them 
about the Rothstein murder. They were released. 

On September 7, 1929, Walsh was killed in the Miami Biltmore 
Hotel. George Uffner was a dealer in narcotics and received financial 
backing from time to time from Arnold Rothstein. Uffner's police 
record dates back to 1924 when he received a suspended sentence on a 
bogus-check charge in Federal court. In 1933 Uffner was sentenced 
in general sessions court, New York City, for a State prison term of 
4 to 8 years on a conviction for forgery and grand larceny. Records 
recovered from Frank Erickson by the district attorney's office in New 
York City in May 1950 revealed that Frank Erickson, Frank Costello, 
George Uffner, and Leonard Erickson were partners in valuable oil- 
lease interests in Wise County, Tex. 

Frank Erickson, long known as one of the biggest gambling racket- 
eers and a close associate of Frank Costello, has maintained lavish 
offices at 487 Park Avenue, New York City. Records seized by the 
district attorney's office in May 1950, clearly established his illegal 
activities in collaboration with such big-time gangsters and racketeers 
as Joe Adonis, Meyer Lansky, Jake Lansky, Vincent "Jimmy Blue 
Eyes" Alo, Mert Wertheimer, and others in gambling operations in 
Broward County, Fla. Frank Costello notes found among the rec- 
ords of the Colonial Inn, Hallandale, Fla., clearly indicated Frank 
Costello's financial dealings with New York mobsters in connection 
with their illegal activities in States other than New York or Louisi- 
ana where he is in partnership with the convicted swindler, Philip 
"Dandy Phil" Kastel. Records also established that Frank Costello 
and Frank Erickson own oil and gas leases of the Kingwood Oil Co., 
Oklahoma City, Okla. 

Joe Adonis is one of the principal members of the Frank Costello 
organization. He has been closely associated with this group for the 
past 20 years. With Meyer and Jake Lansky, Frank Erickson, Vin- 
cent Alo, alias Jimmy Blue Eyes Alo, and others, he has been active in 
gambling operations in Broward County, Fla. With William Moretti 
and Abner "Longie" Zwillman, who are Frank Costello associates, 
Adonis has been active in the gambling racket in New Jersey. Adonis 
has also been a close friend of Benjamin "Bugsy" Siegel, the gangster 
who became a gambling czar in Las Vegas, Nev., before he was killed 
in 1947. Adonis has also been close to members of the Capone gang 
in Chicago. He has been active in labor racketeering in New York 
and New Jersey. He is said to have connections with leading racke- 
teers in virtually every large city of America. 

In August 1949 it was revealed that Joe Adonis had muscled into 
the automobile industry in New York. Associated with him in that 
venture was Ralph Conti, who had been arrested 12 times on various 
charges ranging from robbery, homicide with a gun, grand larceny, 
extortion and policy-racket violations, but never convicted. It was 



160 ORGANIZED CRIME 1 IN INTERSTATE COMMERCE 

brought out in court that Conti had sponsored the sale of 110 cars 
on the secret list of the Kings County Buick, Inc. Joe Adonis, alias 
Joe Doto, alias Joe A., is unquestionably one of the top-ranking racke- 
teers of America today. 

The Chairman. Before you leave Joe Adonis, what is the name of 
that automobile business? 

Mr. Peterson. That is the Kings County Buick, Inc. 

The Chairman. What is it, a distributorship ? 

Mr. Peterson. That is my understanding; yes. 

The Chairman. Do you know anything about the size of the 
business ? 

Mr. Peterson. No, but it is a pretty large automobile distributor- 
ship. In other words, it was brought out in court at that time that 
110 cars on the secret list, the sale had been made and arranged by this 
fellow Conti. 

The Chairman. What do you mean, 110 cars on the secret list? 

Mr. Peterson. I think it had to do with black-market operations. 

The Chairman. All right, Mr. Peterson. 

Mr. Peterson. Meyer Lansky, an original member of the Frank 
Costello group, is one of the big gambling racketeers of the country 
with operations in several sections of the country. In New York he 
has been in the juke-box distributing business. There were strong 
indications that Lansky 's juke-box operations in New York had some 
connection with similar juke-box distributing activities of the Capone 
gang in Chicago. In fact, one company with which he was connected 
at one time had the same financial backing as the financial backing 
of a company operated by Jack Guzik's son-in-law in Chicago. 

On June 28, 1949, Meyer Lansky sailed from New York for Italy. 
It was alleged that the purpose of this trip was to see Charles "Lucky" 
Luciano who was deported there after his conviction in New York. 

Morris Rosen, 118 Riverside Drive, New York City, became a domi- 
nant factor in the Flamingo Hotel gambling operations in Las Vegas, 
Nev., within a few months after Benjamin "Bugsy" Siegel was killed. 
It is claimed that Morris Rosen was friendly with Louis Shomberg, 
alias Dutch Goldberg, one of the biggest racketeers of the country 
during prohibition. It was also firmly believed in Nevada that Rosen 
was representing Siegel and the New York mob in Nevada. 

Mr. Halley. Isn't it a fact that Rosen is the man who was ques- 
tioned in the formal investigation on gambling that took place in 
Nevada ? 

Mr. Peterson. No. Rosen was the man that they held hearings 
out in Nevada — I will go into that a little later in my Nevada state- 
ment. 

Mr. Halley. You are going to touch on that. 

Mr. Peterson. I am going to touch on that. That was in connec- 
tion with the wire service there. Morris Rosen, together with Moe 
Sedway out in Nevada, had, I believe it was, the Golden Nugget Rac- 
ing Service, but I will get to that later in my testimony. In fact, 
there was a Federal suit filed in Nevada. They held hearings there 
and finally they kicked Rosen out of Nevada. 

Mr. Halley. Can't you go into that tie-up at this moment? Rosen 
apparently admitted that he came from New York. 

Mr. Peterson. He came from New York, yes. Very briefly, here is 
the story 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 161 

Mr. Halley. If you are going; to go into it, save it. 

Mr. Peterson. I will go into it later, but very briefly I will go over 
it now. It is rather interesting. Benjamin "Bugsy" Siegel was 
brought to the west coast by Joe Adonis. Siegel was a part of the 
New York mob. Siegel became the head of the Flamingo Hotel out 
in Nevada. Siegel was killed June 20, 1947. After Siegel was killed 
Sanford Adler had the controlling interest in the Flamingo Hotel. 
Morris Rosen then went to Nevada. Morris Rosen got into a fight 
with Sanford Adler. Sanford Adler came screaming into the hotel 
for help and Sanford Adler decided he didn't want to be the con- 
trolling owner of the Flamingo Hotel, and Morris Rosen became, to- 
gether with Moe Sedway, and I forgot who the other party was now. 
Moe Sedway, incidentally, was Bugsy Siegel's partner in the opera- 
tion before. 

Mr. Halley. Isn't it right that Rosen came from New York as a 
virtual stranger, from the New York mob? 

Mr. Peterson. That is right. 

Mr. Halley. And just stepped in there with no investment at all. 
Is that right ? 

Mr. Peterson. I don't know. He claims to have an investment. 
He claimed after he got kicked out of Nevada and even as late as last 
November I know he was questioned in New York in connection with 
another matter in which he stated then that he still had his interest 
in the Flamingo Hotel, although he was supposed to have been out of 
there, you see. 

Mr. Halley. He made an investment, but was able to pay for it out 
of the profits? 

Mr. Peterson. I can't answer that particular question. I have my 
own ideas of why he was out there and whom he represented. I don't 
think there is any question. 

Mr. Halley. Can you state your ideas? 

Mr. Peterson. I think that money originally was the New York 
mob money. I think that is who Siegel represented up there. You 
have to bear in mind the original incorporators; that Louis Pokrass 
was part of that group. He was the one that I think filed the papers 
in connection with the Nevada Projects Corp. Louis Pokrass was 
associated with Adonis and with Costello back in New York during 
prohibition days. So, I think it was New York mob money. When 
Siegel went out of the picture, Sanford Adler took over; and they 
didn't want that. So, out of a blue sky here comes Morris Rosen from 
New York, and he becomes the dominant factor in that operation. 
So, to me, there is no question whom he represents ; but I can't prove 
that, of course. 

Does that answer your question ? 

Mr. Halley. Thank you. 

Mr. Peterson. Another man from New York, who doesn't spend 
much time there, Anthony Carfano, alias Little Augie Pisano, has 
been spending much time in Florida in recent years in the association 
of some of the biggest racketeers of the country. Carfano was an 
associate of Joe Adonis in New York, and was also a partner of Joe 
Masseria, alias Joe the Boss, before the latter was killed. It was also 
claimed that in 1929, after Frankie Uale (Yale) was murdered, Little 
Augie Pisano succeeded to the Uale enterprises in Brooklyn. These 
enterprises included bootlegging, industrial rackets, and slot machines. 



162 ORGANIZED CRIME 1 IN INTERSTATE COMMERCE 

One man who is very seldom heard about but who is important for 
both his New York and Chicago connections is Gaetano Ricci, alias 
Tony Goebels, 125 Ocean Parkway, Brooklyn, N. Y. He is an im- 
portant link between the New York underworld and the Chicago 
Capone syndicate. As far back as 1928, Ricci was arrested in Chicago 
in the company of Louis (Little New York) Campagna, one of the 
leading members of the Capone gang. During the period in which 
the Capone mobsters were exerting every possible effort to effect the 
paroles of Paul Ricca, Louis Campagna, Charles Gioe, and Phil 
D 'Andrea from the Federal penitentiary, in 1947 Ricca made numerous 
telephone calls to Mrs. Campagna and to the homes of Campagna's 
relatives as well as to Campagna's farm in Berrien Springs, Mich. He 
made calls to Francis Curry, an important contact for the Capone mob 
in Joliet, 111., and to individuals known as to be close to Frank Nitti 
before Nitti committed suicide in 1943. He is also understood to have 
made calls to Owney Madden in Hot Springs, Ark. Madden was a 
close associate of Frank Costello and other members of that group. 
He was also in touch with the person who controls the commercialized 
vice in the near North Side of Chicago. It was also alleged in June 
of 1949 that Ricci exerted some influence in a reshuffling of the under- 
world leadership of Chicago's near North Side. Ricci is a native of 
Italy, having been born at Viesti, Italy, on January 1, 1893. He 
arrived in the United States in 1898 on the S. S. Trojan Prince and 
became a naturalized citizen in November 1944. He is New York City 
Police Department's No. B-261555. He is married but is allegedly 
separated from his wife. 

Another individual known as Joseph Profaci, alias Guiseppe Pro- 
faci, 82-15 Fourteenth Avenue, Brooklyn, N. Y., is an important con- 
tact for underworld characters. His name and address were found 
in a confidential address book seized by the Los Angeles police early in 
1950 from Giroloma Adamo, alias Mo Mo Adamo, a principal lieu- 
tenant for Jack Dragna, one of the most notorious gangsters on the 
west coast. Included in this list of addresses were some of the most 
important underworld characters of the Nation, including two lead- 
ing members of Chicago's Capone gang, Murray Humphreys and Tony 
Accardo. Profaci was arrested in Cleveland, Ohio, on December 6, 
1928, when a raid was conducted on a hotel room in which an alleged 
meeting of the Mafia Grand Council was taking place. Thirteen 
guns were found in the hotel room by the Cleveland authorities. Pro- 
faci is New York City Police Department's No. 14481, Cleveland 
Police Department's No. 32776, FBI's No. 4469866, and narcotics in- 
ternational list 11-274. Profaci was born in Italy on October 2, 1897, 
is married, has six children, and lives with his wife, Unifa, and family 
at the given address. For many years he has operated the Mamma 
Mia Importing Co., Inc., 1414 Sixty-fifth Street, Brooklyn, N. Y. 
His brother Salvatore is also an officer of this company which is en- 
gaged in the packing of olive oil and the jobbing of canned tomatoes. 

Another New York individual whose name should be borne in mind 
is Joseph Bonanno, alias Joe Bananas, 114 Jefferson Street, Brooklyn, 
N. Y. He is tied up with several enterprises, including laundries.' 
Bonanno is also connected with the Colorado Cheese Co., Trinidad, 
Colo., which is a distributor for Italian cheese. His name was also 
found in the records seized from Jack Dragna's lieutenant by the 



ORGANIZED CRIME! IN INTERSTATE COMMERCE 163 

Los Angeles police along with the other addresses that I have men- 
tioned before. 

In many respects the kingpins of rackets in New Jersey are iden- 
tical with the riders of the underworld in New York City. Joe Adonis, 
one of the most important members of the Frank Costello mob in New 
York, is one of the most influential figures in the rackets in New Jer- 
sey. Likewise, Abner (Longie) Zwillman, who has long been con- 
sidered the top-ranking racketeer of the New Jersey area, was a mem- 
ber of the original Frank Costello gang following the repeal of pro- 
hibition. In recent years Zwillman, like his associate Frank Costello, 
has attempted to create the impression he is no longer connected with 
the rackets. However, it is known that some of the most powerful 
gambling racketeers of the Nation keep in touch with him. For ex- 
ample, both Morris Kleinman and Lou Rothkopf, of the powerful 
Cleveland syndicate, have been in frequent telephone communications 
with him. 

William Moretti, Hasbrouck Heights, N. J., together with Abner 
(Longie) Zwillman, Joe Adonis, and Anthony Sabio, alias Chicago 
Fats, make up the ruling mob in New Jersey. In South Plainfield, 
N. J., an extremely large crap game has been operated by the Joe 
Adonis crowd, and it appears probable that William Moretti and 
Zwillman have also had an interest in this operation. William Moret- 
ti and Abner (Longie) Zwillman are also allegedly "big shots" in the 
numbers-game racket as well as crap games in New Jersey. William 
Moretti has also been close to Frank Costello of New York. In fact, 
it has been claimed that Costello is the godfather of Moretti's children. 
The influence of Moretti has been felt on the west coast through Joe 
Sica, one of the most important underworld leaders in Los Angeles. 
Sica allegedly received his training from Moretti in New Jersey. 

Joe Adonis spends a considerable amount of time in New Jersey 
and also has legitimate interests in the State. There is good reason 
to believe, for example, that Joe Adonis is the principal owner of a 
company, the name of which I will give you, in Cliff side, N. J., al- 
though another man is the owner of record. That again has to do 
with automobiles. I have a list that I will give you. 

Abner Zwillman resides at 32 South Munn Avenue, East Orange, 
N.J. 

James Cerce has operated a large wire room for horse-race betting 
on the top of the Oakley Building, 211 Market Street, Paterson, N. J. 
James Cerce is reportedly a lieutenant of Joe Adonis. 

Nick Delmore of Elizabeth, N. J., has been a member of a syndicate 
that has controlled the numbers racket in Union County, N. J., in 
years gone by. Associated with Nick Delmore in the numbers racket 
has been Hoboken Joe Stassi. During the prohibition era, William 
J. Syms and Lee McRitchie were associated together in New Jersey. 
They were also associated with Joe Stassi. When the Broward 
County Kennel Club, Inc., Hollywood, Fla.. began operations in 1934, 
two of the principal stockholders were William J. Syms and Joseph 
Stassi. Later Stassi's name was dropped as a stockholder and in 
his place appeared the name of Lee McRitchie. William J. Syms 
continued to be the dominating influence in the operation of the 
Broward County Kennel Club. It is also claimed that William J. 
Syms and Nick Delmore own certain companies in Newark at the 
present time and are connected with a group that operates bowling 



164 ORGANIZED CRIME IN INTERSTATE COMMERCE 

alleys, skating rinks, and other activities in the State. There are 
also indications that Jake Lansky has been close to William J. Syms 
in dog-track operations in Broward County, Fla. 

In 1947 a killer for one of the mobs gave information which has 
not been verified, but in view of the names he mentioned it might 
be well to look into it. He claimed there was the formation 

The Chairman. Are you going to give that information to coun- 
sel for the committee ? 

Mr. Peterson. In view of the names, I can mention some of them 
here and put it on the record. The people aren't apt to be slandered 
any. 

The Chairman. In that connection, I want it understood that neces- 
sarily in this kind of testimony, for some statements which are made 
you must have substantiating data for everything that you say ; but, 
if anyone feels that they have been misrepresented or if they want to 
make any statement of correction or explanation, they will of course 
be given an opportunity to do so. 

Mr. Peterson. This group, it was alleged, had formed a syndicate 
to control sporting events, racing, and were also engaged in the nar- 
cotics racket. That included members of the New York mob, some of 
the important members of the Capone syndicate, some of the New 
Jersey representatives, and some from Philadelphia. It covered a lot 
of territory. 

It might be well for you to look into that information which I will 
give to you, because the names involved are very important. 

The Chairman. Does this syndicate that you are talking about have 
a name? 

Mr. Peterson. The syndicate did not have a name as such, as far as 
I know. They were also allegedly controlling juke-box distribution 
companies, the names of which I will give you. In fact, Meyer Lansky 
was the treasurer of one of those companies. That is a matter of 
record. 

The Chairman. What company was that? 

Mr. Peterson. That was the Simplex Distributing Co. 

The Chairman. Of New York ? 

Mr. Peterson. Yes. 

The Chairman. Mr. Peterson, Meyer Lansky and Jake Lansky are 
brothers ? 

Mr. Peterson. They are brothers ; that is right. 

The Chairman. Jake is the one who operated in Broward County ? 

Mr. Peterson. Both Jake and Meyer. 

The Chairman. The Colonial Inn and Green Acres ? 

Mr. Peterson. Both brothers were a matter of record in that opera- 
tion. 

Another individual by the name of Vito Genovese, 75 Bluff Road, 
Palisades Gardens, Palisades, N. J., was formerly a gunman for 
Charles (Lucky) Luciano. He fled to New Jersey when Luciano got 
in trouble as the head of New York City's commercialized prostitution 
racket. Genovese has a criminal record reflecting numerous arrests 
since the year 1917 on charges of various crimes, including that of 
homicide. He is New York City Police Department's No. B-59993. 

Anthony Sabio, alias Chicago Fats, is allegedly the king of the book- 
makers in Passaic County, N. J., under William Moretti. 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 165 

That covers very briefly some of the principals in New Jersey. I 
have one or two other connections here that I will give you without 
making it a matter of public information. 

In New England, very briefly, Harry (Doc) Jasper Sagansky, 
Boston, was perhaps the principal gambling racketeer in the New 
England area prior to the time of his conviction a few years ago, 
in 19-13, I believe it was. Records recovered in Boston several years 
ago established that Harry (Doc) Jasper Sagansky in 1912 called 
Frank Erickson in New York as often as six times each betting 
day. Canceled checks seized in raids on Sagansky's apartment reflect 
that they were made out to "L. Erickson," who is Leonard Erickson, 
brother of Frank. Leonard Erickson was Frank Erickson's banker. 
During July 1912 Sagansky made out 11 checks to Erickson totaling 
$13,520 to settle his obligations to him that month. 

The Chairman. Mr. Peterson, that would indicate that Erickson 
was the betting commissioner and was handling the lay-off bets. 

Mr. Peterson. That is right, for Sagansky, who was the big rack- 
eteer there, but he also was dealing almost on as large a scale with — ■ 
for example, in July 1912, he had to pay N. N. Kronenberg, of 
Houston, Tex., a betting commissioner, $12,864.75 in order to balance 
accounts. In Chicago, he issued three checks amounting to $5,142.25 
in the first 20 days of July 1942 to E. M. Dobkin, a man I men- 
tioned yesterday, one of Chicago's large betting commissioners. At 
that time Sagansky's headquarters was located in the Roughan Hall, 
15 City Square, Boston. The extent of Sagansky's business in gam- 
bling activities during that period was reflected by bank deposits 
which totaled $1,114,131.78 in 1941 and $1,374,575.46 'in 1942. 

Frank Iaconi is head of the gambling racket in Worcester, Mass. 
Iaconi is closely associated with Raymond Patriarca, the king of 
rackets in Providence, R. I. Patriarca is also allegedly tied up with 
members of the Frank Costello mob in New York. Patriarca and 
Iaconi were associated together during rum-running days. Iaconi 
worked for the Patriarca gang as a Providence-Worcester agent. 
Booze was run between the two cities. Iaconi then left the boot- 
legging racket and began operating beano games, then horse betting, 
and then numbers. In 1940, when Daniel H. Coakley, a member of 
the Governor's Council in Massachusetts, was impeached for obtain- 
ing the release of Patriarca from the Massachusetts State Penitentiary, 
Iaconi informed Patriarca that he should stay out of Worcester. 
Patriarca then brought Iaconi in line by a series of robberies of 
Iaconi's gambling places. There were about four robberies in a 
very few days. One of them involved Tony Santello, who handed 
over $21,000. Four days later there was a robbery of a Worcester 
barroom where Iaconi, a high city official and four others were present. 
After another robbery of an Iaconi gambling joint on Green Street 
in Worcester of $19,000, Patriarca was invited to come to Worcester 
and make peace with Iaconi. Since that time the Iaconi-Patriarca 
alliance has been functioning smoothly. Iaconi's monopoly of gam- 
bling in Worcester is an important part of Patriarca's gambling 
set-up in that particular area. 

The Chairman. That was in the spring of 1940; was it not? 

Mr. Peterson. Yes; it was in 1940. I don't know the time of the 
year. 



166 ORGANIZED CRIME IN INTERSTATE COMMERCE 

The Chairman. Do you have the exact date ? 

Mr. Peterson. Yes. I have it in our files. 

The Chairman. Will you give it to the committee ? 

Mr. Peterson. Yes. 

William H. Ridings, 6 Whipple Street, Pawtucket, R. I., has also 
been a big lay-off man and betting commissioner there. Telephones 
are listed to the above address in the names of John Samuel Horton, 
George Ashcroft, and John Allen. Ridings formerly did business 
with Harry "Doc" Jasper Sagansky, the chief of New England 
gambling rackets until he ran afoul of the law in 1943. Frank Iaconi, 
the gambling king of Worcester, Mass., at one time used Ridings to lay 
off bets several times a day. 

Jumping to Florida, that has long been a stamping ground for some 
of the most notorious gangsters of the Nation. This has particularly 
been true of the Miami area and also in Broward County, Fla., directly 
to the north of Dade County, in which Miami and Miami Beach are 
located. The Capone syndicate has had a firm foothold in Florida 
for the last 20 years. Al Capone maintained an estate in Florida 
which was visited by virtually all of the prominent members of the 
Chicago Capone gang. Charles Fischetti, who is unquestionably one 
of the most powerful underworld leaders in America today, has a 
palatial home located at 6475 Allison Road, Miami, Fla. Charles 
Fischetti has connections with the leading members of virtually 
every important mob from the east coast to the west. 

Tony Accardo, frequently referred to as the present leader of the 
Capone syndicate, has maintained a residence at 9199 Collins Avenue, 
Surf Side, Fla., just north of Miami Beach. His brother, Martin 
Leo Accardo, a felon, has lived in a palatial home at 1217 Granada 
Boulevard in Coral Gables. Clarice Accardo is the wife of Tony 
Accardo. They, together with their children, live in the very fine 
residential suburb of Chicago, River Forest, 111. Their home is 
located at 1431 Ashland Avenue, River Forest, In Florida Tony 
Accardo has maintained a boat, the Clari-Jo, River Forest, Illinois. 

Jack Guzik, the former business manager of the Capone syndicate, 
has spent a large amount of time in Miami Beach, as has virtually 
every important member of the gang. Property owners in Miami 
Beach include Ralph Buglio, Pat Manno, and Peter Tremont, Ralph 
Buglio has long been known as an associate of prominent members 
of the Capone syndicate. Buglio has owned a house at 261 North 
Cocoanut Lane, Palm Island, Miami Beach. Many years ago Buglio 
was a suspect in some of Chicago's gang killings. On February 2, 
1936, Ralph Buglio, Rocco De Stefano, and others were arrested by 
the Chicago police in connection with alleged holdups of liquor whole- 
salers in the State of Illinois. It was claimed they had been in- 
volved in hijacking merchandise amounting to over $75,000 in 1 year. 
Bonds in the sum of $90,000 each were required. Prosecution was 
later declined. On July 10, Rocco De Stefano, his father, Michael 
De Stefano, Ralph Buglio, and others were arrested by the State's 
attorney's police for failure to pay sales taxes over a period of 15 
months. 

The Chairman. In what year was that? 

Mr. Peterson. I have July 10 down here. Apparently I left out 
the year. I think that was about the same time, about 1936. I think I 
can find that for you in my notes here. 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 167 

The Chairman. You can supply that ? 

Mr. Peterson. Yes. I will supply that. 

Biig'lio's associate, Rocco De Stefano, has also been closely allied 
with Harry Russell, Charles Fischetti, Jack Guzik, and other big 
Capone syndicate members, all of whom spend a considerable amount 
of time in Florida. 

Peter G. Tremont, who is a property owner with Buglio in Miami 
Beach, is a big policy operator on Chicago's South Side. It is also 
known that Pat Manno, who has been in the policy racket in Chi- 
cago for many years, owns a residence at 5812 Pine Tree Drive, 
Miami Beach, Fla. Manno also maintains a permanent address at 
1439 North Franklin Street, River Forest, 111. 

Harry Russell, who operates a bar at 400 South State Street and 
who has been associated with Tony Accardo in the operation of gam- 
bling places in Chicago, has also spent a large amount of time in 
Florida. In fact, it was publicly charged several months ago that 
he had muscled into the S. & G. Gambling Syndicate in Miami Beach. 
Harry Russell has been an associate of Max Caldwell. I mentioned 
him yesterday. 

On August 21, 1941, the State's attorney's office in Chicago charged 
that Rocco De Stefano, Harry V. Russell, Peter Tremont, Patrick 
Manno, Max Caldwell, Milton Schwartz, and others had helped spend 
$900,000 looted from the treasury of local 1248, Retail Clerks Protective 
Association union funds. No indictments were returned and no 
further action was taken. During the time that Caldwell was affiliated 
with the Retail Clerks International Protective Association, local 
1248, in Chicago, he furnished free air transportation, apparently 
with union funds, for Ralph Buglio, Harry Russell, Rocco De Stefano, 
Peter Tremont, Pat Manno, and others, from Chicago to Miami. 
Caldwell has entered into business in the Miami area at the present 
time. When a suit was filed in 1941 for an accounting of the union 
funds, a union representative testified he could find only $62 of the 
$910,000 Caldwell had collected as business manager of the union. 
Martin Guilfoyle, long a big-time gambler of Chicago and once listed 
as a public enemy there, divides his attention between the operation 
of handbooks in Chicago and the Miami area. 

Virtually every member of the Capone syndicate has frequented the 
Miami area and in many instances have engaged in racketeering activi- 
ties there. During the heyday of Al Capone, the Capone syndicate 
was in control of dog tracks in virtually every part of the country, 
including Florida. The Capone syndicate czar of dog racing during 
that period was Edward J. O'Hare, who was killed in gang warfare 
in Chicago on November 9, 1939. Just prior to the time O'Hare left 
his office in Sportsman's Park, Cicero, 111., he had been holding a con- 
ference with William H. Johnston and John Patton in their offices at 
Sportsman Park. Johnston w T as then described as a publicity man 
and Patton was one of the owners of the track along with O'Hare. 
These individuals were also interested at that time in dog-track opera- 
tions in Florida. William H. Johnston, 1090 Arbor Lane, Jackson- 
ville, Fla., is presently listed as the president of the Miami Beach 
Kennel Club, Inc., president of the Associated Outdoor Clubs, Inc., 
Tampa, Fla., president of the Jacksonville Kennel Club, Inc., presi- 
dent of the Orange Park Kennel Club, Inc., all of which are Florida 
dog tracks. James Patton, the son of John Patton, is listed as the 



168 ORGANIZED CRIME IN INTERSTATE COMMERCE 

vice president of the Miami Beach Kennel Club, Inc., and the Jack- 
sonville Kennel Club, and is assistant treasurer of the Orange Park 
Kennel Club, Inc., Jacksonville, Fla. With reference to the Miami 
Beach Kennel Club, John Patton appeared as one of the owners of 
this track. Until 1941, John Patton's name appeared as a stockholder 
in the Miami Beach Kennel Club. Since that date the stock was 
transferred to his son, James. John Patton has long been associated 
with members of the Capone gang. Many years ago he was known 
as the Boy Mayor of Burnham, a suburb of Chicago, which was the 
center of vice, gambling, and booze for the Capone syndicate. On 
April 7, 1925, the press in Chicago reported a raid on the Capone gang 
headquarters. Arrested in the raid were John Patton, Robert Larry 
McCullough, Joe Fusco, Frank Nitti, and others who were considered 
then important members of the syndicate. 

Mr. Halley. Is this the same John Patton? 

Mr. Peterson. That is the same John Patton. 

Mr. Halley. What is the basis upon which you state that William 
Johnston is allied with the Capone syndicate ? 

Mr. Peterson. I do not say that. I say he has been associated with 
John Patton since in the 1930's. 

Mr. Halley. In what kind of operation? 

Mr. Peterson. In the operation of dog tracks and also in the opera- 
tion of Sportsman's Park in Chicago. 

The Chairman. Mr. Peterson, did you mention Tropical Park ? 

Mr. Peterson. No. 

The Chairman. Were you going to mention it ? 

Mr. Peterson. I don't think so. 

The Chairman. Do you have any information about the ownership 
of Tropical Park? 

Mr. Peterson. Yes ; I have some information, but I didn't include 
that in this. 

The Chairman. Is John Patton not one of the owners of Tropical 
Park? 

Mr. Peterson. I am not sure. I would have to check my records 
back at the office. Those that I know that Patton has been interested 
in are those that I have mentioned. Of course, now, he does not hold 
the stock. The stock is in the name of his son, James Patton. However, 
John Patton has still been very friendly with William H. Johnston. 

Mr. Halley. Can you give some more detail on their business rela- 
tionships, in particular, say, in Sportsman's Park ? 

Mr. Peterson. In Sportsman's Park? 

Mr. Halley. Yes. 

Mr. Peterson. Surely. I think if you would check \, ith some racing 
people there, you would find that John Patton spends an awful lot 
of the time in the penthouse there at Sportsman's Park with William 
H. Johnston in the operation of that track. 

Mr. Halley. They own the track? 

Mr. Peterson. The track is owned by, I believe it is called the 
National Jockey Club, of which William H. Johnston is president and 
in which John Patton at one time held stock, but he no longer appears 
as a stockholder in that track, either. I think his son, James Patton, 
is a stockholder in the track. 

Mr. Halley. Are there any other ventures in the Chicago area in 
which you find Patton and Johnston together ? 



ORGANIZED CRIME IN INTERSTATE COMMERCE 169 

Mr. Peterson. Only in connection with tracks. 

Mr. Halley. What tracks i 

Mr. Peterson. I mean in Chicago, just Sportsman's Park, the one 
track ; and then the tracks in Florida. 

Mr. Halley. Can you give further detail on the Florida situation? 

Mr. Peterson. Yes. 

Mr. Halley. With relation specifically to Johnston and Patton and 
their associations? 

Mr. Peterson. If I may, I will finish this particular portion, and 
then you may have some other questions. I wanted to bring out 
again, which I mentioned yesterday, arrested in the raid there were 
John Patton, Robert Larry McCullough, and others. During that 
period, John Patton was associated with Edward J. O'Hare, repre- 
sentative of the Capone gang, Jack Guzik, business manager of the 
Capone outfit, and others, in the operation of a dog track known as 
the Laramie Kennel Club and the Hawthorne Kennel Club near 
Chicago. This track was known as a Capone gang dog track. During 
the dog-track season in Florida until the present time Robert Larry 
McCullough, who was arrested with John Patton, Frank Nitti, and 
others in the Capone headquarters late in 1925, has been serving as the 
chief of police at the Miami Beach Kennel Club, Inc. He also serves 
in a somewhat comparable police capacity at Sportsman's Park near 
Cicero, 111., which is a horse-racing track. 

McCullough has been known in times gone by as a Capone gang 
terrorist and strong-arm man. He was questioned in connection with 
some of the notorious gang killings in Chicago many years ago. An 
official program of the Miami Beach Kennel Club dated March 20, 
1948, lists L. A. Shumway as the mutuels manager of the Miami Beach 
Kennel Club. Shumway was an employee in some of the Capone 
gang's gambling establishments in Cicero several years ago and was 
called as a witness by the Government in the income-tax cases against 
Al Capone. It has also been reported that among the present officers, 
directors, and stockholders, in the Miami Beach Kennel Club is Ed- 
ward Krumrey, who is also from Burnham, 111. Krumrey is also 
listed as a timer at the National Jockey Club which operates Sports- 
man's P'ark near Cicero, 111. The last known address of Edward 
Krumrey is 14125 Mackinaw Avenue, Burnham, 111., where John 
Patton was formerly mayor. Another reported stockholder in the 
Miami Beach Kennel Club is David Kind. In 1929, an indictment 
was returned in criminal court, Chicago, charging David Kind, L. A. 
Shumway, Edward J. O'Hare, and others with conspiracy in offering 
perjured testimony as to betting at dog tracks in Illinois. 

In addition to the infiltration of Capone gangsters in the Miami 
area, many of the important Cleveland gangsters have also located 
there. Fred Angersola, known as Fred King, and his brother, John 
Angersola, alias John King, were formerly big-time gamblers in the 
Cleveland area. John King is known as the owner of a fine home at 
4431 Alton Road, Miami Beach, Fla., and another home at 5440 La 
Gorce Drive. John Angersola has been arrested in Columbus, Detroit, 
Cleveland, and Toledo on such charges as robbery, investigation, and 
suspicion. George Angersola also spends a large amount of time in 
Florida along with his brothers, and is known in Cleveland as an 
associate of Moe Davis, alias Moe Dalitz, and the Polizzis. 



170 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Another individual who has been tied up with the Cleveland syndi- 
cate, Joe Di Carle, has spent time in Florida, particularly at the 
Wofford Hotel, Miami Beach. Di Carle has associated there with Joe 
Massei, formerly of Detroit, Charles Fischetti, and Joe Adonis. 

Joe Massei has been a big-time Detroit racketeer and allegedly still 
has affiliations with such Detroit mobsters as Pete Licovoli, William 
"Black Bill" Tocco, and Joe Zirilli, who have had the numbers racket 
in Detroit, Joe Massei has been one of the operators of the Miami 
Provision Co., 1002 Northwest Thirty-second Street, Miami, Fla. 
This concern is a wholesale meat and provision company dealing with 
hotels and restaurants in Miami. At one time Massei owned a home 
on Pine Tree Drive in Miami Beach. He sold this home in the fall 
of 1947 and moved to the penthouse of the Grand Hotel in Miami 
Beach, along with other well-known Cleveland hoodlums and big-time 
gambling operators. The Grand Hotel has served as a congregating 
place for such individuals as Joe Adonis, Anthony Carfano, alias 
Little Augie Pisano, Charles Fischetti, Jack Guzik, Ralph Buglio 
from Chicago, and numerous others. 

Joe Massei has been arrested numerous times in Detroit. On May 
24, 1920, and August 11, 1921, he was arrested on armed robbery 
charges and was discharged both times. On August 31, 1925, he was 
arrested in connection with a murder investigation and was discharged. 
On February 3, 1933, he was again arrested for murder and was dis- 
missed by the court on May 15, 1934. His record contains 15 notations 
reflecting various conflicts with the law. However, he apparently 
never served any time except on one occasion when he was sentenced 
to serve 60 days in the Wayne County Jail, Detroit, Mich., for contempt 
of court in September 1933. 

The big time racketeers from all over the country have become 
deeply entrenched in the Miami area and many of them have interests 
in hotels there. For example, in Minneapolis, Minn., perhaps the 
outstanding racketeer has been Isadore Blumenfield, alias Kid Cann, 
who has allegedly been at one time the head of a syndicate which has 
controlled gambling in Minneapolis for many years. Kid Cann and 
members of his family own valuable ocean-front property in Miami 
Beach, Fla. It has also been reported that Kid Cann has a million- 
dollar investment in a hotel in Miami Beach, Fla. A former candidate 
for mayor in Minneapolis a few years ago claimed that he was ap- 
proached by Kid Cann's group and offered a substantial contribution 
to his campaign fund. In return this group wanted to name the chief 
of police of Minneapolis. 

The Chaikman. Who was that ? 

Mr. Peterson. I don't have the name of the candidate here, but 
the candidate was defeated. He didn't accept the offer. This is a 
number of years ago. 

Kid Cann has also been a suspect in a number of unsolved murders. 
One of the murder victims was Liggett, who was running a weekly 
newspaper and had accused Kid Cann and the police department of 
controlling and protecting gambling. Liggett had threatened to ex- 
pose those conditions just before he was killed. Kid Cann is also 
understood to be engaged in the liquor business. There have been 
charges that he owns night clubs in the vicinity of Minneapolis. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 171 

Although this has not been proven in court there is good reason to 
believe that he has financial interests in some of these night clubs. 

Kid Cann's name first appeared in the records of the Minneapolis 
Police Department in 1920. He has been charged with such crimes 
as murder, violation of the National Prohibition Act, assault, and as 
a suspect in the shooting of two police officers. He was once indicted 
for conspiracy to kidnap Charles Urschel, a wealthy Oklahoma oil 
man. This indictment was nolle prossed. In recent years it was 
claimed that he did operate a gambling place next door to 1538 
Nicolette Avenue, Minneapolis, Minn. Kid Cann has a brother and a 
lieutenant whose name is Yiddi Blumenfield, alias Yiddi Bloom. 
Yiddi Bloom and Harry Mitchlin and Harry Joffa were secretly in- 
dicted by a Montana Federal grand jury for conspiracy in a large black 
market operation in liquor. In December 1943, Yiddi Bloom, Harry 
Mitchlin, Mrs. Verna Bloom, wife of Yiddi, and Mrs. Ray Schneider, 
sister of Kid Cann, were indicted for illegal distribution of wine. 
The tax case was settled for $73,000 and fines on the criminal charges 
amounted to $30,000. 

Harry Blumenfield, alias Harry Bloom, is another brother and 
lieutenant of Isadore Blumenfield, alias Kid Cann. All of the Blumen- 
fields allegedly are large property owners in the greater Miami area. 
At least two ocean-front hotels are located on real estate owned by this 
family. 

In recent years, Julius Berman, alias Julius Kramer, alias Harry 
Kramer, alias Jules Berman, alias Julie Beeman, has operated the 
horse-book concession at a hotel which is allegedly owned by Isadore 
Blumenfield, alias Kid Cann. Julius Berman is New York City Police 
Department No. B99872, and he has a long record going back to 1924. 
It is reported that he was associated at one time with Louis "Lepke" 
Buchalter, of Murder, Inc., New York City. Berman has also been 
arrested twice on narcotics charges. 

One of the officers in the corporation holding title to the hotel which 
is allegedly owned in part by Isadore Blumenfield is one Edward 
Berman, a notorious Minneapolis racketeer. Edward Berman is FBI 
No. 613,989. He was sentenced to 5 years in the Federal penitentiary 
in United States District Court, Oklahoma City, Okla., on October 7, 
1933, in connection with the Urschel kidnapping case. He was 
charged with conspiracy to kidnap. Apparently his offense related 
to passage of the ransom money. 

Another individual who has held leases to hotels in Florida in which 
the gangster element has been closely identified is Thomas Cassara. 
Several years ago Thomas Cassara took over the lease of the Grand 
Hotel, 220 Twenty-third Street, Miami Beach, Fla. In 1940 he took 
over the lease of the \Vofforcl Hotel, Miami Beach, Fla., which he 
operated for one season only. In 1947 Cassara reportedly operated 
the Chanticleer Restaurant, 8572 Sunset Boulevard, Hollywood, with 
Monte Prosser and Danny Romano. Prosser is manager of the Copo- 
cabana Night Club, New York City, and Danny Romano has a brother 
by the name of Louis who has been prominently identified with the 
Capone syndicate in Chicago. 

The Chairman. Do you know who owns the Copocabana Night 
Club? 



172 ORGANIZED CRIME! IN INTERSTATE COMMERCE 

Mr. Peterson. I can't prove who owns it. I know whose name has 
been very prominently identified with it. 

The Chairman. If you do not know, just say so. 

Mr. Peterson. I think it has been printed in the papers as a matter 
of fact, who supposedly is connected with it, one of the big mobsters. 
That hasn't been proved. 

Cassara has also been manager of the Raleigh Hotel in Miami 
Beach, Fla. This hotel was reportedly built with funds which came 
from New York and Chicago about 1940. Thomas Cassara incident- 
ally was shot on June 30, 1946, as he was standing in front of the 
Tradeswinds Restaurant, 865 Rush Street, Chicago, 111. Cassara was 
president of the Raleigh Importing Distributors, 600 South Michigan 
Avenue. Standing beside Cassara when he was shot was a man by 
the name of Arthur T. McAboy, 7321 South Shore Drive, an official 
of the J. & B. Liquor Co., Cairo, 111. Police claimed that McAboy 
had been negotiating for a 75 percent interest in the Raleigh Import- 
ing Distributors. Cassara was to retain a 25 percent interest. Police 
also reported that Rocco DeStefano, a well known Capone syndicate 
hoodlum, was a silent partner with Cassara in the Raleigh Distribu- 
tors. A collector for back checks for the Flamingo Hotel stated in 
1947 that there were about 35 individuals that controlled gambling 
throughout the East here and in New Jersey and Florida, and he 
mentioned, for example, Dandy Phil Kastel, Julie Podello, Frank 
Costello, and Tony Carfano alias "Little Augie" Pisano, who also has 
spent a large amount of time in the Miami area in association with 
other big time hoodlums. Another important underworld character 
who has become deeply entrenched in the Miami area is Sam Taran. 
Sam Taran is the head of the Taran Distributing Co., records and 
appliance division, Miami, Fla. This individual is an ex-bootlegger 
with a long record for violations of the internal revenue laws. Chi- 
cago police files reflect that in 1934 he served a 2-year term in the 
United States penitentiary. 

In 1932 he was arrested at the Edgewater Beach Hotel in Chicago 
in connection with liberty bonds he sold which had been stolen in a 
Nebraska bank robbery. He was later released when the State could 
not prove he had knowledge of the bonds being stolen. Taran at one 
time was a small time prize fighter in St. Paul, where he was also 
known as a racketeer. Sam Taran has been reputedly the juke box 
boss of the mob in Florida. He has been associated there with very 
important members of the Capone mob as well as hoodlums from other 
areas. 

Directly north of the Miami area is Broward County, Fla. Gam- 
bling operations in this area have long been controlled by members 
of the Frank Costello mob in New York. As you know, just recently 
records were uncovered by the district attorney's office in New York 
which definitely established that the Colonial Inn in Hollandale, Fla., 
has been owned by Joe Adonis, alias Joe Doto, one of the most power- 
ful gangsters in this country, Frank Erickson, Meyer Lansky, Jake 
Lansky, Vincent Alo alias "Jimmy Blue Eyes," from the New York 
mob aiid Mert Wertheimer, head of the powerful Chesterfield syndi- 
cate in Michigan. Notes found in the amount of $50,000 in favor of 
Frank Costello would indicate the possibility of his connection with 
the place as well. The gambling racket in this county has attracted 
the <ra:i<rster element to settle there. 



ORGANIZED CRIME! IN INTERSTATE COMMERCE 173 

In this same county there is also located the Broward County 
Kennel Club. The vice president and general manager of this club 
is William J. Syms. Syms has been associated in times gone past 
with Nick Delmore and Hoboken Joe Stassi from New Jersey. He 
was also one of the stockholders in this club orginally when it was 
started in 1934. It is reported that Syms is a close friends of Jake 
Lansky, one of the gambling czars in Broward County, Fla. The 
accountant for Jake Lansky is also the accountant for the dog track. 

On January 10, 1945, in the United States District Court at Miami, 
Fla., a stockholders' suit was filed by F. Strong, Barbara Roberts, and 
Lee MeRitchie. against the Broward County Kennel Club, Inc., Wil- 
liam J. Syms, Gerald McCurrie, and J. E. Gallagher, defendants. The 
plaintiffs alleged that the defendants voted themselves exorbitant 
salaries — namely, William J. Syms, $1,666.67 per week; McCurrie, 
$1,163.34 a week; Gallagher, $583.34 per week; and Ben Eisen, $500 
per week. The suit prayed for an accounting, et cetera. The suit 
disclosed that when the dog-track operations began on June 20, 1934, 
the original stockholders were William J. Syms, Joe Stassi, Florence 
Strong, Barbara Roberts, and a corporation. 

As of January 15, 1945, the court records reflected that the stock- 
holders were William J. Syms, Sr., William J. Syms, Jr., Lee Mc- 
Currie, who also was associated with Syms in New Jersey during 
bootlegging days, Barbara Roberts, Florence Strong, and May E. 
Pettit. The complaint alleged that William J. Syms, Sr., dominated 
and controlled the destiny of the club and operated the track in a 
high-handed manner. 

In the defendants answer it was alleged that MeRitchie became a 
stockholder in 1940. It is admitted that the corporation did obtain 
loans totaling $5,000 as alleged in the complaint and which was paid 
to George Morton Levy, a New York attorney residing in Mineola, 
who in turn gave the money to the corporation. When George Morton 
Levy was questioned concerning the $5,000, he brought into the pic- 
ture the name of Lauretta Costello, who allegedly is the wife of Frank 
Costello. Ben Eisen was questioned concerning how he was able to 
keep books at the Broward County dog track as well as at the Gulf 
Stream Race Track. Although he refused to answer any other ques- 
tions, he admitted he was the comptroller of the Gulf Stream Race 
Track. 

When the case went to trial March 21, 1946, depositions were taken 
from Joseph Stassi, Lee MeRitchie, George M. Levy, and others. In 
a deposition taken from Frank L. Bang he testified that William J. 
Syms, Joe Stassi, and Lee MeRitchie were closely associated together 
in the operation of dog tracks in Nassau, Rensselaer County, N. Y., in 
1935, and the Nassau County Kennel Club, Minneola, Long Island, 
from 1930 to 1935. Bang also testified in his deposition "that one 
David Dolan was a front man for Syms, Stassi, and MeRitchie. 

During the prohibition era activities one of Syms' partners was 
Lee J. MeRitchie, of Elizabeth, N. J., whom I mentioned was also 
connected with this dog track there. 

Another associate during that period was Nick Delmore. It is 
claimed they are still in business together in certain legitimate busi- 
ness enterprises. 

68958—50 — pt. 2 12 



174 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

In Tampa, Fla., Salvatore (Red) Italiano is the leader of a group 
of racketeers in control of "Bolita" and other forms of gambling. 
The principal lieutenants of Italiano have been Jimmy Lumia, Tony 
(Nino) Decidue, Tom Decidue, Paul Antinori, Santo Trafficante, and 
a son by the same name. During 1941 these gangsters allegedly mem- 
bers of the Mafia were in complete control of vice, gambling, and 
similar activities. During the 1910 elections it is claimed that these 
racketeers spent huge sums of money for campaign purposes. 

About 1947 Jimmy Lumia brought to Tampa a racketeer by the 
name of Philip Locicero. Lumia and Lucicero opened a night club 
known as The Chateau, which is located in the Desoto Hotel in Tampa. 
Locicero remained in the background of the club's transactions. Until 
early 1949 he spent a large amount of time in the Jockey Club. About 
two or three weeks before the killing of Jimmy Velasco, Salvatore 
Italiano, and Philip Locicero made a trip to New Orleans. The 
place they visited was allegedly the headquarters for the Mafia in 
the Southern States. In Tampa the meeting place for the Mafia has 
allegedly been at the homes of Jimmy Lumia or Santo Trafficante. 

Santo Trafficante, a lieutenant of Salvatore (Red) Italiano, in 
Tampa, Fla., has connections on the west coast. Early in 1950, when 
the Los Angeles police seized the records from Jack Dragna's lieu- 
tenant, Giroloma Adama, they found, as I mentioned before, the 
addresses of some of the most notorious gangsters in the country, in- 
cluding Murray Humphreys and Tony Accardo. In the list was 
recorded Santo Trafficante, 2821, which apparently is the telephone 
number, 3010 North Boulevard, Tampa, Fla. Also recorded in the 
address book recovered from Jack Dragna was James Lumia, M1426, 
again the telephone number, 3215 Twelfth Street, Tampa, Fla. Jimmy 
Lumia has been one of the leading racketeers in Tampa until it is 
my understanding he was killed there just a few weeks ago in a gang 
killing. 

Paul Antinori, who has been associated with the gang that controls 
Bolita and other illegal activities in Tampa, the Narcotics Bureau 
has reported, I believe one man testified the other day that Ignazio 
Antinori of Tampa went to Havana, Cuba, to obtain narcotics for 
associates in the Middle West. The drugs were unsatisfactory and 
when Antinori did not make restitution, he was killed in Tampa by 
shotgun fire in 1940. In 1942 the Narcotics Bureau arrested Antinori 's 
two sons, Paul and Joseph, and several others. Paul is the man that 
I just mentioned. They were convicted in a trial in which Carl 
Carramusa, a codefendant, appeared as a Government witness. Car- 
ranmsa moved to Chicago where he was killed by a shotgun blast in 
front of his home in 1945. Paul Antinori incidentally is married to 
Rose Decidue. 

Another man engaged in the Cuban lottery "Bolita" with his two 
brothers and an uncle at the Sea Breeze Cafe is Anthony (Tony) 
Li cat a. 

In the 1930's, according to J. Richard "Dixie" Davis, who was the 
lawyer for the slain gangster, Dutch Schultz, a national syndicate was 
operated from New York by Charles "Lucky" Luciano, Benjamin 
"Bugsy" Siegel, and Meyer Lansky. Dixie Davis, who, of course, 
was in a position to know what he was talking about, stated that 
"Moey" Davis became the power in Cleveland, Ohio, and anyone who 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 175 

questioned it would have to deal with "Lucky" and Meyer and 
"JBugsy." 

Moe Davis has been closely associated in gambling enterprises 
in the Cleveland area for many years with Maurice Kleinman, Lou 
Rothkopf, alias Lou Body, alias Lou Rhody, Thomas Jefferson Mc- 
Ginty, and others. Rothkopf, Kleinman, and Davis maintained a 
suite in the Hollenden Hotel, Cleveland, for many years. Members 
of this group have been in association with some of the biggest racket- 
eers from the east coast to the west. They have maintained contact, 
for example, with Abner "Longie" Zwillman, of New Jersey, and it is 
known that Lou Rothkopf was in very close contact with Mickey 
Cohen and Jack Dragna, notorious west coast gambling racketeers. 

In the late 1930's a series of lawsuits was filed against Maurice Klein- 
man, Moe Davis, Lou Rothkopf, and Thomas Jefferson McGinty, who 
were named as operators of gambling joints known as the Thomas 
Club, the Arrow Club, which subsequently became known as the Petti- 
bone Club. 

In the early 1930's Kleinman, Rothkopf, and Davis were partners 
in a front for a gambling operation called the Prospect Advertising 
Co. 

The Chairman. Where was that located ? 

Mr. Peterson. Cleveland. 

On February 3, 1931, William E. Potter, a Cleveland city council- 
man, was slain in one of the most sensational crimes ever committed 
in Cleveland. The most logical suspect insofar as the murder was con- 
cerned was one "Pittsburgh Hymie" Martin. Moe Davis and Lou 
Rothkopf were with "Pittsburgh Hymie" until a few hours before the 
slaying. Davis was also with Hymie until an hour prior to the arrest 
of Hymie who was charged with the murder of Potter. "Pittsburgh 
Hymie" was tried for this murder and was convicted. He won a 
retrial, however, and was acquitted. It was alleged that Potter had 
been killed because it was feared he was about to expose some crooked 
deals. The police had traced checks written by a city official to the 
Prospect Advertising Co., operated by Moe Davis and Maurice Klein- 
man. In recent years Davis, Kleinman, and Rothkopf have been 
connected with the operation of the Mounds Club, the Pettibone Club, 
the Jungle Inn, located near Youngstown, Ohio, the Beverly Hills 
Club, and the Lookout House, near Cincinnati. It is known, of course, 
that Thomas Jefferson McGinty has been an important figure in the 
operation of the Mounds Club. Several years ago it was alleged that 
Moe Davis was then connected with a gang which was known as the 
Mayfield Road gang. Some of Davis' former associates have included 
Joe Massei, of Detroit, Mich., Abner Zwillman, of Newark, and certain 
members of the Capone gang in Chicago. 

The Mayfield gang subsequently fell under the leadership of Alfred 
P. "Big Owl" Polizzi and Frank Milano. In 1945 a large amount of 
publicity attended the gang murder of Nathan "Nate" Weisenberg, 
slot-machine king of Cleveland. Following that murder the syndicate 
composed of Kleinman, Rothkopf, Davis, and others, moved out of 
the Hollenden. At one time Moe Davis was interested in the River 
Downs Race Track and the Coney Island Dog Track located in Cleve- 
land. He was also involved in a dog track at Dayton, Ky., together 
with Alfred P. Polizzi. The dog-track operation, however, lasted 
only 13 days before it was closed by the Attorney General of Kentucky. 



176 ORGANIZED CRIME! IN INTERSTATE COMMERCE 

Moe Davis, alias Moe Dalitz, is now the treasurer, or was as of 
February 1950, and apparently still is, of the Desert Inn, Las Vegas, 
Nev., one of the most elaborate gambling establishments in America. 
Davis has resided at 400 Park View Drive, Cleveland, Ohio. He has 
a number of legitimate interests there, including the Michigan In- 
dustrial Laundry Co. in Detroit. The combination of Davis, Klein- 
man, and Eothkopf are also allegedly interested in the Pioneer Linen 
Supply Co. in Cleveland. This group has also controlled a slot- 
machine and gambling resort at Brady Lake, Ohio, and, as I mentioned 
before, has owned the Pettibone Club, a gambling place located in 
Geauga County, Ohio. They are interested in a number of other 
legitimate businesses which I will make available to you. They are 
listed in this statement that I have here. 

Lou Rothkopf , alias Lou Rhody, Fenway Hall Hotel, Euclid Avenue 
and One Hundred and Seventh Street, Cleveland, Ohio, is FBI No. 
L128584. He was born in Cleveland on June 3, 1903. He apparently 
owns several apartment houses in Cleveland. Lou Rothkopf spends 
much of his time in Las Vegas, Nev., Miami, Fla. 

The Chairman. Do you have information about the alleged apart- 
ment houses ? 

Mr. Peterson. I have some information on that. On February 23, 
1937, Rothkopf was arrested by the United States marshal at Cleve- 
land, Ohio, on a charge of violation of the internal-revenue laws. On 
May 22, 1937, he was sentenced to serve 4 years and fined $5,000. On 
January 9, 1940, a case was ordered dismissed in the United States 
district court in Cleveland as to Lou Rothkopf, Max Diamond, Maurice 
Kleinman, Albert Philip, Morris Phillip, Kulius Kater, alias Doloff, 
and Tony Scalise. Rothkopf has racketeering connections from the 
east coast to the west and has been in touch with such gangsters as 
Mickey Cohen, big-shot gambler in Los Angeles, also Abner Zwillman, 
32 South Munn Avenue, East Orange, N. J., on several occasions. 

In February 1949 while Rothkopf was in Los Angeles he was in 
telephone communication with Jack Dragna at the Flamingo Hotel 
in Las Vegas. He was also in touch with Allen Smiley at the same 
place. Rothkopf also was in constant communication with Mickey 
Cohen and had also visited Mickey Cohen's home. 

Maurice Kleinman, 12701 Shaker Boulevard, suite 802, Cleveland, 
Ohio, is the vice president of the Desert Inn, Las Vegas, Nev., definitely 
as of February 1950 and I assume that he still is, which is one of the 
most elaborate gambling establishments in America. Kleinman, to- 
gether with Moe Davis, alias Moe Dalitz, Lou Rothkopf, and Thomas 
Jefferson McGinty, unquestionably form one of the most powerful 
gambling syndicates in the entire country. Kleinman has been, as I 
said before, in communication with Abner Zwillman, 32 South Munn 
Avenue, East Orange, N. J. Kleinman was once a pugilist and his 
friends and associates have included gamblers, bootleggers, and racket- 
eers. Kleinman, Davis, Rathkopf , and McGinty have been associated 
together in some of the biggest gambling operations in Ohio. Klein- 
man was released from the United States penitentiary at Lewisburg, 
Pa., in September 1936 after having served 3 years of a 4-year sentence 
for income-tax evasion. When he was released he still owed the 
government $29,345 in taxes. The Cleveland Press, on June 3, 1947, 
reported that the Federal Government had a lien against Kleinman in 
the sum of $61,000 and that it had been outstanding since 1933. Three 



ORGANIZED CRIME IN INTERSTATE COMMERCE 177 

days later the lien was vacated, and Kleinman's attorney claimed that 
the matter was all a mistake and had been settled many years before. 
Kleinman was once a big bootlegger and had many powerful political 
friends in Cleveland. 

In 1938 a Cleveland Trust Co. teller who had been sentenced to 
Leavenworth Penitentiary for embezzlement filed a suit against the 
Ohio Villa, a notorious gambling house in a Cleveland suburb. Named 
as operators of the Ohio Villa were Morris Kleinman, Sam Tucker, 
and others. The Ohio Villa is now the Richmond Country Club, Rich- 
mond Heights, Ohio, and is owned by Anthony Milano, who is a close 
friend and adviser of Mickey Cohen on the west coast. Maurice Klein- 
man, Moe Davis, and Sam Tucker were indicted in February 1930 by 
a Federal grand jury in Buffalo, N. Y., which charged them with oper- 
ating a huge rum-running ring that had a barge line from Canada to 
Buffalo. This indictment was later nolle prossed. 

Sam Tucker, who was indicted there, is presently a director in the 
Desert Inn, Las Vegas, Nev. He also has listed as an address 1347 
Biscay a Drive, Surf Side, Miami Beach, Fla. 

Thomas Jefferson McGinty, is a stockholder in the Desert Inn at Las 
Vegas. He has been an owner of the Mounds Club located at Cleve- 
land and has long been associated with Moe Davis, Maurice Kleinman, 
Lou Rothkopf and others in big-scale gambling operations in Ohio. 

Cornelius J. Jones, of 638 Lawson Avenue, Steubenville, Ohio, who 
was also one of the partners of the Mounds Club, near Cleveland, is 
now a director of the Desert Inn at Las Vegas. 

Others who have been closely associated with the Cleveland syn- 
dicate mentionel previously include George Angersola, John Anger- 
sola, Anthony Milona, Alfred "Big Al" Polizzi, Charles Chuck Polizzi, 
John Scalise. This group is also believed to have influenced gambling 
operations in the vicinity of Youngstown, Ohio. 

Jack Licovoli, alias Jack White, is one of the most important racket- 
eers in Youngstown, Ohio, and Trumbull County. He is a cousin 
of Yonnie Licovoli, who is now in the Ohio State Penitentiary, and 
is also allegedly connected with Pete Licovoli, of Detroit, Mich., one 
of the principal numbers racketeers in that area. 

Allegations have been made that Licovoli has been a part of the 
powerful gambling combination including Moe Davis, Maurice Klein- 
man. Lou Rothkopf, and others. The Jungle Inn is located in Trum- 
bull County and is said to be operated by the Licovoli gang. Licovoli 
has become extremely wealthy, and it is claimed that he has had an 
interest in such other gambling establishments as the Pettibone Club, 
Brady Lake, Chesapeake Club, several years ago. He was also at one 
time in charge of all the slot machines in Lake Geauga and Trumbull 
Counties, Ohio. 

Joe Di Carle, alias Joe Di Carlo, formerly an underworld character 
from Buffalo is one of the principal lieutenants 

The Chairman. What was that name? 

Mr. Peterson - . Joe Di Carle, alias Joe Di Carlo, was formerly an 
underworld character from Buffalo. He is one of the principal lieu- 
tenants of the Jack Licovoli mob. He is also associated with George 
Angersola, alias George King. Licovoli originates from St. Louis and 
visits there a dozen times a year. Joe Di Carle, Youngstown, Ohio, 
is also associated with Jack Licovoli, George Angersola. and others 
in big-time gambling. He has been in contact with Mickey Cohen, 



178 ORGANIZED CRIME! IN INTERSTATE COMMERCE 

west coast racketeer. In fact, Mickey Cohen telephoned Joe Di Carle 
at the Wofford Hotel, Miami Beach, Fla. In Florida it was claimed 
that Di Carle was associated with Joe Massei, Charles Fischetti, and 
Joe Adonis. Also associated with Jack Licovoli have been Mike 
Farrah and John Farrah, both of whom are from Youngstown, Ohio. 
These individuals are also believed to have connections with the 
Cleveland gambling combination of Kleinman, Rothkopf, and others. 

Another group in Cleveland which is somewhat important also is 
the one headed by Shondor Birns. Associated with him there also is 
Charles "Chuck" Amata. Both Birns and Amata called, for ex- 
ample, Mickey Cohen, the west coast racketeer. Shondor Birns also 
flew down to Miami to see John King and Al Polizzi in behalf of Max 
Diamond who was in trouble in this black-market case that I men- 
tioned a few moments ago. 

In Detroit Pete Licovoli, alias Pete Licavoli — just a difference in 
spelling — is one of the most important racketeers. Licovoli together 
with George Zirilli, and William u Black Bill" Tocco, have been in 
control of the numbers racket. In earlier years Joe Massei who is 
now in Miami, was associated with Pete Licovoli, "Black Bill" Tocco 
and Joe Zirilli, and it is believed that Joe Massei still plays some part 
in the Detroit area. 

Sam Buffa, who operates the Sky Club in Battle Creek, Mich., is said 
once to have worked for Joe Massei. Associated with Sam Buffa is a 
man by the name of Tony Scalise, who at one time was a part of Pete 
Licovoli's crowd. In fact, Tony Scalise was once the bodyguard for 
Pete Licovoli. 

Early in 1950 when the Los Angeles police were attempting to locate 
Jack Dragna, they seized the records that I mentioned before and 
included in those records were the names and addresses of some of our 
important members of the Capone syndicate, in Tampa, Fla., and all 
parts of the country. Included in these records also were the follow- 
ing names and addresses indicating a close association with Jack 
Dragna, the most notorious gangster on the west coast perhaps : Pete 
Licovoli, Tuxedo 22077, 1154 Balfore Road, Crosse Point Park, Mich. ; 
Joe Zirilli, 702 Middlesex, Crosse Point Park, Mich.; William Tocco, 
781 Middlesex, Grosse Point Park, Detroit, Mich.; Vito Tocco, ap- 
parently at the same address as William Tocco ; and one John Priziola, 
1349 Devonshire Road, Grosse Point Park, Mich. Originally the 
name of Vito Tocco appeared at the top of the list and later it was put 
down and the address was scratched out and it was put down in the 
list with the other names. That is not very important but I men- 
tion it. 

Also associated with Pete Licovoli, Joe Zirilli, and "Black Bill" 
Tocco in the numbers racket and other activities of that nature were 
Long Joe Bommarito, Sam Lucido, Bill Bommarito, Phil Cusimano, 
Angelo Meli, Pete Corrado, Lee Tourneau, and Buster Lucido. It is 
claimed that Pete Licovoli and Sam Lucido have also operated illegal 
gambling joints in Canada. In addition to the numbers racket in 
times gone by Pete Licovile and Sam Lucido have also run floating 
crap games in Detroit, The Detroit papers have also alleged that the 
wire service for bookies has been operated by a mob headed by Pete 
Licovoli, Sam Lucido, and others. 

Sam Lucido lives on Sunningdale Drive, Grosse Point Park, De- 
troit, Mich. The Government is allegedly trying to collect back 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 179 

income taxes from him at the present time. Buster Lucido, a brother 
of Sam, is a handbook operator. He is also in the numbers racket 
and owns some legitimate businesses. Pete Licovoli owns a big ranch 
in Tucson, Ariz. Several months ago the police seized several thou- 
sand dream books that are used by numbers-racket suckers at his 
home. Dominick Licovoli, a brother of Pete, is married to Joe Zirilli's 
daughter. Pete Licovoli is also reported to be associated with some 
big-time gamblers in Las Vegas, Nev. The ranch which Licovoli 
owns in Tucson is known as the Grace Ranch. It is also claimed that 
he owns another ranch about 11 miles from Tucson. Licovoli is also 
said to be a friend of Mickey Cohen, one of the biggest gambling 
racketeers on the west coast, and he also has been friendly with Jimmy 
Utley, a Los Angeles racketeer. 

Another gambling syndicate operated in Michigan is known as the 
Chesterfield syndicate. It has been operated in Michigan. The head 
of the Chesterfield syndicate is Mert Wertheimer, who is one of the 
biggest gamblers in the entire Nation. Wertheimer now has the 
gambling concession at a hotel in Reno, Nev. Next to Wertheimer in 
importance in the Chesterfield syndicate was Lincoln Fitzgerald, who 
is now operating the Nevada Club, Reno, Nev., with Daniel Sullivan, 
also from Michigan. 

Other members of the Chesterfield syndicate in Michigan have in- 
cluded Leftie Clark, Red Gorman, Mike Brunton, and Al Driscoll. 
Records recently recovered from Frank Erickson by the district at- 
torney in New York definitely established that Wertheimer was a 
partner in the elaborate gambling casino known as the Colonial Inn, 
Hallandale, Fla., some time ago. 

The Chairman. Excuse me, Mr. Peterson. Wertheimer operates 
the gambling casino at Riverside ? 

Mr. Peterson. At Reno, Nev. ; that is correct. 

The Chairman. Wertheimer operates one at the Mapes Hotel? 

Mr. Peterson. Lou Wertheimer. They are brothers. 

The Chairman. There is something about the RFC in connection 
with that; is there not? 

Mr. Peterson. There is supposedly a $907,000 loan. 

The Chairman. How many brothers are there? 

Mr. Peterson. Those are the only two that I know of. There may 
be more. Mert Wertheimer is the best known of the two. 

The Chairman. I understand they do not get along. Do you know 
about that ? 

Mr. Peterson. I don't know about that, 

The records reflected that Wertheimer was associated in the Colonial 
Inn with some of the most notorious gangsters in the country, in- 
cluding Joe Adonis 

The Chairman. That is Mert you are talking about? 

Mr. Peterson. That is Mert Wertheimer; that is right. 

Joe Adonis, alias Joe Doto; Vincent Alo, alias Jimmy (Blue Eyes) 
Alo; Meyer Lansky, Jake Lansky, and Frank Erickson, all of whom 
were members of the Frank Costello mob of New York. 

Mr. Halley. To bring that up to date, the Colonial Inn is no 
longer operated as a gambling place, but the same group with some 
changes are now in a place called Greenacres. 

Mr. Peterson. There are a large number of places there. A couple 
of years ago, at least, during the height of the gambling season, it 



180 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

was alleged there were 52 more-or-less elaborate — not all elaborate 
but places operating in Broward County, Fla. There was good rea- 
son to believe that a considerable number of those were controlled 
by the New York mob. For example, you remember when Jack 
Letendre started to operate from the Club La Boheme down there, 
opposition was raised apparently by the New York mob. It was also 
alleged the Chicago mob may have been included, but they objected 
very strenuously, and finally he was forced out of the place. When 
he got back to Ehode Island he was bumped off ; he was killed, and 
every indication was that it had to do with his attempt to get into 
the gambling business down there in opposition to the mobsters who 
were running the gambling in Broward County, Fla. 

Mr. Hallet. The murder clarified the financial picture in Broward 
County. 

Mr. Peterson. Yes. 

Mr. Halley. Isn't it a fact that that group you have mentioned — 
I am simply trying to bring your testimony into line with certain 
facts — are the Colonial Inn group now, and the La Boheme and the 
Greenacres ? 

Mr. Peterson. That is the information that I have. I can't prove 
that. 

Mr. Hallet. You have been mentioning Joe Massei from time to 
time as being quite important. Were you informed he had a con- 
cession of what is known as the New York crap game down at Green- 
acres ? 

Mr. Peterson. No. 

Mr. Hallet. A big crap game. 

Mr. Peterson. He may have. I don't have that information, how- 
ever. 

Mr. Hallet. From your knowledge as an expert, will you give your 
opinion as to how a concession for a very valuable particular crap 
game in a gambling establishment would be given to one man in 
that way ? 

Mr. Peterson. You mean by the mob or by the authorities? 

Mr. Hallet. You answer it your own way. Take them one, two. 

Mr. Peterson. Usually a particular mob is tied up with the au- 
thorities of that particular jurisdiction, which gives them more or 
less a monopoly, so to speak. In other words, a place doesn't operate 
unless they have the permission of the authorities. Nobody is foolish 
enough to open a $250,000 establishment with the idea that maybe 
the authorities might find it the next day. In other words, they 
don't do that. They divide up the territory. It is a matter of record 
in Chicago years ago that they even had conferences between the 
gangsters to divide the territory. When you get into somebody else's 
territory, then you are in trouble. Take, for example, one particular 
area in Chicago a few years ago. Here is an accurate description 
of how a gambler operated in this particular area in Chicago. If 
you wanted to operate a gambling establishment, you first went to the 
ward committeeman. However, he did not have the final word in 
that particular ward. This is a few years ago. 

Mr. Hallet. You are now talking about Chicago. 

Mr. Peterson. I am talking about that as an example. You asked 
how this thing operates. If you went to him and said, "I want to 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 181 

operate a place at such-and-such an address," the ward committee- 
man would say, "All right ; I will think it over." The ward commit- 
teeman contacted the syndicate's representative. The syndicate's rep- 
resentative in this particular area said either "He can go at that 
address" or "He can't go." If he can go, the syndicate gets 60 percent 
of the total profits. They put their own man in the place to make 
certain they get the 60 percent of the profits. All of the protection, 
everything, was hand! eel by the syndicate. That was in this one dis- 
trict where we developed that information several years ago. That 
is the way it operates. 

The Chairman. Mr. Peterson, before you continue, Senator Hunt 
has a question. 

Senator Hunt. Mr. Peterson, down in Florida among the records 
we subpenaed were some canceled vouchers, checks, made payable to 
Mickey Cohen. They were checks written by one Mr. Johnny 
O'Rourke. The evidence given us was to the effect that these checks 
went up, I believe, to as much as $5,000 in amount, covered a period 
of something like 3 months, and there were thirty-some checks. The 
aggregate amount, I think, was around $8,000. In questioning 
O'Rourke with reference to these checks, he said they were horse- 
race bets that Mickey had placed with him in which Cohen had won. 
It was an unusual incident that every bet made, Cohen won. O'Rourke 
won no bets. We asked him why that was. He said he thought it 
was simply because Mr. Cohen knew the horses better than he knew 
them. 

The question I wanted to ask you is : Do you think that those could 
have been not horse-race bets, but just Los Angeles fashion "muscling 
in" on the earnings of the Miami group ? 

Mr. Peterson. I think that could very well be. One thing is cer- 
tain. How many checks were there ? 

Senator Hunt. I would say about 30. 

Mr. Halley. About that. 

Mr. Peterson. There is one thing certain, and that is that Mickey 
Cohen, on the basis of expert knowledge of horses, didn't make 30 
bets and win 30 times. That just wouldn't happen — that couldn't 
happen — unless he also owned the horse that was running and the 
jockey; I mean, the other horses and jockeys. 

Senator Hunt. My statement might have been in error on that par- 
ticular score to this extent, that there were no checks made by Cohen 
to O'Rourke. These checks might have been in settlement of half a 
dozen bets, and there might have been a side bet where Cohen would 
have lost. But the winnings were always going in one direction, and 
never did O'Rourke receive money equal to the winnings of Cohen. 

Mr. Peterson. Isn't it possible he was the lay-off man ; that Mickey 
Cohen was laying off for O'Rourke? That might be possible. 

Senator Hunt. I do not know. It seemed very strange and odd 
to us that constantly and without exception in the balancing of 
accounts Cohen was always the winner. 

Mr. Peterson. I think that is something certainly worthy of a 
very complete investigation. I would be just hazarding a guess. 

The Chairman. Mr. Peterson, are you at a place where you can 
pause until the afternoon session? 

Mr. Peterson. Yes. 



182 ORGANIZED CRIME IN INTERSTATE COMMERCE 

The Chairman. How much longer do you think your statement 
will take ? We do not want you to hurry, because this is most useful 
information for the committee. 

Mr. Peterson. I would say maybe not over an hour. 

The Chairman. The committee will be in recess until 2 o'clock this 
afternoon at the same place. 

( Whereupon, at 12 : 15 p. m., the committee recessed until 2 p. m. the 
same day.) 

AFTERNOON SESSION 

' (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 every- 
one 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 ? 

FURTHER TESTIMONY OF VIRGIL W. PETERSON, OPERATING 
DIRECTOR, CHICAGO CRIME COMMISSION, REPRESENTING THE 
AMERICAN MUNICIPAL ASSOCIATION 

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, 1919, 
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 1919, 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, Cleve- 
land. 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, 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 183 

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 Con- 
tinental 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 pur- 
poses. According to authorities in West Virginia, the same group 
are allegedly engaged in gambling operations in Clarksburg, Parkers- 
burg, 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-Dis- 
patch it was alleged that Smith participated in a conference of gam- 
blers at the Hyde Park Club, Venice, 111., 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 



184 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

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, 111., 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 par- 
ticipant 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 affi- 
davit 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, 111., 
on May 8, 1941. Sam Giardano was arrested in this case in Los An- 
geles. 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, 111., has long been con- 
sidered 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, 111. 

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 brieflv 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 notori- 
ous gangster, was also slain at the same time. The kingpins of the 



ORGANIZED CRIME IN INTERSTATE COMMERCE 185 

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 impor- 
tance 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 be- 
fore 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 con- 
nected 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. Green- 
berg also admitted knowing the four paroled Capone convicts, Phil 
D 'Andrea, Charles Gioe, "Little New York" Campagna, and Paul Ric- 
ca. 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 book 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 



186 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

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 in- 
cluding 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 hand- 
books 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 Binag- 
gio 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 under- 
world 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- 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 187 

eating 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, (>4(>2. 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 Colo- 
rado 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 Mor- 
rison 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 stock- 
holder in the Beverly Country Club gambling casino. It is said that 
he is practically equal in power with Dandy Phil Kastel in the opera- 
tion 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 per- 
mitted 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 Con- 
tinental Press Racine: Service was to serve the handbooks. Carlos 



188 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

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-lend- 
ing 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. Mar- 
cello 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 Lns Vegas, Nev., members of the notorious Frank Costello mob 
became firmly entrenched through Benjamin "Bugsy" Siegel, who con- 
structed and operated the Flamingo Hotel, one of the most elaborate 
gambling establishments in America. Siegel was one of the most no- 
torious 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 execu- 
tioners. 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 con- 
nected with the Costello-Siegel-Lansky group in the East, and Moe 



ORGANIZED CRIME IN INTERSTATE COMMERCE 189 

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 syndi- 
cate 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. Ben- 
jamin "Bugsy'' Siegel became the "big shot'' of gambling in Las Vegas. 

During this same period the Chicago Capone syndicate was launch- 
ing 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 syndi- 
cate'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 annoimced 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 de- 
parted 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 asso- 
ciates control of the Flamingo Hotel and gambling Casino. About 
April 5, 1948, Rosen and Adler had a fight in the patio of the Fla- 
mingo Hotel. Adler ran into the hotel calling for help. Fearing for 
Tiis life, Adler apparently relinquished his interest in the Flamingo 
to Rosen and his associates. He also sold his interest in the Rancho 

68958— 50— pt. 2 13 



190 ORGANIZED CRIME IN INTERSTATE COMMERCE 

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 opera- 
tions, 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 Con- 
tinental Press, Arthur (Mickey) McBride, and Moe Sedway, and 
Morris Rosen, as well as Connie J. Hurley, a Continental official. Sed- 
way 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 serv- 
ice 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 serv- 
ice, 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, oper- 
ates 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 Rothbera: 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 in- 
vested 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. 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 191 

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., 148 Michigan Avenue, Dulnth. 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 con- 
trolled 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, Lewis- 
burg, 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 Cleve- 
land. 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 embezzle- 
ment. 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 Cleve- 
land for many years. 

Lou Rothkopf, alias Lou Rhody, alias John Zarumba, Fenway Hall 
Hotel, Euclid Avenue and One Hundred and Seventh Street, Cleve- 
land, 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- 



192 ORGANIZED CRIME IN INTERSTATE COMMERCE 

nication with Mickey Cohen, Los Angeles gambling racketeer. He 
has also been in telephonic communication with Abner "Longie" Zwill- 
man 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 informa- 
tion 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 com- 
mittee 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. 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 asso- 
ciation with this man. I will give the committee the name. 



ORGANIZED CRIME! IN INTERSTATE COMMERCE 193 

Jack I. Dragila, the Capone of Los Angeles, has operated the Uni- 
versal Sports News which covered California and also parts of Ne- 
vada. For a long time Dragna has been attempting to get a foot- 
hold in Las Vegas in gambling activities. Only recently, Dragna did 
purchase an interest in a Las Vegas establishment which is not pri- 
marily 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 even- 
tually 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 im- 
mediately 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 con- 
nection with the killing of a Negro bootlegger on May 25, 1932. 

Beginning in 1936, Benny Binion launched into a program of pro- 
tection 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 1919 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 elate, 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, 



194 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

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 Beno, 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 connec- 
tion with the murder proper, but in connection with the gun used in 
the Lingle killing. He was not convicted, however. Foster was con- 
sidered 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 gam- 
blers. 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, 
1919, 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 shoot- 
ing of Fitzgerald two of the individuals under suspicion by the au- 
thorities were members of the old Purple Gang of Detroit. 

Fred Elkins, originally from Portland, Greg., 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. 
391908, was received at the McNeil Island Federal Penitentiary on a 
charge of counterfeiting on October 1, 1913, on a sentence of 8 years 
and a $100 fine. In 1918 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 1918. 

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



ORGANIZED CRIME' IN INTERSTATE COMMERCE 195 

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 ter- 
roristic 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 Ave- 
nue, Los Angeles, Calif. As a result of the public expose of the con- 
nection 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 notori- 
ous 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 



196 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

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 syndi- 
cate 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, 8170 Melrose, 
Los Angeles, operated by Joe and Freddie Sica, may be the new head- 
quarters 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 Ros- 
selli, 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 racket- 
eers of Colorado; James Lumia (recently killed), and Santo Graffi- 
canti, 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 de- 
livered 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 De- 
partment. 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 con- 
sequence 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 head- 
quarters for the Jack I. Dragna organization. Joe Sica has also 
been identified with the operations of Mickey Cohen, gambling rack- 
eteer 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. 



ORGANIZED CRIME EN INTERSTATE COMMERCE 197 

The Sica family own a candy store at 20 Boyden Street, Newark, N. J. 
Joe Siea 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 $50,000 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 Chi- 
cago 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 report- 
edly 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., oper- 
ates a bookmaking establishment near the town of Ontario, in south- 
ern California. Matranga is affiliated with Jack I. Dragna. Ma- 
tranga'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 high- 
lights — 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 fre- 
quently work in close collaboration with one another; the principal 
mobs themselves engage in activities in several States; money ob- 
tained through illegal activities is frequently invested in legitimate 



198 ORGANIZED CRIME IN INTERSTATE COMMERCE 

business enterprises, which places racketeers in competition with legit- 
imate business and industry, and that racketeering methods are fre- 
quently resorted to in connection with the legitimate businesses ; tre- 
mendous wealth and political power vested in the racketeering ele- 
ment 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 Sena- 
tor 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 fore- 
most 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 alli- 
ances 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. 



ORGANIZED CRIME' IN INTERSTATE COMMERCE 199 

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 indi- 
viduals — I mean your burglars and safe blowers and other individ- 
uals — 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 connec- 
tions 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 con- 
ditions within their own area. 

Then there are certain areas of activity in which the Federal Gov- 
ernment 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 trans- 
portation 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 Wil- 
son 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, 1 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. 



200 ORGANIZED CRIME' IN INTERSTATE COMMERCE 

Senator Wiley. To what extent would you say are the political 
organizations or units in the State of Illinois infested with racketeer- 
ing elements ? 

Mr. Peterson. Wherever you have a bad ward in the city of Chi- 
cago, 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 Re- 
publicans 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 in- 
filtrated 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 dav on legitimate business, 
Mr. Halley? 

The Chaerman. 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 Chaerman. 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 legiti- 
mate businesses in which gangsters and racketeers are alleged to have 
interest or ownership. This, for the time being, will have to be kept 



ORGANIZED CRIME IN INTERSTATE COMMERCE 201 

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 check- 
ing 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 legiti- 
mate 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 prob- 
ably 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 sug- 
gestion. 

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 con- 
trolled, you could prove through your investigations, through rec- 
ords, 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 w T ill 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 w r e 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 



202 ORGANIZED CRIME IX INTERSTATE COMMERCE 

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 Mil- 
waukee for 2 years — years ago, of course. I remember having a con- 
ference 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 adminis- 
trators 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 Milwau- 
kee 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 lie said, "Do you have any information concerning 
this particular group?" It was some of the group that I have men- 
tioned in this testimony that I have given. 

He said, "The representative of this syndicate was informed by some 
other people that the district attorney w r on'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, w T as 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 author- 
ities 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 in- 
formed concerning the law enforcement machinery or the law enforce- 
ment 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 committee- 
men or precinct captains or block workers engaged in politics have 
actual criminal records? 



ORGANIZED CRIME IK INTERSTATE COMMERCE 203 

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 off hand that has an actual criminal rec- 
ord. 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 news- 
paper 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 in- 
formed. I mean so that the stories in the press report the signifi- 
cance 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 ex- 
cept 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 or- 
ganized 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 sev- 
eral 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 19:20's, and that sort of thing. We 
still have certain hoodlum elements in some of the labor organiza- 
tions, but I think the authorities have done a pretty good job in re- 
cent 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 ex- 
actly responsive to your question. The intelligent labor leaders will 
not tolerate the racketeering element to get a firm foothold within 



204 ORGANIZED CRIME IN INTERSTATE COMMERCE 

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 inter-, 
ested 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 con- 
trol in politics in these big cities? For instance, we have read of a 
number of instances, and you have read a number of instances your- 
self, 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 con- 
tributions that have been made ? 

Mr. Peterson. Let me answer in this fashion : You have a big or- 
ganized 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 



ORGANIZED CRIME IX INTERSTATE COMMERCE 205 

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 tre- 
mendous political power as well as with reference to the rackets them- 
selves, 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 com- 
monplace 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 com- 
mercialized 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, 

68958 — 50 — pt. 2 14 



206 ORGANIZED CRIME IN INTERSTATE COMMERCE 

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 Common- 
wealth, 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 prob- 
lem 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 com- 
mercialized gambling racket as such is an inherently illegitimate busi- 
ness. 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 



ORGANIZED CRIME IN INTERSTATE COMMERCE 207 

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 mor- 
alistic 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 



208 ORGANIZED CRIME IX INTERSTATE COMMERCE, 

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 in- 
cludes men with former FBI experience or men with Army and Navy 
intelligence, gathered the facts. Our first approach is usally to go 
tp the officials responsible for those particular conditions. Generally 
speaking, your officials when it is brought to their attention, some- 
rimes 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 condi- 
tions. 

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 Ave 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 sus- 
pended. 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 sup- 
posed 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 mem- 
bers 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 cer- 
tainly 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 



ORGANIZED CRIME IX INTERSTATE. COMMERCE. 209 

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 im- 
provement. 

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 } r ou. 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. Petersox. 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 some- 
thing 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 for- 
ward 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 Chi- 
cago 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 



210 ORGANIZED CRIME. IX INTERSTATE COMMERCE 

had wider-open gambling during that period than you have in Chi- 
cago 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 Ken- 
nelly 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 technology 
cal improvements in transportation, radio, telephone, airplane, wire 
service, and what not, it makes it more of an interlocking and inter- 
woven 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 under- 
standing 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 alli- 
ances with other gangs in other parts of the country. The first thing 
3 7 ou 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 m} T field and it is such an at- 
tractive 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 con- 
tacted 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. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 211 

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 legit- 
imate 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, nat- 
urally, 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 legis- 
lature. He worked for them. 

The Chairman. But you did not get your bills through the legisla- 
ture, 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 sin- 
cere 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 dooa, 
make an honest effort? 



212 ORGANIZED CRIME IX INTERSTATE COMMERCE 

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 infor- 
mation 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. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 213 

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 Amer- 
ican 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. Petersox. 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. ) 



INVESTIGATION OF OKGANIZED CRIME IN INTERSTATE 

COMMERCE 



WEDNESDAY, AUGUST 16, 1950 

United States Senate, 
Special Committee To Investigate Organized Crime 

in Interstate Commerce. 

Washington, D. C. 
The committee met, pursuant to call of the chairman, at 10 : 15 
a. m., in room 224, Senate Office Building, Senator Lester C. Hunt 
presiding. 

Present : Senators Hunt and O'Conor. 

Also present : Rudolph Halley, chief counsel ; Harold G. Robinson, 
associate counsel ; and Alfred Klein, assistant counsel. 
Senator Hunt. The committee will come to order. 
Mr. Olney. would you please be sworn. The testimony you are about 
to give is the truth, the whole truth, and nothing but the truth, so 
help you God? 

Mr. Olney. I do so swear. 

TESTIMONY OF WARREN OLNEY, ATTORNEY, BERKELEY, CALIF. 

Senator Hunt. I might say to you, Mr. Olney, that the committee 
has been working in various parts of the United States, in Florida, 
some in New York, the Central States and Kansas City, and St. Louis. 
We have also been into some other parts of the United States and will 
continue to get around over the United States where we think our work 
is needed. However, due to the Korean situation and to some extent 
due to the fact that this is an election year, the committee is finding it 
difficult to divide itself up sufficiently to find time and personnel to get 
to all the places in the United States. For that reason we have put 
you to some inconvenience asking you to come in to see us instead of 
our going out to see you. I thought that a word of explanation for the 
reason we have asked you to come to Washington should probably be 
a part of the record. 

Mr. Olney, if you will please, give your full name, together with 
your present position, and I think at the same time it would be well if 
you would enunciate to some extent the position you have held with 
reference to the crime investigating commission in California. 

Mr. Olney. Thank you, Senator. 

My name is Warren Olney, and my residence is in Berkeley, Calif. 
I am an attorney. At present I hold no official position and am en- 
gaged in private practice, as I have been for some years. I was counsel 

215 



216 ORGANIZED CRIME IN INTERSTATE COMMERCE 

for the special crime study commission on organized crime for the 
period November 1947 to the 30th of June 1950, when that commission 
terminated its work. Prior to that, except for the war years, for some 
3 years prior to the formation of that committee, I had been in the 
military service and before that in the attorney general's office where 
1 also came into contact with criminal matters. 

Senator Hunt. Thank you. 

Mr. Halley, will you take over now, please? 

Mr. Olney. Senator, in view of your statement to me, I would like 
also to make it part of the record that I am here purely as an indi- 
vidual. I represent no one and am not associated with any official 
organization of any kind at the present time. While I am very glad 
to come and give any testimony that may be of assistance or use, I am 
not here in any representative capacity, either the Commission or the 
Department of Corrections under which it functions or anyone other 
than myself in responding to the request that I come. 

Senator Hunt. Thank you. 

Mr. Halley. In line with that, Mr. Olney, the committee is inter- 
ested in getting information from the people who have the informa- 
tion, although we understand that naturally yours is second-hand 
information and that you didn't participate in any of the matters 
which we are investigating. This committee through its chief investi- 
gator, Mr. Robinson, who, of course, was chief investigator with your 
commission, is very well acquainted with your work, and we have been 
long desirous of hearing from you about conditions in California. 

Mr. Olney, you mentioned first that you had served in the office of 
the attorney general of the State of California. Is that correct? 

Mr. Olney. I did at one time. 

Mr. Halley. That was back in about 1940 or 1941 ? 

Mr. Olney. That was from 1939 to 1942. 

Mr. Halley. During that time did you make certain investigations 
into gambling? 

Mr. Olney. Yes, we did. 

Mr. Halley. Those investigations had primarily to do with the 
gambling ships which were being organized off the coast of the State 
of California, did they not? 

Mr. Olney. Well, no. When I first went into that office in 1939 
there were four gambling ships off the coast of California, and we had 
quite an active time with them, but that took only about 4 or 5 months, 
and then we gave a great deal of attention, more than we had to the 
gambling ships, to the bookmaking racket and the wire service. 

Mr. Halley. It was the gambling ships, though, that first called 
to your attention a situation which required study and investigation ? 

Mr. Olney. What was that again ? 

Mr. Halley. It was first the gambling ships that created the need 
for the investigation ? 

Mr. Olney. No, the ships were the most conspicuous and crying 
thing and problem that we had. 

Mr. Halley. What was the situation with reference to those gam- 
bling ships ? Who was operating them and how ? 

Mr. Olney. At that time in 1939 there were four of them. There 
were two in Santa Monica Bay. One was the Rex, that was operated 
by Tony Conero on behalf of a syndicate. There must have been 10 



ORGANIZED CRIME IN" INTERSTATE COMMERCE 217 

or 12 people in that syndicate who had put up the money for it and 
were supposed to have interests in it. They were all old time, pro- 
fessional gamblers and many of them were from out of State. 

Then in Santa Monica Bay there was a ship called the Texas 
which was operated by "Russian Louis'' Straus, who still is a gambling 
figure in California and in Nevada at the present time. That also 
was backed by a syndicate. A man named Orloff, who had an interest 
in that. I don't remember the others offhand. 

In San Pedro Bay there was a ship called the Tango, with which 
the Blazer brothers were identified, and another group. Conero at 
one time had been in that syndicate also. 

Then there was a fourth one there, the Mount Baker, which was a 
syndicate operation. My recollection is that the most prominent 
people connected with that came from the State of Washingon. 

All four of them were going. There were moored at locations that 
were supposed to be and were in fact more than 3 miles from the 
nearest land. The assumption was that that place was outside the 
boundaries of the State and outside the boundaries of the United 
States. They operated gambling games of every kind and descrip- 
tion. Three of them had restaurants aboard and were elaborately 
fitted up. Three of them had race books on there. Two of them 
operated by unlicensed shortwave radio, and the third, Conero's ship, 
had a cable which he ran along the floor of Santa Monica Bay more 
than 3 miles out to the ship. He had cut in to the regular wire service 
and was getting it direct. 

Mr. Halley. These were rather elaborate installations, then? 

Mr. Olney. Very. 

Mr. Halley. Did Dragna have an association with any of them ? 

Mr. Olney. Not at that time as far as I know. He did earlier. 
There had been gambling ships off the coast for 10 or 15 years, and 
there was one in 1930 or 1931. The Monfalcone, I believe, was the name 
of it, in which Dragna claimed to have a major interest. 

Mr. Halley. Is that the one in which Charles Fischetti was found 
to be at least in some way connected ? 

Mr. Olney. Yes; that is right. The only connection that would 
substantiate it was that in 1930 Dragna was arrested about 2 o'clock 
in the morning by the Los Angeles Police Department with some three 
other men in the car. 

Mr. Halley. They were coming off the ship ? 

Mr. Olney. They didn't know. The officers walked up to them 
and they got a sawed-off shotgun in their face held by Dragna. No- 
body was shot. They took them in to the station. Dragna identified 
himself and said they were coming from the ship on the way home, 
that they had brought in a quantity of money. 

These ships made so much money out there, so much hard cash, that 
bringing the money in became a problem. Conero, for example, used 
to deposit all of his money with a small bank in Santa Monica, and 
after some months of experience with them, the bank wrote them 
a letter and told them that they would close out his account unless 
they had a truck to handle the money. So he bought a truck. That 
was the sort of thing that was going on on the ships. These men 
claimed they had been coming in with the money. They included 
Dragna, a man who gave his name as Russo, who was identified by 



218 ORGANIZED CRIME IN INTERSTATE COMMERCE 

fingerprints as Charles Fischetti, and John Roselli. who was subse- 
quently convicted in New York in that moving-picture shake-down. 
There was a third, Canzoneri was his name. I don't know who he is. 

Mr. Halley. From the gambling ship investigation and incidentally 
you did succeed in shutting the ships down, did you not ? 

Mr. Olney. Yes ; we did. 

Mr. Halley. From there you went into an investigation of book- 
making generally, is that right ? 

Mr. Olney. That is correct. 

Mr. Halley. Would you describe just briefly the nature and results 
of your investigation in 1941 of bookmaking £ 

Mr. Olney. The thing that led up to our interest in bookmaking 
were evidences that were rather new to us, that we didn't understand 
and where we could get no explanation from other sources of a number 
of instances that happened in different parts of the State that involved 
corruption in the Government, that obviously tied back into the book- 
making racket. This is all ancient history now, so I won't use names 
on it, but one of those occurrences was in a rather large city where 
the chief of police had been offered money to permit a sizable book 
to operate and refused it. They then tried to bribe certain members 
of the city council to get rid of the chief unsuccessfully. When that 
didn't work election came along and councilmen were put in for the 
express purpose of getting rid of the chief and putting in a new chief, 
when a book opened up and operated for a long time. And as so many 
times, they got awfully greedy, and an exposure followed and arrests 
were made and a good many of those officials went to prison. 

The thing that was startling about it was that it was for a mere 
handbook. It was startling to us at that time that it would be possible 
or feasible or economically worth while to go to the time and trouble of 
taking hold of a whole city government in that fashion just to have the 
opportunity to run a handbook. 

We had another example of it right in San Francisco in 1937 when 
they had what was referred to as the Atterton investigation there, 
which involved corruption in the police department. There was a 
long and extensive inquiry. In the course of it it was brought out 
in the public, made public, that the main figure in the difficulty was a 
bail bond broker there, and that he had a relationship with people in 
the wire service which was such that the police department was func- 
tioning as a sort of help to the wire service and to the bookmakers. 
There were a certain number of bookmakers in San Francisco who were 
buying the service from the Nationwide News Service, as it was called 
at that time. It was a corporation. Every week, according to the 
evidence that was developed, envelopes were picked up that were 
apparently payments for this stuff. 

Then it developed that there were phony raids being staged 
systematically. The wire service people would call up in advance 
and tell them how many men would be at one of these locations ready 
for arrest and who their names were, and the bail bonds would all be 
prepared before the raid was even made. 

Then it was found, it came out in the testimony, that it went fur- 
ther than just bookmaking, that these same people would make "fixes" 
through their same contracts for anything that came along, prostitu- 
tion, robbery, anything that could be handled. Not all robbery cases 
can be taken care of in that way. 



ORGANIZED CRIME IN INTERSTATE. COMMERCE 219 

It was examples of that sort, and those are only two among many, 
that indicated to anybody who was taking a look at the State as a 
whole that there was something serious about this bookmaking racket, 
something new which we had never encountered before. This thing 
crept up on law enforcement generally in California in the thirties 
without a realization of what it was. 

Then we had to find out as best we could what the bookmaking 
racket was, why it had this development. We had had betting 
at the races, of course, in our State ever since we had had a State, 
ever since there had been racing, but not accompanied by problems 
of this character. It had been a petty nuisance in the largest part. 

We found it very difficult to get an understanding of what the 
bookmaking racket was, what it was that made it go, why there was 
so much money in it and where the money went and who the people 
were behind it. Not even the bookmakers seemed to have any clear 
idea. When they were arrested, they knew what it took to make 
book, but actually most of the little ones who would get arrested don't 
have much of an understanding about the business itself. They 
merely know that they get certain information on the horses, they 
handle the bets, they lay stuff off, and things of that kind. The police 
officers who would arrest the bookmakers had no great understanding 
about the essentials of the business. 

We made a study of it which involved in the largest part going up to 
Nevada. We sent our chief investigator up there, and then I went up 
myself and spent 3 days up there where they are licensed, watching 
those operations to see how they worked. We kept hearing that wire 
service was important, but it was difficult for us to see why. We 
couldn't see why a man couldn't make book by what you could get on 
the radio or in the newspapers. 

After spending a lot of time up there and watching the thing, 
seeing how it went and what the service was used for, we saw the need 
for rapid play to make money. The big money in it comes from the 
$2 bets in the horse parlors, and people won't make a $2 bet unless 
they know how they came out on the previous race, and you have to 
have fast results and fast information to keep a rapid turn-over in a 
place like that, to say nothing of a number of other reasons. 

It was studies of that sort that convinced us that the wire service 
was an essential to that racket. 

Then of course it became very apparent that the largest part of 
the money in the racket was being funneled off into the wire service. 
No bookmaker who does not have wire service can hope to compete 
with one who does any more than a stockbroker who hasn't got ticker 
service could hope to compete with one who has it. The result is that 
the bookmakers who actually handle the bets in these places were for 
the largest part little better than clerks or hired help. The wire 
service could charge them and did anything they felt like. There were 
no standard rates. It just depended on how profitable they thought 
the man's business was. The biggest amount of money was going 
there. That tied back into these things that we had been observing 
before, of interference with Government through money. A large 
part of that seemed to come from people who had been connected 
with that wire service. 

Those things convinced us that probably the most vulnerable point 
of attack on the racket as a whole was through the wire service. Of 



220 ORGANIZED CRIME EN" INTERSTATE COMMERCE 

course, you can eliminate bookmaking from the community by going 
around and arresting every bookmaker and keeping the places con- 
tinuously closed, and that will eliminate them. There is no doubt 
about that, except for telephone bookmakers. That begs the question. 
The big difficulty with it has been to put officers in a posi on of inde- 
pendence where they can do that. With these tremendous funds at 
their disposal, it has been possible for the bookmaking racket, the 
people in it, to interfere in one way or another with governmental 
agencies so that for practical purposes the hands of local policemen 
are badly tied. 

The first attack that we made on the bookmaking racket through the 
wire service was in the courts, and it was just about the time that 
the Federal Government was proceeding with its inquiries with refer- 
ence to Moses Annenberg. They had some grand jury hearings in 
process in Chicago. There was an antitrust grand jury, and then 
there was an income-tax grand jury, and eventually one that involved 
violation of the Federal lottery laws, all of which involved wire serv- 
ice operations. Up to that time the legality of this specialized news 
service for bookmakers had never been directly challenged by any- 
body, but in those Federal cases a very, very complete picture of 
evidence, of how the system worked, how the information was 
gathered from the race tracks, the manner in which it was centered 
in Chicago for distribution all over the United States, and the wires 
and the distributors locally in our State as well as other parts of the 
State were all brought out. 

The Federal authorities were very, very cooperative with us, and 
what information we got, what evidence we got, of the picture 
throughout the rest of the country came from the Treasury Depart- 
ment and the Justice Department. It fitted in with our picture. 

We tried to get rid of the wire service by getting rid of the com- 
munications network. We filed an injunction suit along in 1940 or 
1941 in which we listed about 100 or so defendants, the first dozen, 
at least, of which were from out of State. They were the heads of 
the former Nationwide News Service, which had by that time been 
changed into the Continental Press. Then we also, of course, listed 
as defendants the distributors of the news service in California and 
as many of their customers as we could. We could never serve process 
in our own State on the people who were at the head of that racket 
because our process doesn't extend beyond our own borders and they 
didn't come inside. 

We went ahead with it and we got a preliminary injunction. The 
theory of it was that public gambling nouses are public nuisances, 
that they were at common law and were under our statutes, and that 
anyone who contributes to a nuisance can be enjoined from contrib- 
uting to it. That was the theory on which we proceeded. 

We got a preliminary injunction granted, and while the case was 
awaiting trial the injunction was being violated right and left, so 
we proceeded with contempt proceedings and brought in a good many 
of these people for contempt and convicted them, and then they 
applied for a writ of habeas corpus to the Supreme Court and were 
discharged. That decision simply wrecked the case right at its 
foundations. The Supreme Court held that our original complaint 
had failed to state a cause of action, that while it was true that a 



1ZED CRIME IN INTERSTATE COMMERCE 221 

p' use was a public nuisance under even our statutes, 

th 10 remedy of injunction was not available to the 

f that type of nuisance. The only remedy for an 

blic nuisance was a criminal prosecution. 

-t out, but there had been a period there when the 

ction was in effect of about a year or a year and a 

i we had not had any effective wire service in our 

ct of it was very, very obvious, very noticeable in 

\l i number of horse parlors and the decrease in the 

mi.. )okmaking. We felt that we had at least learned 

•act ter that the wire service was the key to the book- 

r. 't. 

v&> me along and I went into the Marine Corps. Besides 

. re was little interest in a matter of this sort during the war. 

e Special Crime Study Commission was appointed in 1947 

igain having trouble with the bookmaking racket. There 

-~ >jj mptoms and indications of the same type of interference with 

the regulai processes of government that we had encountered before. 

Mr. Ha t y. In addition to that, just prior to the formation of your 

commis c ' id there been a series of typical gang murders ? 

Mr. Ol^k . Yes, there had. There was a series of them. They were 
thought by the authorities who investigated the murders that they 
had their origins in struggles over the profits of the wire service and 
the bookmaking racket. 

Mr. Hallet. They included Bugsy Siegel ? 
Mr. Olney. That is one. 

Mr. Hallet. Then there was a man called Meatball Gamson. 
Mr. Olney. That is another, yes. 
Mr. Halley. And Paul Gibbons. 

Mr. Olney. Yes, he was one. "Big Greenie" Schachter was one. 
But all of those murders are unsolved. Certainly no one has been con- 
victed of them. The complete story has never been made public. But 
the judgment of the officers who were trying to solve those murders 
was that they were gang shootings that had their origins in the struggle 
for the profits of the wire service. So the condition was becoming 
more and more acute. 

Mr. Halley. There were certain events that had transpired just 
prior to the Siegel murder, for instance, that gave reason for having 
that belief; is that correct? 

Mr. Olney. There were. I see you have a copy of our report there. 
Mr. Halley. Yes. 

Mr. Olney. I think there is some mention of that there. 
Mr. Halley. I think you mention this in your report, and I will 
quote from your third progress report. On page 24 you say : 

It is known that two visitors from Chicago suddenly appeared in California, 
conferred with Dragna and possibly Cohen, and that Dragna abruptly withdrew 
from the Trans-America Service. Two weeks later Siegel was shot to death. 

Mr. Olney. That happened of course before our commission was 
formed, and that information is from the Los Angeles Police Depart- 
ment. That was a result of their investigation. 

I might add something that is not in there, that the police depart- 
ment's own reports in advance of the Siegel shooting phophesied vio- 

68958— 50— pt. 2 15 



222 ORGANIZED CRIME IN INTERSTATE COMMERCE 

lence and gang warfare over the competitive situation that was de- 
veloping in that wire service. 

Mr. Halley. Would you go a little bit further into detail about the 
competitive situation that developed insofar as it affected the Cali- 
fornia-Nevada area ? 

Mr. Olney. I will to the best of my ability, but here again I would 
like to be sure that it is understood of course that I am repeating 
second-hand information. It is the result of inquiries and investiga- 
tions rather than matters that I know directly of my own knowledge. 

Senator Hunt. Mr. Olney, any time that you wish and ask as, I 
think we can take it off the record any time you would like to have 
your remarks off the record. 

Mr. Olney. Thank you. . 

The personnel of the wire services has changed from time to time 
over the years in California. When Annenberg had this Nation- 
wide News Service it was pretty clearly set up in the North. There 
was a partnership of Krelling and Cohen, which used the name of 
Pioneer News, that distributed all racing information for everything 
north of Tehachapi. In the South it was Eugene Normile and Russell 
Brophy who distributed it. When Nationwide News Service was dis- 
solved and Continental Press took its place, there was considerable 
change. For a time Krelling and Cohen went out of business com- 
pletely, for around 9 months. Normile went out of service forever. 
He quit entirely and Brophy took over. Then for a time Brophy 
seemed to be the main figure in the distribution of wire service in the 
South. 

Senator Hunt. Is this Mickey Cohen ? 

Mr. Olney. No, this is Brophy. 

Senator Hunt. You also used the name Cohen. 

Mr. Olney. No. That is a different Cohen — Stanley Cohen, from 
San Franciso ; no relation. 

That continued up until about the time that Siegel came to Cali- 
fornia, which must have been 1943, or something like that, as I- recall, 
but even then the changes in the key personnel were not too great. A 
man made his appearance who came from the East by the name of 
Tony Corrica. He had his headquarters in Phoenix, Ariz., and oper- 
ated what he called the Washoe Publishing Co. in Phoenix and also in 
Reno. All of the racing information in California came through him 
during this period. He was the next higher in this echelon. That was 
the set-up as near as it could be judged up until 1945 or early in 1946 
when there appeared a rival wire service called the Trans-America. 
They leased lines from Western Union, ticker service, and so forth. 
They had headquarters in Los Angeles, established another head- 
quarters in San Diego, and were in process of applying for new leases, 
over to San Bernardino County and then up into the San Joaquin 
Valley, but they never got that far. That group was a much rougher, 
tougher crowd than the former Continental people had been. They 
had men like Mickey Cohen and Jack Dragila and Joe Sica who were 
typical thugs attached to them. There were increasing indications 
that there was not competition but a struggle for monopoly between 
the two groups. Bookmakers in the areas that were being served by 
both of them, for example, were compelled to take both services. They 
had to buy them both or else. That was the word that they got. There 



ORGANIZED CRIME IN INTERSTATE COMMERCE 223 

were a number of beatings and acts of violence of one sort or another 
against bookmakers who didn't take them both. 

Mr. Robinson. Mr. Olney, may I clarify that here ? You mentioned 
Brophy. Was he Ragen's son-in-law % 

Mr. Olney. He was related to Ragen. Yes; that is right. He was 
his son-in-law. 

Mr. Robinson. Was there a time when this violence that was going 
on that he was beaten by Joe Sica and Mike Cohen ? 

Mr. Olney. Yes; that was one of the incidents that took place. 
Brophy had a large office in the downtown area with a lot of phones 
and girls working. Two thugs walked in on him one day right during 
the working hours, with everybody there, and one of them was Mickey 
Cohen and the other one was Joe Sica. They had some words with 
Brophy and then proceeded to give him an unmerciful beating. They 
broke his ribs and I understand they damaged him internally to an 
extent that he has never recovered from it completely. It put him in 
the hospital. They then went through the place and jerked out all the 
equipment, cut all the lines and everything else, put the whole place out 
of business. That was during the period that there were these two 
rival groups there. 

That continued with two groups up until the time that Ragen was 
murdered in Chicago. My best recollection is that that was in July 
of 1946, but within a week or 10 days after Ragen was killed in 
Chicago, Trans-America went out of business all over the United 
States, except in our area. In California and in Phoenix and in 
Nevada it was still operating. At that time it was controlled by Siegel. 
It continued to go along even though it had folded up everywhere else 
up until the time that £>iegel was killed, and then, within a week or 
10 days after Siegel's death, it folded up completely and Trans- Amer- 
ica personnel, offices, and leases — the whole works — was taken over by 
Continental. It seemed to us incredible that those events were not 
related to the killings that had taken place. 

Mr. Halley. If one relates the events and draws some conclusions, 
it would seem that on the death of Ragen whatever group was operat- 
ing Trans-America in Chicago had made its peace with the Con- 
tinental group. Would that be your conclusion ? 

Mr. Olney. It would be, and there were some positive indications 
of that. 

Mr. Halley. What were they? 

Senator O'Conor, we were in the midst of discussing the events 
surrounding the taking over of the wire service by groups and the 
warfare between Trans- America service and Continental leading up 
to the murder of Bugsy Siegel. 

Senator O'Conor (presiding). Would you go right ahead. 

Mr. Olney. There were some key personnel who had been originally 
associated with Nationwide News Service and then with Continental 
who had deserted Ragen and Continental at the time that Trans- 
America was formed, and there was a great deal of bitterness on 
Ragen's part and others. These incidents, for example, are related 
in that long statement that Ragen gave to the State's attorney in 
Chicago just before he was killed. So, there was personal animosity 
between the Ragen group and these deserters who had gone to Trans- 
America. After Ragen's death they were taken right back into Con- 



224 ORGANIZED CRIME IN INTERSTATE COMMERCE 

tinental. They were absorbed there without difficulty, without 
trouble. 

Mr. Hallf.y. In other words, the very people who were fighting 
Continental became part and parcel of Continental. 

Mr. Olney. That is correct. 

Mr. Halley. In California, however, the group that was fighting 
Continental decided to keep right on fighting. Is that so? 

Mr. Olney. That seemed to be the case. 

Mr. Halley. And Bugsy Siegel was bossing it. 

Mr. Olney. Evidently; yes. He was pretty well identified with 
Trans-America as being the controlling figure in the West. 

Mr. Halley. Of course, at that time there was an existing set-up 
of distributors and bookies all operating through Continental. Is 
that right? 

Mr. Olney. That is right. 

Mr. Halley. Siegel was in effect trying, you say, to gain a separate 
position for himself? 

Mr. Olney. It was a case of one group trying to "muscle in" on 
the other by force. 

Mr. Halley. Siegel was just taking advantage of the "muscling in" 
that had started when Trans-America was organized. Would you 
come to that conclusion? 

Mr. Olney. Siegel was there in California when Trans-America 
first appeared. It never existed separately from him as far as we 
know. 

Mr. Halley. He was their representatitve there ? 

Mr. Olney. As far as we knew, he was always considered that. 

Mr. Halley. He simply didn't join in the general peace which 
followed the death of Ragen. 

Mr. Olney. No ; he didn't. Others who were associated with him 
apparently did. Jack Dragna, for example, and Cohen also, had 
been 

Mr. Halley. Now you are talking about Mickey Cohen ? 

Mr. Olney. Mickey Cohen — had been fairly close to Siegel, and yet 
when this change in the wire service took place they evidently gave 
some indication of switching sides. 

Mr. Halley. Was there a similar dispute in Nevada ? 

Mr. Olney. There was ; yes. 

Mr. Halley. And that finally resulted in hearings being held by 
the Governor of Nevada and a law passed to prevent discrimination 
in giving wire service ; is that right? 

Mr. Olney. Yes, but that hearing was a good deal later, and the 
difficulty that caused it was in 1948, I think. . By that time Trans- 
America had gone out of existence even in Nevada, but the thing that 
caused the trouble there was that — I think I am giving you the sub- 
stance of what is in that transcript. All I know about it is the testi- 
mony that was developed before the Nevada State Tax Commission. 
It apeared there that there were only certain books in Las Vegas who 
would be given the service, and even then only on the most exorbitant 
conditions. Siegel was the one who had started that method of opera- 
tion. When Tony Corica had service, there was a standard price for 
all books in Nevada, and anybody who wanted to operate a hand- 
book could pay the price and get the service and run a licensed book. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 225 

When Siegel arrived, he just walked in on some of these fellows 
and indicated that he was in control of the service, and if they ex- 
pected to continue they were going to have to cut him in. In some 
instances it was as much as 25 percent of the operations of the 'book 
that he wanted, and in other cases he demanded the complete conces- 
sion of the book, the gambling establishment. Most of those places 
are run by leasing concessions out to professional gamblers, and any 
of the gamblers who didn't meet his conditions just had the wire serv- 
ice cut off, and they were out in the cold. 

According to their testimony, a race book is really essential to a 
successful operation, not merely so much because of the profit that is 
involved in the book itself but because it brings in the daytime cus- 
tomer, and people who are in there will play the other games, too, par- 
ticularly the slot machines. Without the book, they don't make very 
much money. There was a great deal of business like this, and there 
were some people, big establishments, who wanted to have books, who 
wouldn't meet or couldn't meet the terms that were being demanded. 
This was after Siegel's death that this took place. Violent threats 
went back and forth. One group filed a suit in the Federal court 
under the Sherman Antitrust Act, claiming they were discriminating 
against them. They didn't get anywhere with that. Then they took 
to tapping each other's wires, and that created a lot of difficulty. The 
district attorney of Clarke County made an appeal to the Governor 
to have a hearing on this thing for fear of the violence that was being 
threatened over it. So, they had their hearing, and a good deal of 
this came out. 

Of course, there are some things that are confirmed by those hear- 
ings, and one of them is the complete dependence of these handbooks 
on the wire service. It is very plain that you can't operate without 
it. It is also perfectly plain that merely giving a public license 
doesn't mean that a man can go in business. The people who can 
determine who makes book and who doesn't make book in any com- 
munity, whether it is licensed or unlicensed, are not the public authori- 
ties; they are this group who control the wire service. 

Mr. Halley. That is because, you found, that they make so much 
money and control so much wealth and power that they are able to 
control other things besides the wire service. Is that correct? 

Mr. Olney. That is one of the bad features of the thing. The con- 
trol comes through the wire service itself, through being able to turn 
it on or turn it off. 

Mr. Robinson. Mr. Olney, did those hearings develop information 
as to what section of the country these people went to when they 
wanted to appeal from conditions that prevailed in Las Vegas ? 

Mr. Olney. Yes. They went to Chicago. 

Mr. Halley. In connection with the evils that you found, I gathered 
from your earlier testimony and would like to develop it in detail 
now, I think you stated that the evil was not so much in the book- 
making and the gambling but rather in the excess power wielded 
and the methods used to wield the power by those who control the wire 
service and therefore the books. Is that correct ? 

Mr. Olney. That is correct. 

Mr. Halley. I think you mentioned that you found corruption 
almost invariably among the law-enforcement officials who permitted 
the service and bookmaking to go on. Would that be an accurate 
statement ? 



226 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Mr. Olney. Yes. It would be inaccurate to use the word "in- 
variably." The corruption was by no means invariable. It is very 
dangerous, I think, to generalize too much on that subject. To begin 
with, this condition grew up in our State without any alarm being 
sounded. It arose over a period of years, and there it was. There 
were evidences all right of corruption. There was much corruption 
that went along with this thing, and it is the corruption that is the 
dangerous aspect of it; but I don't mean to suggest that every time 
and every place bookmaking is to be found either in our State or else- 
where that there is necessarily corruption. One of the commonest 
things that has taken place — and in some respects it is worse than 
the outright bribery — is the fact that these groups have money enough 
to subsidize candidates and put them in office. If you put the man 
in office, you don't ordinarily have to pay him off. He just doesn't do 
anything. 

Mr. Halley. They finance his campaign. 

Mr. Olney. Yes. But that is not corruption in the ordinary sense. 
It is not bribery. It has a bad effect on government. There is no 
doubt about that. 

Senator O'Conor. And yet, insofar as the end result is concerned 
it is more damaging than to have corruption in isolated instances. 

Mr. Olney. It really is. The thing is, if they put men in office who 
do their bidding on one thing, they will do it on anything else. 

Mr. Halley. They go into legitimate enterprises and use their 
power over local officials to gain advantages over other businessmen, 
do they not ? 

Mr. Olney. There have been some indications of that, but our in- 
formation on that subject is very slight. Perhaps I should explain 
why, because I think that is one of the most interesting aspects of 
organized crime. 

Our commission was very, very limited in its powers, and we had 
no effective subpena power. We couldn't subpena witnesses and com- 
pel them to give testimony unwillingly. We used subpenas which 
were issued by the director of the department of corrections, but their 
validity was so doubtful that we couldn't use them except to afford 
legal protection to witnesses who were already friendly. When you 
get into investments and into the use of gangster funds in legitimate 
business and things of that kind, you can't get those facts out of the 
witnesses willingly. You have to have an effective subpena power 
and be able to swear the witness and prosecute him if he lies, and call 
for books, records, and documents. 

So, our inquiry on that subject is not as thorough as it should have 
been or might have been, I should say, unci was not as thorough as we 
would like to have had it. It might be a little misleading if I didn't 
make it clear. 

Mr. Halley. I am wondering whether perhaps we wouldn't gain 
more by going into a few of your specific investigations and your 
telling the committee a few of the details about them to back up some 
of the generalities we have been discussing. 

First, would you complete the story of how you handled the wire 
service and got rid of it? 

Mr. Olney. When the commission was first appointed, we sug- 
gested to the public utilities commission that they make a general 
inquiry on their own motion, as they had the authority to do — of 



ORGANIZED CRIME IN INTERSTATE COMMERCE 227 

course, they have complete subpena power — into the use that was being 
made of communications facilities in our State for unlawful purposes, 
which they did. That resulted in some extensive hearings. In that 
fashion we were able to get witnesses whether they wanted to testify 
or not. It ended up by the utilities commission being convinced of 
the dependence of the racket on the communications services and that 
the use made of telephones and telegraph, which facilities were short 
-at that time, was enough to justify them in making an order applicable 
to all communications facilities in the State over which they had juris- 
diction directing them to discontinue service or to refuse service when- 
ever they had any reasonable grounds for believing it was to be used 
for an unlawful purpose. That regulation has been very effective. 
Under the regulation the leased wire of the Continental Press Service 
was eliminated. There are no "drops" on that wire in the State today. 
It has changed the whole appearance of the bookmaking racket and 
the size of it very much. It has eliminated the monopolistic aspect of 
it. It is still just as easy to place a bet in California as it ever was. 
You can go to a cigar counter or call a telephone number that a bellboy 
will give you or something of that sort and get in touch with a bookie 
who operates by telephone. But it is a telephone bet. You make your 
bet and maybe the next day, maybe at the end of the day, you find 
out whether you won or whether you lost, something of that sort. 
That is prevalent, but the thing that is not prevalent any more that 
used to be are these big open things that we call horse parlors, big 
rooms with the blackboards on the wall listing all the races and where 
people sit there in chairs and bet on race after race after race. That 
is the big money-making operation. 

In 1940, when we filed that injunction suit we were able to list by 
address and the name of the operator over 800 of those horse parlors 
in various parts of the State. Since we got rid of that Continental 
wire, we would have difficulty in listing half a dozen addresses with 
any assurance that you would find anything resembling that going on. 
For a time we couldn't find any. A few months ago, I think this was 
along in January or February, somewhere around there, we found a 
couple of horse parlors operating in San Bernardino. We couldn't 
figure out how that could be done, because the operation was similar 
to what had been going on before. They were getting a quick, fast, 
complete service — run downs and everything else. Nobody else was 
getting it. It baffled us for a long time. We spent a lot of time trying 
to run that down. We thought we must be up against something new. 
We found out what it was. It was a wire tap. The Continental lease 
line which goes all around the United States. Although there are no 
longer any "drops" on that wire in our State, the physical wire still 
goes through. There is one part of it that comes in through the 
southern part of the State and goes down to Mexico, down to Tijuana. 
Then it is looped through the full length of the State into Oregon 
and Washington. These fellows had detected that circuit in the 
Cajon Pass near San Bernardino and put on a regular physical wire 
tap. In doing so, they short-circuited the signal system for Santa 
Fe trains going through there which might have been serious. That 
is the way the thing was eventually discovered, through that short. 

Incidentally, the investigation went far enough so that the Federal 
Government indicted those people for tapping that line and that is 
pending now. 



228 ORGANIZED CRIME IN INTERSTATE COMMERCE 

That experience lias made it plain to us that, when we find one of 
these horse parlors operating, it is a cinch that there is a tap on that 
line. There is no other way that they can get that information as yet. 

It is very easy to underestimate the importance of that change r 
because superficially it doesn't seem as though there was much differ- 
ence because it is still easy to place a bet, but it is the horse parlors 
where the money was and it is the horse parlors that can be controlled 
and monopolized. Without the wire service, there is no monopoly, 
because a bookmaker who operates by telephone gets his stuff over the 
radio and the newspapers, any one of a dozen different ways and 
doesn't have to pay for it. What profit there is in the operation he 
keeps. It doesn't go into the hands of a central organization. The only 
controlling and monopolistic aspect of it that remains has to do with 
the lay-off business. Most of these books are not bank rolled heavily 
enough to carry their own risks, and besides that they have to unload 
bets when they get in an unfavorable position. That is capable of 
being fairly well controlled, but nothing like the rigid monopoly that 
the wire service could maintain. 

Mr. Halley. How is the lay-off business controlled ? 

Mr. Olney. It has to be done on credit. It has to be done by people 
who have money and are capable of handling the thing. It just by 
nature tends to be centralized. 

Mr. Halley. In what hands is it centralized in the State of Cali- 
fornia ? 

Mr. Olney. That would be very hard for me to answer. We know 
of a couple of lay-off centers that have appeared fairly recently, one 
of them in San Francisco, and there has been another one in Los 
Angeles that has appeared. Those centers are operating something 
like a legitimate business, a sort of caricature of a legitimate business. 
For instance, there was a place called the Kingston Club in San Fran- 
cisco that was a lay-off center for many years. These large gamblers, 
big operators like Sacramento Butch, and others who had plenty of 
money, would gather there and sit around, and somebody phoned in 
and wanted to know if anybody was interested in taking so many thou- 
sand on such and such a nag in such a race, and a man speaks up and 
says yes, he will take it ; he will handle it. That is the way it is done. 
It is not a formal organization. To do business in that way requires 
confidence, credit, and knowledge, and money, and there are very 
few people who can do all those things. 

Mr. Halley. And the ability to enforce your credit if somebody 
welshes. 

Mr. Olney. Yes. 

Mr. Halley. What would you say is the biggest single bookmaking 
operation that you investigated on the Commission ? 

Mr. Olney. By all means the Guaranty Finance Co. in Los Angeles. 

Mr. Halley. How did they operate? 

Mr. Olney. That was a very complicated operation. They had to 
begin with a charter from the State as a regular corporation author- 
ized to do a small-loan-broker's business, and they maintained an office 
that had all the appearance of a regular loan office. Their operations 
were conducted mostly by runners. They had 128, I believe that we 
knew of from their records, men who spent their time during the day 
going around picking up bets, sometimes in factories, plants, stores, or 
wherever it might be. They would pick up the bets during the day 



ORGANIZED CRIME IN INTERSTATE COMMERCE 229 

and then they would make payoffs the next day. It all funneled into 
this office of the finance company. 

Mr. Halley. Did they receive special telephone service? 

Mr. Olney. They had a large installation of telephones. The tele- 
phone company in our State ever since 1941 has had a formal policy, 
one of its rules that is posted as instructions to all employees, that 
the company will not give service to bookmakers or people who are 
using the telephones unlawfully. The result has been that bookmakers 
cannot get telephone service if the company is aware of what they are 
using it for. This big installation that the Guaranty Finance Co. 
had was listed under all kinds of names, like a service station, a monu- 
ment company, a beauty parlor, an accountant, an answering service, 
all sorts of things of that sort. 

Mr. Halley. Through these various devices they were able to get 
telephone service at a time when service was very difficult for the 
ordinary subscriber to get during the postwar period ; is that right? 

Mr. Olney. Yes. The bookies seemed to have little difficulty doing 
that. 

Mr. Halley. While we are on that subject 

Mr. Olney. I should say this about that to make it clear as far as 
the company is concerned, because we went around and around with 
them on that subject. They did satisfy us of the existence of this con- 
dition in various places. The availability of telephone service de- 
pended a great deal on what the particular exchange happened to be. 
The shortage wasn't so much in the instruments as it was in the 
switching mechanism in the various exchanges, and some of those 
exchanges were loaded clear up, and then there was no way of putting 
in new service. You just had to wait until some other line went out 
of service before you could get one. At the same time there would be 
other exchanges a few miles away where the lines weren't all taken up, 
and there would be no difficulty about it. So we found that many of 
the specific cases that were reported to us and that we checked where 
bookies seemed to have telephone service and legitimate people could 
not get service, in many instances it was due to that difference in the 
exchanges. 

Mr. Halley. Getting away for the moment from the telephone 
service and book to the wire service, has it not been developed that 
during the war at one period the telegraph wire went out of service 
and one of the large bookmaker wire service distributors was able 
to get his service resumed before the Western Defense Command did ? 

Mr. Olney. That was reported by the Federal Communications 
Commission. During the war they made an investigation that lasted 
a year and a half or 2 years of the use being made of communications 
facilities all over the country by gamblers to see whether or not it 
was interefering with the war effort. In their report one of the inci- 
dents that they relate took place down near Bakersfield where a plane 
crashed and happened to hit wires that knocked out all of the tele- 
graph circuits between the north and the south. Then service was 
resumed, as is usual in such cases, by routing the service around the 
damaged area. They had the statistics on the time when resumption 
•of service took place. This incident happened in 1942 when things 
on the coast looked awfully bad, and we actually felt we were going 
to be attacked at any time. Among the lines that were knocked out was 
the Continental Press line and also the telegraph wire that was used by 



230 ORGANIZED CRIME IN INTERSTATE COMMERCE 

the Fourth Army that went clear down to Mazatlan, Mexico. Con- 
tinental Press wire had service resumed in something like 15 minutes 
and the Fourth Army's was 2 or 3 hours before it was resumed. 

Mr. Halley. Getting back to the telephone service, the Guaranty 
Finance, the telephone company actually did make a complaint about 
Guaranty Finance, did they not? 

Mr. Olney. They made a report. It was not exactly a complaint. 
They reported it to the sheriff's office because the location was in 
unincorporated territory. The telephone company is, of course, not a 
police agency. They are not doing law-enforcement work and nobody 
expects them to, but when facts come to their attention that indicate 
something is wrong, they are expected to report, and that is what they 
do under their rules. TLey reported these Guaranty Finance Co. 
installations over and over again. For example, one of these phones 
was listed to a service station and yet it was on the second floor. One 
of their employees pointed out that if all these businesses were really 
on the premises, as indicated by the telephone listings, there wouldn't 
be room enough in the building to hold them all. They did report that. 

Mr. Halley. Would you be able to state whether or not those com- 
plaints were made to the attorney general's office? 

Mr. Olney. My recollection is that there were two or three cases 
where their reports showed that the information had been given to 
somebody in the attorney general's office. Most of them were to the 
sheriff's office. 

Mr. Halley. Who finally prosecuted ? 

Mr. Olney The Guaranty Finance Co. ? 

Mr. Halley. Yes. 

Mr. Olney. The district attorney of Los Angeles County. 

Mr. Halley. Did your commission seize the Guaranty Finance 
Co.'s records ? 

Mr. Olney. First, I should say that our commission got them from 
our corporation commissioner. We became suspicious due to a number 
of circumstances concerning this outfit and inasmuch as they had a 
license from the corporation commissioner to operate their brokerage 
outfit we got in touch with the corporation commissioner and they 
made a check and came back and they were as suspicious as we were. 
Under their statute they had the power to go in and make an actual 
investigation on the premises, take possession temporarily of the rec- 
ords, and subpena witnesses and find out what was going on. So they 
did that. They quickly found it was a bookmaking operation and 
had all these records. They notified us, and we in turn subpenaed 
those records from them. Then we turned them over to the Bureau 
of Internal Revenue because of the tremendous amounts that were 
involved and the nature of some of the entries that appeared in there. 
They turned them back after some months. Then we turned them 
over to the district attorney of Los Angeles County, and he presented 
the matter to the grand jury. Ten of them were indicted ; eight of 
them were convicted. Was it 12 that were indicted? Eight of them 
were convicted, including the four principals and four of the em- 
ployees. The principals were recently sent to a State prison. 

Mr. Halley. Did a special agent, I think his name is McClary, of 
the attorney general's office, conduct an investigation of Guaranty 
Finance and report that he had not found any illegal activity ? 



ORGANIZED CRIME EST INTERSTATE COMMERCE 231 

Mr. Olney. All I know about that, Mr. Halley, is what has been 
jn the newspapers and what is in our report there. The investigator 
did visit the premises, I understand, and nothing happened. 

Mr. Halley. Was the bookmaking business interrupted the day 
he was there? 

Mr. Olney. Not as far as the records show. 
. Mr. Halley. The records indicate the business continued. 

Mr. Olney. As near as you could tell from the records it wasn't; 
it went on as usual. This was about a week or 10 days before the 
corporation commissioner went in there. But there has been contro- 
versy over what that investigator saw and what he reported and 
what was going on at the time he was there. 

Mr. Halley. There is no question that the attorney general took 
no steps to stop the activity ; is that right? 

Mr. Olney. There is no question about that, no ; he did not. I say 
there is no question about that ; he did not. 

Mr. Halley. Was Guaranty Finance finally convicted ? 

Mr. Olney. The four principals were convicted ; yes. 

Mr. Halley. And are they now out of business ? 

Mr. Olney. They are out on bail pending appeal. I would be 
very doubtful that they are out of business. 

Mr. Halley. Has the attorney general's office in California been 
aggressive in its efforts to prosecute this company ? 

Mr. Olney. I much prefer not to answer questions of that sort 
because I can only do so by my own opinions and conclusions. I 
would like to stick to the facts. 

Senator O'Conor. Can you state facts which might bear upon that 
subject from which we can draw our own conclusions ? 

Mr. Olney. In our commission and its efforts to find out what was 
going on and to get agencies interested in stopping things which we 
though were going on we have had no help from the attorney general.. 

Mr. Robinson. Perhaps I can help in the matter that the Senator 
wants here. Was there a point reached where the attorney general 
concluded that the crime commission had obtained information as a 
result of telephone monitoring which led to the Guaranty Finance 
matter ? 

Mr. Olney. Yes; that is right. 

Mr. Robinson. Did he take any action with respect of it? 

Mr. Olney. Apparently he did. I coidd relate what I know about 
it if that is what is desired. 

Senator O'Conor. Please do. 

Mr. Olney. I can sum it up this way: The district attorney of 
Los Angeles County informed us that some time after we had ob- 
tained these records of the Guaranty Finance Co. and also after we 
had given the telephone company a long list of phones that the 
Guaranty Finance Syndicate were using, as a result of which they 
discontinued service for several hundred, following that the attorney 
general told Mr. Simpson, the district attorney of Los Angeels 
County, that he thought that the telephone company was tapping 
its own lines or monitoring its own lines in its own exchanges for 
the benefit of the crime commission, and that that was a violation of 
the wire-tapping statute. We have a State statute on it. He said it 
ought to be investigated and prosecuted. He was quite insistent that 
that be done and that our commission be indicted. But the difficulty 



232 ORGANIZED CRIME IN INTERSTATE COMMERCE 

with it, as it turned out, was that, of course, nothing of that sort 
had happened at all. There was no wire tapping or monitoring of 
any kind. 

The list of telephones that we had given to the telephone company 
to remove was not obtained in any such fashion as that. They were 
the telephones that appeared right in the Guaranty Finance Co.'s 
records, the ones they were paying the bills on. 

_ Mr. Robinson. Along that line, Mr. Olney, when the crime commis- 
sion asked the telephone company to terminate this service, thereafter 
there followed litigation by the subscribers seeking to get their service 
back? 

Mr. Olney. Yes, there did. 

Mr. Eobinson. Was there a provision that a telephone company 
had to be authorized by a law-enforcement agency ? 

Mr. Olney. Yes. 

Mr. Robinson. Did the attorney general construe in both affirma- 
tive and negative manner the question of whether the crime commis- 
sion was or was not a law-enforcement agency ? 

Mr. Olney. There was a matter of an opinion which came out in 
connection with our power in that litigation, but it is rather incidental 
to the inquiry here. 

Mr. Robinson. His final holding was what ? 

Mr. Olney. It was involved. I know the net result of it was that 
it indicated that the crime commission was without any authority to 
pass on any information to the telephone company of the sort that we 
had, but there was more to the opinion than that. The details of it 
I don't recall. 

Mr. Halley. What was your experience in connection with the 
slot-machine racket in California ? 

Mr. Olney. We made some inquiry into that. We found that there 
were a great many slot machines in California in various parts of the 
State. They had all the usual accompaniments that go with them that 
you find in other States, all the enforcement and governmental diffi- 
culties, all the complaints that went with them. But they were spotty. 
There were some counties that had them, and many counties that had 
none at all. We carried our inquiries as far as we could. The thing 
we were interested in was to see whether or not that racket was really 
syndicated, and, if so, to what extent. It resulted in our making some 
recommendations to the Governor and to the legislature with respect 
to changes in our slot machine statutes which were made, so that ma- 
chines are now subject to seizure on sight. Formerly you had to have 
actual evidence that the machine had been played and paid off before 
you could get a conviction, so it made it most difficult and very expen- 
sive to try cases on them. Since the law was changed at the last legis- 
lature and we have an improved statute, most of the machines, not 
all of them by any means, most of them are gone. Most of them were 
shipped into Nevada to get away from that statute. 

Mr. Halley. Were you able through the efforts and investigations 
of your commission to obtain any convictions in connection with the 
slot-machine racket ? 

Mr. Olney. No ; we didn't. We had no law enforcement authority 
whatever. We had none of the powers of peace officers and none of 
the commission personnel or its staff had any authority to appear in 
court or take part in any prosecutions. The thing that we did do 



ORGANIZED CRIME IN INTERSTATE COMMERCE 233 

in our inquiries when we had evidence indicating some criminal offense, 
we would take that to the regularly constituted authorities for prose- 
cution. We interested them in the matter and tried to assist them 
as much as we could. There were a number of cases of that sort. 

Mr. Halley. It was my understanding that in Mendocino County, 
for instance, police officers who had been retired and a man who was 
then actively an assistant on the attorney general's staff were 
convicted ? 

Mr. Olney. That is correct, there was. In our inquiries in the slot- 
machine racket and the punchboard racket, too, which were very 
closely connected, we found something going on at the time our com- 
mission was functioning which had never happened in the history 
of the State. There was evidence which was very convincing to us 
of a genuine effort to try to organize a system of protection for these 
machines to begin with and other operations later, to cover the whole 
State, a State-wide system. We had concrete evidence of that sort, 
stronger in some counties than in others, in 16 different counties 
of the State during a period of some 2 years. The Mendocino County 
case was one, and in that case criminal prosecution resulted and 
there were some convictions. In fact, it broke up the system for all 
practical purposes. 

Mr. Halley. Was this assistant attorney general convicted? 

Mr. Olney. No, no. There was a man named Caddell, who was 
one of the defendants and who was convicted, and he had been asso- 
ciated at the time of these acts with the attorney general's office. 
He was the attorney general's — I think he called him his coordinator 
of law enforcement. Anyway, he had a traveling assignment to 
travel all around the State working with various law enforcement 
agencies. It was a responsible position. He was convicted. He 
was an investigator, not an assistant attorney general. 

Mr. Halley. Was he found to have made graft payments to the 
sheriff of Mendocino County ? 

Mr. Olney. Not personally. There was a group charged with 
conspiracy to violate the gambling laws aud also conspiracy to bribe 
the sheriff as an incident to the other one. They were convicted 
in all those counts. There was evidence of two bribes paid to the 
sheriff to permit the machine to run, but they were not paid by this 
man in person. It was paid by one of the codefendants. He was 
convicted as a member of that conspiracy. 

Mr. Eobinson. Some years ago, Mr. Olney, the mayor of Los 
Angeles was recalled and the mayor who is presently serving was 
elected on that recall movement, 

Mr. Olney. Yes; that is right. That was in 1038, I believe. 

Mr. Robinson. Some of the allegations that sponsored that recall 
movement were the activities of the vice squad of the Los Angeles 
Police Department? 

Mr. Olney. I don't know. I don't know enough about that recall. 

Mr. Robinson. I am trying to develop the antecedents of Wiley 
Caddell and James Mulligan, who were convicted in the Mendocino 
case, 

Mr. Olney. All I know about that is simply that both of t'hose men 
had been in the Los Angeles Police Department for twenty-odd years, 
something of the sort, They were there in the police department prior 



234 ORGANIZED CRIME IN INTERSTATE COMMERCE 

to Mayor Bowron's election. They were there for a while afterwards, 
too, I think. I don't know how long. 

Mr. Robinson. Members of the vice squad ? 

Mr. Olney. Yes. 

Mr. Robinson. Caddell then became coordinator of law enforce- 
ment for the attorney general's office ? 

Mr. Olney. No. He went from the police department into the dis- 
trict attorney's office of Los Angeles County. He was an investigator 
there I believe for quite a few years and didn't become investigator in 
the attorney general's office until 1947. 

Mr. Robinson. Was he a civil service employee in the attorney gen- 
eral's office? 

Mr. Olney. No, he was not. 

Mr. Halley. Isn't it a fact that this man Caddell actually delivered 
slot machines to Mendocino County? 

Mr. Olney. Not that I know of. 

Mr. Halley. Wasn't that established at the trial ? 

Mr. Olney. No. 

Mr. Halley. It was my understanding — correct me if it is wrong — 
that one of the defendants, and Mr. Robinson said it was probably 
Griffin, brought slot machines from San Bernardino County to Mendo- 
cino County. 

Mr. Olney. Yes, there was testimony of that sort indicating he went 
with a truck from Mendocino County down into Los Angeles and then 
over to San Bernardino and then back up to Mendocino County. My 
recollection is that the movements of the truck were traced by the gaso- 
line tickets where he bought gasoline. Then he showed up with some 
slot machines up there. 

Mr. Halley. That was part of this conspiracy with Caddell, is that 
correct ? 

Mr. Olney. That is correct. 

Mr. Halley. Isn't it also a fact that previously certain slot machines 
had actually been seized in San Bernardino by the attorney general's 
office at the direction of Caddell? 

Mr. Olney. That is true, but as to whether or not the machines that 
then appeared in Mendocino County were the same ones that were 
seized in San Bernardino County, we never knew for sure. We never 
could prove it. 

Mr. Halley. There was the inference, but there was a gap in the 
evidence. 

Mr. Olney. That is right. 

Mr. Halley. Was the attorney general cooperative with the pros- 
ecution in Mendocino County ? 

Mr. Olney. No, he was not ; quite the contrary. 

Mr. Halley. This is Fred Howser, who was then attorney general, 
is that right? 

Mr. Olney. That is right, it was. 

Mr. Halley. Was he also the attorney general during the period of 
the Guaranty Finance Corp. investigation? 

Mr. Olney. Oh, yes. 

Mr. Halley. Didn't he actually make the statement that the prose- 
cution in Mendocino County was a dead one ? 

Mr. Olney. Well, he did at one time; yes. It was when the grand 
jury first began. I think it was before the grand jury hearing. He 



ORGANIZED CRIME IN INTERSTATE COMMERCE 235 

made an investigation of some sort of his own up there. That is my 
recollection. He made that remark in connection with it to the press. 

Mr. Halley. Is it a fact that the chief investigator for the attorney 
general, Walter Lentz, took certain statements from your witnesses or 
the prosecution witnesses, to be more accurate, and made them available 
to the defense? 

Mr. Olney. I don't believe it was Mr. Lenz. During that Mendocino 
County case after the indictment was returned and before a verdict was 
finally returned, the attorney general's office under Mr. Lenz — I mean 
he was the chief investigator and he himself went up there — they 
took their whole investigative staff up there. That is a small county, 
and they had more investigators from the attorney general's office than 
they did deputy sheriffs in the whole county working on this case. 
They took statements from many, many witnesses. None of those 
statements were ever made available to the prosecution, and at the 
trial they showed up in the hands of defense counsel . 

Mr. Halley. Who was James M. Mulligan in that case ? 

Mr. Olney. I believe a former Los Angeles police officer, formerly 
on the vice squad there. 

Mr. Halley. Was there testimony that he had been collecting as 
much as $10,000 a month in protection money from various gamblers? 

Mr. Olney. No, there was not testimony to that effect at that trial. 

Mr. Halley. Didn't Fred Grange, one of the defendants in that 
trial, so testify ? I know it is hard to remember these things because 
we are going back a ways and covering a lot of ground. 

Mr. Olney. I remember the alleged incident that you are referring 
to, but I have difficulty in attributing that to any testimony that 
Grange gave. Grange had knowledge of some items that bore on 
that subject, but I don't believe he gave any such testimony as that. 
I don't think that testimony came out at that trial. 

Mr. Halley. Was there such a statement made by Grange in the 
course of your official investigation? 

Mr. Olney. Yes, Grange had something to say on that, but my 
recollection of that is that Grange said that he had been told by one 
of his other codefendants — I forget which one, Griffin, I believe — 
that Mulligan had been collecting those sums of money. I don't be- 
lieve Mulligan ever made that statement to Grange, and I don't think 
■Grange ever gave any testimony on it. 

Mr. Halley. The committee has been looking from time to time into 
connections between organized crime in the narcotics racket. Did 
you find anything in that connection in your work in California? 

Mr. Olney. Oh, my, yes. 

Mr. Halley. Would you describe it generally ? 

Mr. Olney. Here again I must make it clear that I am repeating 
information that we get second-hand. In our inquiries in the nar- 
cotics racket we got a tremendous amount of help of all sorts from 
the Federal Bureau of Narcotics. 

Mr. Halley. Would you go ahead on the narcotics? 

Mr. Olney. We tried to find out the extent that we had a narcotics 
traffic in our State and how it was organized and the extent to which 
it was syndicated. Right at the outset we were advised by the Fed- 
eral Narcotics Bureau, and our own inquiries subsequently confirmed 
it, that it is impossible with an investigation that is limited to the 
State of California to penetrate any great distance into the narcotics 



236 ORGANIZED CRIME IN INTERSTATE COMMERCE 

racket for the reason that the main centers of that racket are not in 
our State. They are outside. While we have distribution of nar- 
cotics and, inquiries inside our State boundaries will show one dis- 
tribution system after another, it gives the appearance of there being 
a considerable number of separate rings. The Federal narcotics 
agents told us and we became eventually satisfied of the accuracy of it, 
that in most instances those rings are connected at the top, but de- 
liberately and on purpose distribution systems are kept separate from 
one another and very often in ignorance of one another, for protec- 
tive reasons, among others. 

We encountered that, and then also in our work we found people 
connected with the narcotics racket mixed up with the wire service 
and the bookmakers, prostitution, and even the abortion racket. 

Mr. Halley. You became particularly acquainted with Joe Sica's 
narcotics activities, is that right? 

Mr. Olney. That is right. 

Mr. Halley. That was one of the biggest narcotics rings uncovered 
in California, I think. 

Mr. Olney. Yes. Of course we had nothing to do with that. That 
was covered by the regular agencies, not by us. We were very famil- 
iar with it. 

Mr. Halley. Wasn't there a point at which you stated that the 
State bureau of narcotics did everything it could to make one of the 
most important witnesses unavailable to the Federal grand jury? 

Mr. Olney. No, I did not make that statement. There was dif- 
ficulty between Colonel White, who was the Federal supervisor for 
the Bureau of Narcotics in connection with the Sica case, and the chief 
of the State narcotics bureau over the matter of the treatment to be 
accorded to an essential witness against Sica and his codefendants 
that the Federal people wanted to use. It is right in Colonel White's 
report that he made at the time to his superiors that at that time the 
chief of the State bureau told him he was going to do everything he 
could to keep that witness from being available. 

Mr. Halley. What happened to the witness ? 

Mr. Olney. He was murdered. 

Mr. Halley. What were the events surrounding the murder? 

Mr. Olney. He had testified before the Federal grand jury in Los 
Angeles, and there were 16, I believe is the number, people who were 
indicted in that narcotics ring, Joe Sica being the most important 
one. The Federal agents, realizing the danger the man was in, sent 
him out of the State and tried to keep him out of the State until the 
time of the trial, but he insisted on coming back to his home in Fresno. 
They had no way of controlling him and he did come back there. He 
lived there in the house with his mother and father. One morning 
about 11 o'clock they left him there in the house. He was alone asleep 
in the living room on a sofa at that time, taking a nap. They came 
back a couple of hours later and he was still there in the same position, 
but somebody had come in there and shot him through the head. 

Mr. Halley. Sica and that group were connected with gangsters 
throughout the country, as far as you know, is that so ? 

Mr. Olney. Our records show that. 

Mr. Halley. Do they show that Sica had originally worked in New 
Jersey ? 



ORGANIZED CRIME EST INTERSTATE- COMMERCE 237 

Mr. Olney. That is what the record shows. 

Mr. Robinson. You referred to Joe Sica earlier in your testimony, I 
believe, Mr. Olney. Was he the same individual you referred to as 
ripping the telephones out of Russell Brophey's wire service instal- 
lation ? 

Mr. Olney. That is the same one. 

Mr. Robinson. At that time he was associated with Mickey Cohen. 
" Mr. Olney. At that time he was with Mickey Cohen; They were 
together in person at the time they pulled Brophey's telephones off 
the wall and beat him up. 

Mr. Robinson. Are there indications that he later became associated 
with the Dragna organization? 

Mr. Olney. Oh, yes. 

Mr. Halley. On the basis of these investigations you have made, is 
there anything you would want to say about your conclusions or rec- 
ommendations for the guidance of this committee ? 

Mr. Olney. I haven't anything that I feel I ought to offer in re- 
sponse to that, but there is one thing that I would like to mention, 
and it has to do with the wire service. I understood that that was 
the subject that you were going to ask me about mostly, which has 
been quite disappointing to us. We found in our own experience 
that the denial of free access to the communications services does 
prevent the effective operation of the wire service and it does break 
up the monopolistic aspect of bookmaking which is the most danger- 
ous part, but we are still having trouble because of the flood of informa- 
tion that can be sent over our borders by telephone where it is readily 
available on the other side. Also we are having trouble with the 
Continental line being tapped in our own State, as I have related 
earlier. It is rather hard to see any justification — rather, I will put 
it in this way : If it is appropriate and proper to get rid of the wire 
service in one State the way it has been done in California, it would 
seem to be in order to do it elsewhere, and it would certainly simplify 
our problem a great deal. Our own public utilities commission filed 
a formal petition with the Federal Communications Commission in 
Washington on — I have a copy of it here — October 4, 1948, suggesting 
that the FCC undertake an inquiry similar to the one that we did in 
California, to take a look at the use being made of the communica- 
tions facilities, with the view, if the evidence and circumstances and 
authority make it appropriate, to have a similar order effective as 
far as interstate communications facilities are concerned. In the 
communication they set out the reasons for it, and they attach a copy 
of their own order of investigation and of the order that resulted from 
it. But that thing has been buried for a year and a half and nothing 
has happened. 

Senator Hunt (presiding) . You have had no response from it at all ? 

Mr. Olney. No noticeable response. 

Senator Hunt. What date was it? 

Mr. Olney. Perhaps I could leave this copy with you. 

Senator Hunt. Good. 

Mr. Olney. It was dated October 4, 1948. It was signed by the 
president of the commission and every member, but there has been no 
action. It seemed to us that, assuming that the authority exists for 

6895S — 50— pt. 2 16 



238 ORGANIZED CRIME EST INTERSTATE COMMERCE 

that action under the Federal law, it would have a tremendous effect 
on the bookmaking racket all over the United States and get rid of the 
worst features of it. 

Mr. Halley. May we keep this copy and put it in evidence? 

Mr. Olney. Yes. 

Mr, Halley. Thank you. I offer this as exhibit No. 18. 

(The document referred to appears in the appendix on p. 262.) 

Mr. Halley. Is there any further comment you think you would 
like to make for the committee's guidance ? 

Mr. Olney. No, sir. 

Mr. Halley. Mr. Robinson has a point he wishes to develop. 

Mr. Robinson. With the curtailment of the wire service in Cali- 
fornia, Mr. Olney, did it then become apparent that the bookmakers 
resorted to long-distance telephone calls? 

Mr. Olney. Oh, yes. 

Mr. Robinson. Did the crime commission undertake any analysis 
of these telephone toll calls ? 

Mr. Olney. Yes; we did quite systematically for a time. 

Mr. Robinson. Did any particular pattern develop insofar as calls 
related to any general area of California or were they distributed 
pretty thoroughly throughout the country? 

Mr. Olney. What we did, when the Continental wire was discon- 
tinued, a certain amount of bookmaking still went on. There was 
some kind of service that was coming in and getting through, and very 
obviously by long-distance telephone call. Sometimes it was done very 
systematically. The lines would be kept open from Reno, for example, 
down to Bakersfield or Fresno or some other place, and then the racing 
information would come down over that line and then, if the call 
terminated at Bakersfield, it would go out to other parts of the State. 

That was being done on a fairly methodical basis, so we tried to find 
out if it would be difficult to control it simply by running back the 
telephone toll tickets until the locations were located. Once you find 
the location, you can get the phone taken out. It is not difficult to 
control under the kind of order that we have. We did try to undertake 
to subpena systematically the toll tickets, and it was not difficult to 
trace out the network from one telephone to the other. But we also 
found that that was only feasible if it was done by an agency that 
had at least State-wide jurisdiction; that it couldn't be done by local 
authorities because usually the calls that supplied the local bookmakers 
aren't on the tickets locally. For example, Bakersfield was one of the 
principal centers where calls from Nevada were received. The book- 
makers in San Francisco were being supplied with information by 
Bakersfield, but those calls appeared on the tickets in Bakersfield. So, 
although you had your bookmaking operation in San Francisco, there 
was nothing in the telephone-company records that would lead you 
back to Bakersfield. So for a county agency to try to run that back 
wouldn't be practicable, but the State is big enough to make a thor- 
ough investigation. 

Is that what you are referring to ? 

Mr. Robinson. Beyond that, Mr. Olney, there were also indications 
there that the contacts were pretty well spread throughout the entire 
country as well. 



ORGANIZED CRIME IX INTERSTATE COMMERCE 239 

Mr. Olney. Yes. In connection with those calls, of course all you 
get when you subpena telephone records are records of phone calls, 
and there is nothing to indicate what the purpose of them was. So 
when we were trying to check this network for the wire service we 
hit into the calls for the lay-off men. I think that is what you are 
referring to. We found a series of calls throughout other cities. 
There were some in Louisiana, some in Kansas City, and St. Louis, 
some in New York as I recall. We concluded eventually that those 
were in the largest part lay-off traffic rather than wire service. 

Mr. Halley. It may interest you to know that last week this com- 
mittee had testimony from the Miami S. & G. Syndicate to the effect 
that daily telephone calls were made all over the country to check 
hot bets, that there was a regular series of phone numbers and locali- 
ties where bets that were suspected of being hot were checked as a 
regular practice each day. That may be one of the reasons for the 
phone calls you found. 

Mr. Olney. That may very well be. I must say there is a great 
deal about that business that I don't pretend to know. It is very 
intricate. 

Senator Hunt. Mr. Olney, have you had any opportunity or reason 
to familiarize yourself with the so-called McFarland bill, which is 
designed to prevent the interstate transmission of racing information ? 

Mr. Olxet. No, sir ; I have not. I saw in the paper that such a bill 
had been introduced, but I have never seen a copy of it. I am not 
familiar with its provisions. 

Senator Hunt. Has the question been asked you this morning that 
in your work out in California you have seen any evidence of this hot 
money getting into hotel ownership, public utility ownership, and 
things of that nature ? 

Mr. Olney. We have had only vague rumors to that effect. It is 
one of the subjects that the commission itself I think felt was very 
important and ought to be examined into, but our authority was so 
weak that we were in no position to do it. We had none of the powers 
of a law-enforcement agency and we had no effective subpena power. 
You can't get that information unless you serve subpenas on people 
to bring in books and records, on unwilling witnesses and compel them 
to reveal the facts and either bring contempt proceedings if they refuse 
or prosecute them for perjury if they lie. Without that power we 
could never penetrate into that subject and we feel that it has been 
a door that should be opened. 

Senator Hunt. I think Mr. Halley asked you this question, but I am 
going to ask it in perhaps a little different way. This committee 
wants to be helpful to every crime commission and to every State. Do 
you know of any assistance in any way that this committee can be 
helpful to the California Crime Commission ? Do you have any sug- 
gestions to make to us that would make our work more effective ? 

Mr. Olney. Senator, our commission of course has expired at the 
end of June, but the statute under which it was appointed still exists 
and other commissions may perhaps follow it. Such suggestions of 
that sort that I would make would have to await our final report, 
which has not yet been published. I think we have some views of 
that sort in there. 



240 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Senator Hunt. Would you care to comment on what you think has 
been the degree of success of the work of your commission, or should 
that be passed over until your final report? 

Mr. Olney. No, I would comment on that. Our work was successful 
in many respects, but the success that we achieved as far as results 
are concerned was due wholly to local law-enforcement agencies. 
Being without any power to act directly ourselves, we had in every 
instance to interest somebody to pick these things up and do some- 
thing about them. We were able to do that in many cases, not as many 
as we would like. But the things that have been done, such prosecu- 
tions as have been had, such changes in the statutes as we have had, 
things of that sort may have originated with us but it was the local 
people who did the work and who were out on the firing line and 
fought these things through. 

There is one thing I ought to say about our reports that perhaps 
doesn't appear in there very clearly as it should. I think anybody 
reading our reports, having no other knowledge of conditions in our 
State, would get quite a distorted picture of law enforcement in Cali- 
fornia. Our job of course was to inquire into organized crime where 
it existed, where we could find it and ferret it out. It was not a part 
of our job to applaud public officers who were doing their duty or to 
comment or make mention of communities where no problem existed 
as far as organized crime is concerned. The result is that there are 
reports of everything bad and nothing good in them. That is due to 
the subject of the inquiry we were making. The conditions that are 
port rayed there are not characteristic of the State as a whole or of 
county after county. One of the most noticeable things in our State 
and I imagine you must have found it in other States also is that it is 
just impossible to generalize about a large State. Some counties have 
no real problems as far as organized crime is concerned. The rackets 
can't operate there. Next door you will find a county where they just 
flourish. We have had that kind of situation. I am afraid our 
reports make no mention of the fact that we have good public officials 
and some very efficient law enforcement in places. The results and 
what we have been able to accomplish are attributable to that fact. It 
is only because we have had sound, effective local officials that we 
were able to get any results at all because we had no power. 

Senator Hunt. One more question. In our work in Florida we 
found that Mickey Cohen had some operations by long distance tele- 
phone call almost daily from Los Angeles to Florida, with the result 
that we subpenaed some records and found one group of checks 
running through the racing period amounting to, I think, some $50,000, 
checks dated 2 to 3 days apart in amounts all the way from $1,000 to, 
I think, one or two of $5,000. In questioning the bookie who had 
signed the checks, a man by the name of O'Rourke, he said to us that 
Mickey Cohen never lost, which was the reason the checks were always 
going one way. In other words, Mickey would call up and place 
a bet, and in the final settlement every 2 or 3 days the advantage was 
always to Mickey Cohen's account, 

Could that be' what we might call legitimate betting or was that 
Mickey Cohen muscling in, and that was the easiest way to settle the 
account? 



jORGANUZED CRIME IN INTERSTATE COMMERCE 241 

Senator Hunt. You wouldn't be able to tell. 

Mr. Olney. Not at all. I did give Mr. Robinson this morning 
the names of a couple of others, some 30 or 40 thousand dollars more 
of Cohen's transactions similar to that in a different part of the 
country. What they mean I could only guess. I couldn't even guess. 

(Discussion off the record.) 

Senator Hunt. Thank you for responding to our call and giving us 
the information you have. We are very appreciative of your taking 
the time and trouble to meet with us. 

(Whereupon, at 12: 15 p. m. the committee adjourned subject to the 
call of the chairman.) 



APPENDIX 

Exhibit No. 2 

[Miami Sunday News, April 16, 1950] 

Only Issue Is McBride 

This community has heard a great deal this winter about the different phases 
of gambling, the groups which maintained it, the iniquitous figures that have 
gathered here at what has become known as the winter assembly point of 
criminal interests in the whole country. Recent developments have made clear 
the processes of fraud, falsehood — which is a common practice — and the devices 
hatched up by high-salaried attorneys to divert public attention from individuals 
and operations when disclosures have been embarrassing. There are many re- 
current evidences of these devices. The point of this is found in a recent local 
event. 

The Federal Communications Commission has been conducting an inquiry here 
because of charges filed with the central organization at Washington against one, 
Mickey McBride. In documents presented to the Commission, it has been al- 
leged that he is not a worthy person to own or operate a public utility, a radio 
station, so closely allied to the lives and homes of our citizens. To meet this and 
refute the charges, McBride's attempt has been peculiar and illogical to say the 
least. The plan of himself and of his associates has been to confuse the ^ublic 
mind and to try to prove that the basic issue is not the worthiness or un-ivorth- 
iness of McBride, but that a conspiracy has been formed by older and existing 
radio stations to embarrass the one which McBride presides over. 

It is needless to say that for many years Greater Miami has been served by 
four stations which provided outlets for that number of national networks — 
NBC, Columbia, ABC, and Mutual. Smaller stations without network connec- 
tions have also sprung up in the last few years and all but one, as far as we 
know, have conducted themselves in keeping with all the requirements of the 
profession. The McBride station, it can be safely asserted, is the only one which 
has been severely criticized during the last winter, including in practices that 
are unethical, undignified, and unworthy of the good name of radio. There is 
only one issue and that is McBride. 

It will be remembered that when the State government delved into the opera- 
tion of the racing wire because that was recognized as the very center and life of 
the most profitable gambling, McBride, according to rumors which have persisted 
for many years, was one of the controlling figures in this operation. The heat 
of inquiry soon drove him into the public announcement that he had been the 
owner, but had recently conveyed title to his son, a young university student. 
This young man doubtless is undeserving of the notoriety which his father, in 
attempting to save himself, has brought to him. The son asserted under exami- 
nation that he was the owner, or at least had been so advised : he did not know 
how it came about ; he had not put out money to acquire it, nor did he know any- 
thing about its operation under his admitted or fictitious ownership. The whole 
plan and purpose of this unexplainable procedure was to shield Mickey McBride. 
This is not hearsay but public record. The FCC, created to prevent sharp prac- 
tices, must see in this instance that there is a screw loose somewhere. 

It is also a matter of official record that a business associate of McBride's was 
an ex-convict with a record too long to be recited in the space limitations of this 
article. 

A third count in the testimony which hadn't been officially presented is that 
Mickey McBride, a friend of Al Capone, had at one time accosted the publisher of 
this newspaper in a public place, claimed that Capone was being misrepresented, 
that he was a man of good purpose and that McBride would like to bring him to 

243 



244 ORGANIZED CRIME IN INTERSTATE COMMERCE 

the publisher for a formal introduction. Of course, we are assuming that McBride 
spoke as a friend of Capone. He was interested in defending Capone, and that 
circumstance certainly implies close friendship. 

Capone was then in serious trouble. The Daily News had revealed that he 
came in during the night, surreptitiously buying or leasing a house. Not only 
that, this newspaper exposed the fact that his killers — most of whom have since 
been killed in gang slayings — were playing golf with sawed-off shotguns in their 
golf bags at the Bayshore Club. 

The infamous suggestion by McBride was resented, of course, and McBride was 
told never to speak again to the publisher, which he has never done because he 
never had an opportunity. McBride answers this by stating that he held con- 
versation with the publisher on a railroad train, implying that it was after the 
disgraceful episode above stated. The fact is that when the publisher was coming 
to Miami in 1925 for the formal dedication of the News Tower building a man 
introduced himself as "Mr. McBride, of Cleveland" and held brief conversation 
with the publisher. That was 5 or 6 years before the appeal was made in behalf 
of McBride's friend, Al Capone. 

This is recited only for the purpose of revealing the apparent lack of truth and 
character on the part of the McBride now under investigation. No, there is no 
desire to form any conspiracy against his radio station. The newspapers and 
radio stations of this community had nothing to do, so far as we know, with filing 
these charges. It was all a part of the crusade the crime commission is making 
on gambling and crime in Greater Miami. 

If McBride is falsely accused, he should come forward with a certificate of 
character from the present Governor of Ohio, his home State. Governor Lausche 
has lived in Cleveland, McBride's home city, all of his life. 



Exhibit No. 4 

Title IS — United States Code Crimes and Criminal Procedure 

chapter 4i. Extortion and threats 

Sec. 871. Threats against President. — Whoever knowingly and willfully de- 
posits for conveyance in the mail or for delivery from any post office or by any 
letter carrier any letter, paper, writing, print, missive, or document containing 
any threat to take the life of or to inflict bodily harm upon the Pesident of the 
United States, or knowingly and willfully otherwise makes any such threat against 
the President, shall be fined not more than $1,000 or imprisoned not more than 
five years, or both. 

Sec. 876. Mailing threatening eommunieations. — Whoever knowingly deposits 
in any post office or authorized depository for mail matter, to be sent or delivered 
by the Post Office Department or knowingly causes to be delivered by the Post 
Office Department according to the direction thereon, any communication, with or 
without a name or designating mark subscribed thereto, addressed to any other 
person, and containing any demand or request for ransom or reward for the release 
of any kidnaped person, shall be fined not more than $5,000 or imprisoned not 
more than twenty years, or both. 

Whoever, with intent to extort from any person any money or other thing of 
value, so deposits, or causes to be delivered, as aforesaid, any communication 
containing any threat to kidnap any person or any threat to injure the person 
of the addressee or of another, shall be fined not more than $5,000 or imprisoned 
not more than twenty years, or both. 

Whoever knowingly so deposits or causes to be delivered as aforesaid, any com- 
munication with or without a name or designating mark subscribed thereto, ad- 
dressed to any other person and containing any threat to kidnap any person 
or any threat to injure the person of the addressee or of another, shall be fined 
not more than $1,000 or imprisoned not more than five years, or both. 

Whoever, with intent to extort from any person any money or other thing of 
value, knowingly so deposits or causes to be delivered, as aforesaid, any com- 
munication, with or without a name or designating mark subscribed thereto, 
addressed to any other person and containing any threat to injure the property 
or reputation of the addressee or of another, or the reputation of a deceased 
person, or any threat to accuse the addressee or any other person of a crime, shall 
be fined not more than $500 or imprisoned not more than two years, or both. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 245 

Sec. 877. Mailing threatening communications from foreign country. — Who- 
ever knowingly deposits in any post office or authorized depository for mail 
matter of any foreign country any communication addressed to any person with- 
in the United States, for the purpose of having such communication delivered by 
the post office establishment of such foreign country to the Post Office Depart- 
ment of the United States and by it delivered to such addressee in the United 
States, and as a result thereof such communication is delivered by the post office 
establishment of such foreign country to the Post Office Department of the 
United States and by it delivered to the address to which it is directed in the 
United States, and containing any demand or request for ransom or reward for 
the release of any kidnaped person, shall be fined not more than $5,000 or 
imprisoned not more than twenty years, or both. 

Whoever, with intent to extort from any person any money or other thing of 
value, so deposits as aforesaid, any communication for the purpose aforesaid, 
containing any threat to kidnap any person or any threat to injure the person 
of the addressee or of another, shall be fined not more than $5,000 or imprisoned 
not more than twenty years, or both. 

Whoever knowingly so deposits as aforesaid, any communication, for the pur- 
pose aforesaid, containing any threat to kidnap any person or any threat to 
injure the person of the addressee or of another, shall be fined not more than 
$1,000 or imprisoned not more than five years, or both. 

Whoever, with intent to extort from any person any money or other thing of 
value, knowingly so deposits as aforesaid, any communication, for the purpose 
aforesaid, containing any threat to injure the property or reputation of the 
addressee or of another, or the reputation of a deceased person, or any threat to 
accuse the addressee or any other person of a crime, shall be fined not more 
than $500 or imprisoned not more than two years, or both. 



Exhibit No. 5 
Title IS. United States Code 

CHAPTER 61. LOTTERIES 

Sec. 1301. Mailing lottery tickets or related matter. — Whoever knowingly de- 
posits in the mail, or sends or delivers by mail : 

Any letter, package, postal card, or circular concerning any lottery, gift 
enterprise, or similar scheme offering prizes dependent in whole or in part upon 
lot or chance ; 

Any lottery ticket or part thereof, or paper, certificate, or instrument purport- 
ing to be or to represent a ticket, chance, share, or interest in or dependent upon 
the event of a lottery, gift enterprise, or similar scheme offering prizes dependent 
in whole or in part upon lot or chance. 

Any check, draft, bill, money, postal note, or money order, for the purchase of 
any ticket or part thereof, or of any share or chance in any such lottery, gift 
enterprise, or scheme ; 

Any newspaper, circular, pamphlet, or publication of any kind containing any 
advertisement of any lottery, gift enterprise, or scheme of any kind offering 
prizes dependent in whole or in part upon lot or chance, or containing any list of 
the prizes drawn or awarded by means of any such lottery, gift enterprise, or 
scheme, whether said list contains any part or all of such prizes — 

Shall be fined not more than $1,000 or imprisoned not more than two years, or 
both ; and for any subsequent offense shall be imprisoned not more than five 
years. 

Sec. 1303. Postmaster or employee as lottery agent. — Whoever, being a post- 
master or other person employed in the Postal Service, acts as agent for any 
lottery office, or under color of purchase or otherwise, vends lottery tickets, or 
knowingly sends by mail or delivers any letter, package, postal card, circular, or 
pamphlet advertising any lottery, gift enterprise, or similar scheme, offering 
prizes dependent in whole or in part upon lot or chance, or any ticket, certificate, 
or instrument representing any chance, share, or interest in or dependent upon 
the event of any lottery, gift enterprise, or similar scheme offering prizes depend- 
ent in whole or in part upon lot or chance, or any list of the prizes awarded by 
means of any such scheme, shall be fined not more than $100 or imprisoned not 
more than one year, or both. 



246 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Exhibit No. 6 

Title 18. United States Code 

chapter 63. mail fraud 

Sec. 1341. Frauds and swindles. — Whoever, having devised or intending to 
devise any scheme or artifice to defraud, or for obtaining money or property by 
means of false or fraudulent pretenses, representations, or promises, or to sell, 
dispose or, loan, exchange, alter, give away, distribute, supply, or furnish or 
procure for unlawful use any counterfeit or spurious coin, obligation, security, 
or other article, or anything represented to be or intimated or held out to be such 
counterfeit or spurious article, for the purpose of executing such scheme or 
artifice or attempting so to do, places in any post office or authorized depository 
for mail matter, any matter or thing whatever to be sent or delivered by the 
Post Office Department, or takes or receives therefrom, any such matter or 
thing, or knowingly causes to be delivered by mail according to the direction 
thereon, or at the place at which it is directed to be delivered by the person to 
whom it is addressed, any such matter or thing, shall be fined not more than 
$1,000 or imprisoned not more than five years, or both. 

Sec 1342. Fictitious name or address. — Whoever, for the purpose of con- 
ducting, promoting, or carrying on by means of the Post Office Department of 
the United States, any scheme or device mentioned in section 1341 of this title 
or any other unlawful business, uses or assumes, or requests to be addressed by, 
any fictitious, false or assumed title, name or address or name other than bis 
own proper name, or takes or receives from any post office or authorized de- 
pository of mail matter, any letter, postal card, package, or other mail matter 
addressed to any such fictitious, false, or assumed title, name, or address, or 
name other than his own proper name, shall be fined not more than $1,000 or 
imprisoned not more than five years, or both. 



Exhibit No. 7 

Title 18- — United States Code 

chapter 71. obscenity 

Sec 1461. Mailing obscene or crime-inciting matter. — Every obscene, lewd, 
lascivious, or filthy book, pamphlet, pictures, paper, letter, writing, print, or 
other publication of an indecent character ; and 

Every article or thing designed, adapted, or intended for preventing conception 
or producing abortion, or for any indecent or immoral use; and 

Every article, instrument, substance, drug, medicine, or thing which is adver- 
tised or described in a manner calculated to lead another to use or apply it for 
preventing conception or producing abortion, or for any indecent or immoral 
purpose; and 

Every written or printed card, letter, or circular, book, pamphlet, advertise- 
ment, or notice of any kind giving information, directly or indirectly, where, or 
how, or from whom, or by what means any of such mentioned matters, articles, 
or things may be obtained or made, or where or by whom any act or operation 
of any kind for the procuring or producing of abortion will be done or performed, 
or how or by what means conception may be prevented or abortion produced, 
whether sealed or unsealed ; and 

Every letter, packet, or package, or other mail matter containing any filthy, 
vile, or indecent thing, device, or substance ; and 

Every paper, writing, advertisement, or representation that any article, instru- 
ment, substance, drug, medicine, or thing may. or can, be used or applied for 
preventing conception or producing abortion, or for any indecent or immoral 
purpose ; and 

Every description calculated to induce or incite a person to so use or apply 
any such article, instrument, abstance, drug, medicine, or thing — 

Is declared to be nonmailable matter and shall not be conveyed in the mails 
or delivered from any post office or by any letter carrier. 

Whoever knowingly deposits for mailing or delivery, anything declared by this 
section to be nonmailable, or knowingly takes the same from the mails for the 



ORGANIZED CRIME IN INTERSTATE. COMMERCE 247 

purpose of circulating or disposing thereof, or of aiding in the circulation or 
disposition thereof, shall be fined not more than $5,000 or imprisoned not more 
than five years, or both. 

The term "indecent," as used, in this section includes matter of a character 
tending to incite arson, murder, or assassination. 



Exhibit No. 8 

Title 18 — United States Code 

chapter 71. obscenity 

Sec. 1463. Mailing indecent matter on wrappers or envelopes. — All matter 
otherwise mailable by law, upon the envelope or outside cover or wrapper of 
which, and all postal cards upon which, any delineations, epithets, terms, or 
language of an indecent, lewd, lascivious, or obscene character are written or 
printed or otherwise impressed or apparent, are nonmailable matter, and shall 
not be conveyed in the mails nor delivered from any post office nor by any letter 
carrier, and shall be withdrawn from the mails under such regulations as the 
Postmaster General shall prescribe. 

Whoever knowingly deposits for mailing or delivery, anything declared by 
this section to be nonmailable matter, or knowingly takes the same from the 
mails for the purpose of circulating or disposing of or aiding in the circulation 
or disposition of the same, shall be fined not more than $5,000 or imprisoned 
not more than five years, or both. 



Exhibit No. 9 

Title IS — United States Code 

chapter 83 

Sec. 1716. Injurious articles as nonmailable.— All kinds of poison, and all 
articles and compositions containing poison, and all poisonous animals, insects. 
reptiles, and all explosives, inflammable materials, infernal machines, and 
mechanical, chemical, or other devices or compositions wTueh may ignite or 
explode, and all disease germs or scabs, and all other natural or artificial articles, 
compositions, or material which may kill or injure another, or injure the mails 
or other property, whether or not sealed as first-class matter, are nonmailable 
matter and shall not be conveyed in the mails or delivered from any post office 
or station thereof, nor by any letter carrier. 

The Postmaster General may permit the transmission in the mails, under 
such rules and regulations as he shall prescribe as to preparation and pack- 
ing, or any such articles which are not outwardly or of their own force danger- 
ous or injurious to life, health, or property. 

The transmission in the mails of poisonous drugs and medicines may be 
limited by the Postmaster General to shipments of such articles from the manu- 
facturer thereof or dealer therein to licensed physicians, surgeons, dentists, 
pharmacists, druggists, cosmetologists, barbers, and veterinarians, under such 
rules and regulations as he shall prescribe. 

All spirituous, vinous, malted, fermented, or other intoxicating liquors of any 
kind are nonmailable and shall not be deposited in or carried through the mails. 

Whoever knowingly deposits for mailing or delivery, or knowingly causes 
to be delivered by mail, according to the direction thereon, or at any place at 
which it is directed to be delivered by the person to whom it is addressed, any- 
thing declared nonmailable, by this section, unless in accordance with the rules 
and regulations authorized to be prescribed by the Postmaster General, shall 
be fined not more than $1,000 or imprisoned not more than 2 years, or both. 

Whoever knowingly deposits for mailing or delivery, or knowingly causes 
to be delivered by mail, according to the direction thereon or at any place to 
which it is directed to be delivered by the person to whom it is addressed, any- 
thing declared nonmailable by this section, whether or not transmitted in accord- 
ance with the rules and regulations authorized to be prescribed by the Post- 



248 ORGANIZED CRIME IN INTERSTATE COMMERCE 

master General, with intent to kill or injure another, or injure the mails or 
other property, shall be fined not more than $10,000 or imprisoned not more than 
10 years, or both. 

Sec. 1717. Letters and writings as nonmailable ; opening letters. — (a) Every 
letter, writing, circular, postal card, picture, print, engraving, photograph, news- 
paper, pamphlet, book, or other publication, matter or thing, in violation of sec- 
tions 499, 506, 793, 794, 915, 954, 956, 957, 960, 964, 1017, 1542, 1543,' 1544 or 23S8 
of this title or which contains any matter advocating or urging treason, insur- 
rection, or forcible resistance to any law of the United States is nonmailable 
and shall not be conveyed in the mails or delivered from any post office or by any 
letter carrier. 

(b) Whoever uses or attempts to use the mails or Postal Service of the United 
States for the transmission of any matter declared by this section to be non- 
mailable, shall be fined not more than $5,000 or imprisoned not more than ten 
years or both. 

(c) No person other than a duly authorized employee of the Dead Letter 
Office, or other person upon a search warrant authorized by Law, shall open any 
letter not addressed to himself. 

Sec. 1718. Libelous matter on wrappers or envelopes. — All matter otherwise 
mailable by law, upon the envelope or outside cover or wrapper of which, or any 
postal card upon which is written or printed or otherwise impressed or apparent 
any delineation, epithet, term, or language of libelous, scurrilous, defamatory, or 
threatening character, or calculated by the terms or manner or style of display 
and obviously intended to reflect injuriously upon the character or conduct of 
another, is nonmailable matter, and shall not be conveyed in the mails nor de- 
livered from any post office nor by any letter carrier, and shall be withdrawn from 
the mails under such regulations as the Postmaster General shall prescribe. 

Whoever knowingly deposits for mailing or delivery, anything declared by this 
section to be nonmailable matter, or knowingly takes the same from the mails 
for the purpose of circulating or disposing of or aiding in the circulation or dis- 
position of the same, shall be fined not more than $1,000 or imprisoned not more 
than one year, or both. 

Sec 1725. Postage unpaid on deposited mail matter. — Whoever knowingly 
and willfully deposits any mailable matter such as statements of accounts, cir- 
culars, sale bills, or other like matter, on which no postage has been paid, in any 
letter box established, approved, or accepted by the Postmaster General for the 
receipt or delivery of mail matter on any mail route with intent to avoid payment 
of lawful postage thereon, shall for each such offense be fined not more than 
$300. 

Sec 1728. Weight of mail increased fradulently. — Whoever places any matter 
in the mails during the regular weighing period, for the purpose of increasing 
the weight of the mail, with intent to cause an increase in the compensation of 
the railroad mail carrier over whose route such mail may pass, shall be fined 
not more than $20,000 or imprisoned not more than five years, or both. 



Exhibit No. 10 

June 23, 1950. 
Hon. Estes Kefauver, 

Chairman, Senate Special Crime Investigating Committee, 

United States Senate. 
Dear Mr. Chairman : Pursuant to the request made upon me during my 
testimony before your committee on June 23, the following additional informa- 
tion is furnished : 

1. For the fiscal year 1949 out of a total of 150,569 cases investigated by the 
Post Office Inspection Service 6,332 investigations were made under the classifi- 
cation of "E" cases. This classification includes the mailing of obscene, scurri- 
lous, defamatory, and threatening matter, poisons, narcotics, explosives, intoxi- 
cating liquors, and the like. I regret that it is impossible to state from our 
records exactly how many of these investigations related to obscenity. It is es- 
timated, however, that at least 50 percent of such investigations did relate to 
obscenity. 

2. Prosecution in the matter of the United States of America v. Charles J. 
Rich et al (Criminal No. 17246) and the United States of America v. Frank 
Camarrata et al (Criminal No. 17247), was handled in the office of Mr. William 
W. Hart, United States attorney for the eastern district of Illinois, East St. 



'ORGANIZED CRIME EST INTERSTATE COMMERCE 249 

Louis, 111. These are the cases in which Judge Wham held that the postal 
lottery statutes (18 U. S. C 1302) did not cover the bookmaking schemes of the 
defendants. 

3. Regarding the "railroader" lottery, our records show that the case against 
defendants Martin A. Bowman et al. was prosecuted by Assistant United States 
Attorney J. J. Holtz before Judge Brewster on August 8, 1939, at Boston, 
Mass. 

Sincerely yours, 

C. C. Garner, Chief Inspector. 



Exhibit No. 11 



Case No. 27595-F. Tres Americas sweepstake (promotion of lottery), Managua, 
Nicaragua; Los Angeles, Calif. 

On July 3, 1942, a report was submitted to the United States attorney at San 
Francisco, Calif., resulting in an indictment being filed charging 61 promoters, 
distributors, and agents, residing in 16 States, with having used the mails, making 
interstate shipments by express, and conspiracy, in connection with promotion 
of a lottery. 

Sixty of the defendants were arrested, and 57 entered pleas of guilty. One 
of the defendants, 75 years of age and ill, was dismissed after having been confined 
in jail for 1 month, while the remainder were sentenced to pay fines ranging from 
$50 to imprisonment up to 2 years. Four of the defendants were not brought 
before the court and the indictment was dismissed for various reasons. 

An estimated $10,000,000 was filched from the public based upon three scheduled 
drawings for which 12,000,000 tickets were printed. 

Principal defendant, Harry Sampson Marks, New York City. 

Closely associated : John Sherman, Max Feinstein, Benjamin Bloom, Henry 
Schwab, Meyer Miles Marks, Brooklyn, N. Y. ; Sam B. Swartzberg, Beverly Hills, 
Calif. ; Thomas A. Hawkins, Los Angeles, Calif. ; Henry Manella, Montreal, 
Canada ; Abe Cohen, Washington, D. C. 



Case No. 12000-F. Canadian national lottery, Springfield, Mass. 

While this lottery was represented to be sponsored in Canada and backed by 
the Canadian National Railways, it was actually organized, promoted, and run 
by a man in Springfield, Mass. The lottery was operated in the New England 
States and in part of the State of New York. Tickets, which were distributed 
by automobile and express, were bought principally by mill and factory workers 
and laborers of poorer classes. The tickets sold for $1 or less. No drawings 
were ever held, however, prizes not to exceed $25 were sometimes paid in order 
to stimulate sales. This lottery was in operation for 5 years and the amount 
filched from the public is conservatively estimated at $450,000. The promoter had 
made his living by the sale of fraudulent sweepstake tickets and the promotion 
of fraudulent lotteries for at least 15 years. He was arrested, indicted, and 
convicted on a charge of using the mails in a scheme to defraud, and was sen- 
tenced in 1937 to 1 year and 1 day in the penitentiary and was also given a sus- 
pended sentence for a like period. 

Promoter was only one arrested and convicted: John P. Cooley (ex-convict), 
Springfield, Mass. 



Case No. 3888-F, Boston, Mass.: 

Manufacture and sale of fraudulent Montreal Post Graduate Hospital trust 
fund sweepstakes tickets, promoted from January 1, 1935, to about July 10, 1935, 
by a group of underlords from New York, New Jersey, Massachusetts, and Canada, 
Arrangements were made to have the sweepstakes ticket sponsored by a physi- 
cian held in disrepute by the Montreal medical profession. Both the hospital and 
the trust fund were nonexistent. 

More than $2,000,000 in lottery tickets sold at $1 each were printed in the 
United States and distributed by mail and express to agents and subagents. 
There were no drawings or prizes and the proposition was a fraud in its entirety. 
On pleas of guilty, 23 of the defendants received average sentences of a year 



250 ORGANIZED CRIME IN INTERSTATE COMMERCE 

and a day. The doctor who acted as sponsor could not be extradited from Canada 
and was not prosecuted. 

Dr. Joseph N. Chaussee, disreputable doctor : Paul J. Berney, Harry Sherman, 
Daniel Lathrop, among the principal promoters. 



Case No. 60&69-F. Spot Commission Co. (Charley Gordon, operator), Shr eve- 
port, La. 

Bookmaking scheme specializing in bets on football games, but also dealing 
with basketball, baseball, and racing. Gordon mailed customers weekly lists 
of games to be played, betting odds, line sheets, etc., solicited bets, and accepted 
them through the mails or by telephone or telegraph. After games were played, 
he mailed checks or statements of account. During the football season he hau- 
dled from $20,000 to $50,000 per week. During the investigation in 1948, In- 
spector Pinson estimated Gordon had netted $55,000 from the scheme. 

When arrested for violation of postal lottery statutes, Gordon waived indict- 
ment, pleaded guilty, and was fined $1,000 on each count. He has apparently 
discontinued the scheme. It was the- informal opinion of the judge, United 
States attorney, and the Solicitor for the Post Office Department that the mail- 
ing of such material by Gordon constituted violation of the postal fraud statutes^ 



ORGANIZED CRIME IN INTERSTATE. COMMERCE 



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Exhibit No. 13 



PERCENTAGE' OF REPEATERS 
AMONG PRISONERS COMMITTED TO FEDERAL INSTITUTIONS 
UNDER SENTENCE OF MORE THAN I YEAR FOR SELECTED OFFENSES, 
FISCAL YEAR ENDED JUNE 30, 1949. 



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COMMITMENTS PERCENT 

20 40 



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EMBEZZLEMENT 

SELECTIVE SERVICE ACT OF 1940 

MILITARY COURT-MARTIAL CASES 

JUVENILE DELINQUENCY ACT 

FRAUD 

WHITE SLAVE TRAFFIC ACT 

THEFT FROM INTERSTATE COMMERCE 

MARIHUANA TAX ACT 

COUNTERFEITING 

LIQUOR LAWS 

POSTAL LARCENY 

NARCOTIC DRUGS (EXCEPT MARIHUANA) 647 

FORGERY 718 — 

NATIONAL MOTOR VEHICLE THEFT ACT 2,149 

IMMIGRATION 139 




OTHER OFFENSES 
ALL OFFENSES 



ORGANIZED CRIME EST INTERSTATE. COMMERCE 



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254 



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-18 



ORGANIZED CRIME IN INTERSTATE COMMERCE 
Exhibit No. 15 



258 



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1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 

Chart 1. — Prisoners in State and Federal prisons and reformatories, for the United States, 

1939-48 

Prisoners in State and Federal Prisons and Reformatories 

movement of prisoners in state and federal prisons and reformatories: 194s 
(preliminary data, subject to revision) 

At the end of 1948 there were 157,470 prisoners in State and Federal prisons 
and reformatories, according to figures released today by James V. Bennett, 
Director, Bureau of Prisons, Department of Justice. This represents an increase 
of 4,906 prisoners, or 3.2 percent, over the 152,504 prisoners confined in these 
institutions at the end of 1947. 

In connection with his release of the accompanying chart and three statistical 
tables dealing with State and Federal prisoners, Mr. Bennett commented as 
follows : 



























PRISONERS PRESENT AT END 


OF YEAR. 




















































































PRIS0NE 


RS RECEr 


fED FROM 


COURT 





























































ORGANIZED CRIME IN INTERSTATE. COMMERCE 



259 



The 9 years from the beginning of 1940 through 194S have witnessed wide 
changes both in the volume of commitments to State and Federal prisons and 
reformatories and in the number of prisoners confined in these institutions. 
These changes, which may be noted in chart 1 and table 1, seem for the most part 
to have been caused indirectly by this Nation's participation in World War II. 

At the end of 1939, almost 2 years before Pearl Harbor, the population of State 
and Federal penal and correctional institutions stood at 182,641. During the 
succeeding 5 years, the prisoner population declined steadily to a low point for 
the 9-year period of 134,236. This figure, reached at the end of 1944, represented 
a decrease of 48,405, or 26.5 percent. 

Several factors contributed to the decline. Stepped-up defense preparations 
began in 1940 and meant improved economic conditions and thus better job oppor- 
tunities for those who might otherwise have become first offenders as well as for 
the thousands of persons released from prisons and reformatories. Contributing 
also was the shift of approximately 11,000,000 persons from the civilian popula- 
tion to the armed forces. Most of these were young adults and thus in the age 
group most likely to violate laws. 

The figures presented do not, of course, include persons committed to the cor- 
rectional institutions operated by the armed services. Thus the war period was 
an abnormal one with respect to the factors which determine the size of the 
regular prison population. 

The increase in prisoners after 1945, as military personnel returned to civilian 
life, seems to have constituted merely a readjustment to a more normal situation. 
It is to be noted that table 1 shows that the 157,470 prisoners present December 
31, 1948, was 25,171 less than the 182,641 confined in State and Federal prisons 
and reformatories at the end of 1939. This decrease of 13.8 percent is significant 
when it is considered that from December 31, 1939, to December 31, 194S, the 
civilian population of the country is estimated to have increased by more than 
10 percent. 

In table 2 movement of population figures for 194S are shown by sex for State 
and Federal prisons and reformatories. Table 3 presents by individual States 
the total figures for State institutions shown in table 2. 

Data for the three tables were furnished by the Bureau of the Census and 
were compiled from figures submitted by the cooperating prisons and reforma- 
tories. 



Tablk 1. — Prisoners present at end of year and prisoners reeeived from court, 
by type of institution, for the United States, 1989^8 

[Includes estimates for certain State institutions] 





Prisoners 


present at end of year 


Prisoners received from court 


Year 


All insti- 
tutions 


Federal in- 
stitutions 


State in- 
stitutions 


All insti- 
tutions 


Federal in- 
stitutions 


State in- 
stitutions 




Total 


1948 

1947 

1946 


157. 470 
152, 564 
141,404 
134. 802 
134, 236 
138, 710 
152, 967 
166, 939 
175,572 
182, 641 


16, 307 
17, 146 

17, 622 

18, 638 
18, 139 
16,113 
16, 623 

18. 465 

19, 260 
19, 7.30 


141,163 

135, 418 
123, 782 
116. 164 
116,097 
122. 597 

136. 344 
148, 474 
156, 312 
162,911 


70. 479 

68, 281 
64, 044 
56, 444 

53, 984 

54, 236 
66, 329 
77. 219 
81, 193 
I 1 ) 


12, 084 
12,948 
14.950 
17, 171 
14,047 

12, 203 

13. 725 
15, 350 
15, 109 


58, 395 
55, 333 
49 094 


1945... . 


42 273 


1944... 


39, 937 
42, 033 
52. 604 
61, 869 


1943- 


1942... 

1941 


1940 ... 


66, 084 
(i) 


1939 








Rate per 100,000 of the estimated civilian population 


1948.-.. 


108.4 
106.9 
102.2 
105.8 
106.1 
108.9 
116.9 
126.9 
133.4 
139.5 


11.2 
12.0 
12.7 
14.6 
14.3 
12.6 
12.7 
14.0 
14.6 
15.1 


97.2 
94.9 
89.4 
91.1 
91.8 
96.2 
104.2 
112.9 
118.7 
124.5 


48.5 
47.9 
46.3 
44.3 
42.7 
42.6 
50.7 
58.7 
61.7 


8.3 
9. 1 
10.8 
11. 1 
11. 1 
9.6 
10.5 
11.7 
11.5 


40.2 


1947.. 


38.8 


1946 


35.5 


1945 


33.2 


1944-_ 


31.6 


1943. 


33.0 


1942 


40.2 


1941 


47.0 


1940 


50.2 


1939 


(i) 







1 Comparable lata not available, 



260 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Exhibit No. 16 

Federal prisoners received from the courts for violation of income tax laws, fiscal 
years ended June 30, 19J f 4-50 



1944 '_ 20 

1945—, 15 

1946 r>i 

1947 43 

1948 103 



1949 146 

1950 164 

Total 542 



Exhibit No. 17 

CHAPTER 586— H. F. NO. 698 

[Coded as Sections 325.53 to 325.62] 

An act relating to licenses for the carrying on of any business, trade, vocation, or com- 
mercial enterprise, and providing for revocation of license by reason of the operation of 
gambling devices 

Be it enacted by the Legislature of the State of Minnesota: 

[325.53] Definitions. Section 1. Subdivision 1. Words, terms, and phrases. 
For the purposes of this act, unless a different meaning is indicated by the con- 
text, the words, terms, and phrases defined in this section shall have the meanings 
given them. 

Subd. 2. Gambling devices. "Gambling devices" mean slot machines, roulette 
wheels, punchboards, number pars, and pinball machines which return coins or 
slugs, chips, or tokens of any kind, which are redeemable in merchandise or cash. 

Subd. 3. Person. "Person" means an individual, a copartnership, an asso- 
ciation, a corporation, or any other entity or organization. 

Subd. 4. Municipality. "Municipality" means any county, city, village, 
borough, or town. 

Subd. 5. License. "License" includes permits of every kind, nature, and de- 
scription issued pursuant to any statute or ordinance for the carrying on of 
any business, trade, vocation, commercial enterprise, or undertaking. 

Subd. 6. Licensee. "Licensee" means any person to whom a license of any kind 
is issued, but does not include a common carrier transporting, or a public ware- 
houseman storing, any gambling device for hire, or a manufacturer or distributor 
of such devices keeping the same only for the purpose of sale or distribution to 
others or repairing of same. 

Subd. 7. Licensed business. "Licensed business" means any business, trade, 
vocation, commercial enterprise, or undertaking for which a license is issued. 

Subd. 8. Licensed premises. "Licensed premises" means the place or building, 
or the room in a building, designated in the license as the place where the licensed 
business is to be carried on, and all land adjacent thereto and used in connection 
with and in the operation of a licensed business, and all adjacent or contiguous 
rooms or buildings operated or used in connection with the buildings where the 
licensed business is carried on. If no place is described in any license, then 
"licensed premises" means the building or place where the licensed business is 
carried on under such license. 

Subd. 9. Issuing authority and authority issuing the license. "Issuing author- 
ity" and "authority issuing the license" mean and include the officer, board, 
bureau, department, commission, or agency of the state, or of any of its munici- 
palities, by whom any license is issued and include the councils and governing 
bodies of all municipalities. 

[325.54] Gambling Device ; possession of. Sec. 2. Subdivision 1. Intentional 
possession ; wilful keeping. The intentional possession or wilful keeping of a 
gambling device upon any licensed premises is cause for revocation of any license 
under which the licensed business is carried on upon the premises where the 
gambling device is found. 

Subd. 2. Revocation of licenses. All licenses under which any licensed business 
is permitted to be carried on upon the licensed premises shall be revoked if the 
intentional possession or wilful keeping of any such gambling devices upon the 
licensed premises is established, notwithstanding that it may not be made to 
appear that such devices have actually been used or operated for the purpose of 
gambling. 



ORGANIZED CRIME IN INTERSTATE COMMERCE 261 

[325.55] Issuing authority to revoke. Sec. 3. The proceedings for revoca- 
tion shall be had before the issuing authority, which have power to revoke the 
license or licenses involved, as hereinafter provided. 

[325.56] Peace officers to observe and inspect premises. Sec. 4. Every 
sheriff, deputy sheriff, constable, marshal, policeman, police officer, and peace 
officer shall observe and inspect the premises where occupations are carried on 
under license and ascertain whether gambling devices are present thereon and 
immediately report the finding thereof to the authority or authorities issuing the 
license or licenses applicable to the premises in question. 

[325.57] Poceedings before issuing authority ; order to show cause. Sec. 5. 
Upon the receipt of such information from any of the peace officers referred to 
in section 4, if any issuing authority is of the opinion that cause exists for 
the revocation of any such license, then that authority shall issue an order to 
show cause directed to the licensee of the premises, stating the ground upon 
which the proceeding is based and requiring him to appear and show cause at a 
time and place, within the county in which the licensed premises are located, 
not less than ten days after the date of the order, why his license should not be 
revoked. That order to show cause shall be served upon the licensee in the 
maimer prescribed by law for the service of summons in a civil action, or by 
registered mail, not less than eight days before the date fixed for the hearing 
thereof. A copy of the order shall forthwith be mailed to the owner of the 
premises, as shown by the records in the office of the register of deeds, at his 
last known postoffice address. A copy of the order shall at the same time be 
mailed to any other issuing authority, of which the authority issuing the order 
to show cause has knowledge, by which other licensee [licenses] to that licensee 
may have been issued, and any such other authority may participate in the 
revocation proceedings after notifying the licenses [licensee] and the officer or 
authority holding the hearing of its intention so to do on or before the date 
of hearing, and after the hearing take such action as it could have taken had 
it instituted the revocation proceedings in the first instance. 

[325.58] Revocation of license. Sec. 6. Subdivision 1. Revocation; stay; 
appeal. If, upon the hearing of the order to show cause, it appears that the 
licensee intentionally possessed or wilfully kept upon his licensed premises any 
gambling device, then the license or licenses under which the licensed business 
is operated on the licensed premises, shall be revoked. The order of revocation 
shall not be enforced during the period allowed by section 10 for taking an appeal. 
Subd. 2. Limitation as to issuance of new license on premises. No new license 
or licenses for the same business upon the same premises shall be issued for the 
period of one year thereafter, except as hereinafter provided. 

[325.5!>] Duties of county attorney. Sec. 7. The county attorney of the county 
in which the hearing is held shall attend the hearing, interrogate the witnesses, 
and advise the issuing authority. He shall also appear for the issuing authority 
on any appeal taken pursuant to the provisions of section 10. 

[325.60] Witnesses. Sec. 8. The issuing authority may issue subpoenas and 
compel the attendance of witnesses at any hearing. Witnesses duly subpoenaed 
and attending any such hearing shall be paid fees and mileage by the issuing 
authority equal to the fees and mileage paid witnesses in the district court. 

[325.61] Property owners liability. Sec. 9. AVhen a license is revoked under 
the provisions of this act, the owner of the premises upon which any licensed 
business has been operated shall not be penalized by reason thereof unless it is 
established that he had knowledge of the existence of the gambling devices re- 
sulting in license revocation. 

[325.62] Appeal to district court ; stay : continuance under bond ; hearing 
upon one year limitation on premises. Sec. 10. Any licensee, or any owner of 
licensed premises, aggrieved by an order of an issuing authority revoking any 
license may appeal from that order to the district court of the county in which 
the licensee resides by serving a notice of his appeal upon the issuing authority 
or the clerk thereof. The notice of appeal shall state that the person appealing 
takes an appeal to that district court from the order revoking the license or 
licenses, describing them and identifying the order appealed from. This notice 
shall be served within 15 days from the date of service of the order appealed 
from, and the same, with proof of service thereof, shall be filed with the clerk 
of the district court of the proper county. The appeal shall stand for trial at 
the next term of the district court following the filing of the notice of appeal, 
without the service of any notice of trial, and shall be tried in the district court 
de novo. The trial shall be by jury if the appellant shall so demand. The licensee 
may continue to operate the licensed business or businesses until the final dis- 



262 ORGANIZED CRIME EST INTERSTATE COMMERCE 

position of such appeal. If the district court upon the appeal shall determine 
that any license involved in the appeal should be revoked, it may, nevertheless, 
in its discretion permit the continuance of the licensed business under a bond 
in the amount and in the form and containing the conditions prescribed by the 
court. The district court on the appeal, or in a separate proceeding, may permit 
the issuance of a new license to a different licensee before the expiration of the 
period of one year specified in subdivision 2 of section 6, upon such terms and 
conditions imposed by the court as will insure that no gambling device shall 
thereafter be maintained upon the licensed premises. 
Approved April 26, 1947. 

Exhibit No. 18 

Before the Federal Communications Commission, Washington, D. C. 

In the Matter of the Petition of the Public Utilities Commission of the State of 
California for an order of the above-entitled Commission instituting on its own 
motion an investigation into the use being made of communications facilities 
and instrumentalities in interstate and foreign commerce, for the purpose of 
determining if such use, in any instance, is in violation of law or is aiding or 
abetting, directly or indirectly, a violation of law or is not in the public interest 

Your petitioner, the Public Utilities Commission of the State of California, 
for grounds of this petition, alleges as follows : 



That your petitioner is a public agency of the State of California created by 
the provisions of article XII of the constitution of said State and is invested by 
said constitution and statutes enacted pursuant thereto with exclusive juris- 
diction over public utilities and is authorized by law to file this petition. 

II 

That, on the 17th day of December 1947, your petitioner, on its own motion, 
issued its order instituting an investigation into the use being made of commu- 
nications facilities and instrumentalities for the purpose of determining if such 
use. in any instance, was in violation of law or was aiding or abetting, directly 
or indirectly, a violation of law or was not in the public interest, a copy of said 
order of investigation being annexed to this petition, marked "Exhibit A," and 
by reference made a part hereof. That said investigation was conducted through- 
out the State and public hearings were held at several places therein. That, 
pursuant to said investigation, your petitioner, on the 6th day of April 1948, issued 
its decision (No. 41415), a copy of said decision being annexed to this petition, 
marked "Exhibit B" and by reference made a part hereof. That said decision 
is final and is now, and since April 26, 1948, has been, in full force and effect. 

Ill 

That the above-entitled Commission has exclusive jurisdiction over interstate 
and foreign communications service, facilities, and instrumentalities and the 
several States are excluded from exercising jurisdiction thereover. That, as 
shown by said decision issued by your petitioner, an interstate telegraph wire 
operated by the Western Union Telegraph Co. is leased by the Continental Press 
Service and said wire is used by the latter to transmit up-to-the-minute informa- 
tion concerning sporting events, including horse races, to many persons through- 
out the United States and foreign countries, who, in turn, use said information 
in conducting the activity of "bookmaking," in violation of the laws of many of 
the States denouncing bookmaking as a public offense. That such situation exists 
in the State of California. 

IV 

That the information transmitted over said leased wire creates the opportunity 
for successful bookmaking, sustains and nourishes that unlawful activity, and 
renders it practically impossible for the several States to enforce their laws pro- 
hibiting bookmaking. It is the opinion of jour petitioner that, so long as the 



ORGANIZED CRIME IN" INTERSTATE. COMMERCE 263 

interstate and foreign field of communications remains without a mandatory pro- 
hibition against the use of interstate and foreign communications service, facili- 
ties, and instrumentalities by wholesalers of information to bookmakers, so long 
with the several States be rendered practically impotent to enforce their laws pro- 
hibiting bookmaking. That the absence of a mandatory rule or regulation pro- 
hibiting the use of interstate and foreign communications service, facilities, and 
instrumentalities for the purpose of transmitting such information to bookmakers 
renders practically unenforceable the decision of your petitioner, heretofore re- 
ferred to. 

V 

In the opinion of your petitioner, the above-entitled Commission, as the ap- 
propriate arm of the Federal Government, is the only public agency possessing 
adequate authority to deal properly and effectively with the subject of dissem- 
ination of such information by interstate and foreign communications utilities, 
which information is, in turn, used by bookmakers to violate the law of the several 
States prohibiting bookmaking. That, in the opinion of your petitioner, it would 
be in the public interest for the above-entitled Commission to institute on its 
own motion an investigation into the use to which interstate and foreign com- 
muncations service, facilities, and instrumentalties are being put to ascertain if 
said service, facilities, and instrumentalities are being used to violate or to aid 
or abet, directly or indirectly, the violation of any State law and, if such condi- 
tion be found to exist, to prescribe an appropriate rule or regulation designed to 
abate such unlawful use. 

Wherefore your petitioner prays that the above-entitled Commission institute, 

on its own motion, an investigation for the purpose specified in this petition 

wth a view to finding the facts as they exist and, if the facts as found so justify, 

the said Commission prescribe a proper rule or regulation in the public interest. 

Dated October 4, 1948. 

Public Utilities Commission of the State of California, 
By R. E. Mittelstaedt, President. 

Everett C. McKeage, 
Roderick B. Cassidy, 
Hal F. Wiggin; 
Boris H. Lakusta 
J. Thomason Phelps, 
Attorneys for Petitioner. 

State of California, 

City and County of San Francisco, ss: 
R. E. Mittelstaedt, being first duly sworn, deposes and says that he is the duly 
appointed, qualified, and acting president of the Public Utilities Commission of 
the State of California ; that he is authorized to and does hereby make this 
verification on behalf of the petitioner herein ; that he has read the foregoing 
petition and knows the contents thereof; and that the same is true of his own 
knowledge except as to matter therein stated on information or belief of peti- 
tioner and as to such matter that he believes it to be true. 

R. E. Mittelstaedt. 

Subscribed and sworn to before me this 4th day of October 1948. 

R. J. Pajalich, 
Secretary of the Public Utilities Commission of the State of California. 

Exhibit A 

Before the Public Utilities Commission of the State of California 

Investigation on the Commission's own motion into the use being made of 
communications facilities and instrumentalities for the purpose of determining 
if such use, in any instance, is in violation of law or is aiding or abetting, 
directly or indirectly, a violation of law or is not in the public interest. Case 
No. 4930. 

order instituting investigation 

It having been represented to this Commission that the use being made by 
communications facilities and instrumentalities, in many instances, may be in 



264 ORGANIZED CRIME EST INTERSTATE COMMERCE 

violation of law or such use may be aiding or abetting, directly or indirectly, a 
violation of law or is not in the public interest, 

It is ordered that an investigation on the Commission's own motion be, and 
the same is hereby, instituted for the purpose of determining — 

(a) If the use being made of communications facilities or instrumentalities, 
in any instance, is in violation of law or is aiding or abetting, directly or 
indirectly, a violation of law or is not in tbe public interest and, if such use be 
found to exsit, what action this Commission should take to prohibit or abate 
such use ; and 

(b) What action should be taken by this Commission to cause communications 
facilities and instrumentalities, if found to be employed in the use described in 
item (a) above, to be utilized for the purpose of satisfying legitimate demand for 
communications services. 

This proceeding is hereby assigned to Commissioner Huls, or such examiner 
as may be designated to take evidence on his behalf, and public hearings herein 
are hereby ordered to be held before such Commissioner or examiner on Wednes- 
day, the 25th day of February 1948, at the Commission's courtroom, room 540, 
State Building, Civic Center, San Francisco, Calif., at the hour of 10 o'clock a. m. 
of said day and on Wednesday, the 18th of February 194S, at the Com- 
mission's courtroom, seventh floor, State Building, Los Angeles, Calif., at the 
hour of 10 o'clock a. m. of said day, at which times and places any interested 
party may appear personally or by counsel and offer any evidence, orally or in 
writing, pertinent to the subject matter of this investigation. 

The communications utilities, named in exhibit A annexed to this order of 
investigation, are hereby made respondents to this proceeding and will be afforded 
the opportunity to appear at the hearings above scheduled and offer any evidence, 
orally or in writing, or make any representations pertinent to the subject matter 
of this investigation. 

The secretary is hereby directed to cause a copy of this order of investigation to 
be mailed, at least ten (10) days prior to the first hearing date set herein, to the 
following : 

1. Each of the communications utilities named in Exhibit A annexed to this 
order of investigation. 

2. The Special Crime Study Commission on Organized Crime, Department of 
Corrections, of the State of California. 

3. The attorney general of this State. 

4. Each district attorney and each sheriff of each county and city and county of 
this State. 

5. The chief of police of each of the principal cities of this State. 

6. Such other parties as the Commissioner may designate. 
Dated, San Francisco, Calif., this 17th day of December 1947. 

Harold P. Huls, 
Justus F. Ckaemee, 
Ira H. Rowell, 

R. E. MlTTELSTAEDT, 

Commissioners. 
Note. — Exhibit A, listing the communications utilities, has been omitted herein. 

Exhibit B 

Decision No. 41415 

Before the Public Utilities Commission of the State of California 

Investigation on the Commission's own motion into the use being made of 
communications facilities and instrumentalities for the purpose of determining 
if such use, in any instance, is in violation of law or is aiding or abetting, directly 
or indirectly, a violation of law or is not in the public interest. Case No. 4930. 

F. V. Rhodes and Marshall K. Taylor, for California Independent Telephone 
Association ; Marshall K. Taylor, for Associated Telephone Company, Limited, 
San Joaquin Associated Telephone Company, and Consolidated Telephone Com- 
pany ; Pillsbury, Madison & Sutro, by John A. Sutro and Francis N. Marshall, for 
Pacific Telephone and Telegraph Company ; Pillsbury, Madison & Sutro, by Hugh 
Fullerton and Henry G. Hayes, for Western Union Telegraph Company, respond- 
ents. Fred N. Howser, Attorney General, for the State of California, John H. 



ORGANIZED CRIME IN INTERSTATE. COMMERCE 265 

Hanson, Chief Investigator of the Special Crime Study Commission on Organized 
Crime, for the State of California ; Roger Arnehergh, for the City of Los Angeles ; 
Warren Olney, for State Commission on Organized Crime; Everett C. McKeage 
and Roderick B. Cassidy of the Commission's Staff, appearing for the Public 
Utilities Commission. 



Public hearings in this matter were held, before Commissioner Huls and Exam- 
iner Syphers, on February 18 and 19, 1948, at Los Angeles, February 25 and 26, 
1948, at San Francisco, and March 10, 1948, at Sacramento. On these dates evi- 
dence was addused and on the last-named date the matter was submitted. 

These hearings were initiated on the Commission's own motion after the Com- 
mission had informally considered the subject matter of the instant investiga- 
tion and after the receipt of a letter, 1 dated December 12, 1947, from the Special 
Crime Study Commission on Organized Crime, alleging that organized book- 
making and the so-called "wire service" on which it depends are able to exist 
only because of their extensive use of the facilities of communications utilities. 

The provisions of section 337a of the Penal Code denounce bookniaking as a 
public offense. 

At the hearing, testimony was introduced by the Attorney General of the State 
of California which included information showing the number of arrests for 
bookniaking, 2 by counties, in the State, the number of telephones seized by police 
officers, the number of convictions for bookniaking, and various other informa- 
tion. 3 These exhibits clearly indicate that there has been a large amount of 
bookniaking conducted in the State of California, particularly in the more popu- 
lous counties such as Alameda, San Diego, San Francisco, and Los Angeles. 
Testimony was received from the sheriffs of Imperial, Los Angeles, and Alameda 
Counties, from the chiefs of police of the Cities of Long Beach, Los Angeles, 
Fresno, Merced, and Stockton, from the United States Attorney for the Southern 
District of California, and from the district attorneys of Los Angeles, San 
Diego, Stanislaus, Alameda, and Sacramento Counties, all of which testimony 
indicated that bookniaking is a major law enforcement problem. This testimony 
further indicated that bookniaking is a definite evil in that it promotes gang- 
sterism, contributes to delinquency and nonsupport, and fosters, within the 
public itself, a disrespect for law enforcement. These officials were practically 
unanimous in stating that every effort should be made to stamp out bookniaking 
and they further stated that bookmakers were almost completely dependent 
upon the use of telephone and telegraph facilities. It was the conclusion of 
these law-enforcement officials that one of the most effective methods of con- 
trolling bookniaking would be to curtail, or prohibit completely, if possible, the 
use, by bookmakers, of telephone and telegraph facilities. 

Other testimony was presented at the hearing indicating, in some detail, the 
methods used by bookmakers in carrying on their business. It was developed 
that, while there is legalized pari mutuel betting at the race tracks in California, 
the operators and proprietors of these licensed tracks are not favorable to illegal 
bookniaking operations. They take the view that off-track bookmakers consti- 
tute "parasites" and are undesirable. Accordingly, it is the general practice 
at race tracks in California to prohibit any activities which would further illegal 
bookmakings. To this end all of the public telephones at the race tracks are 
locked approximately a half hour before the starting time of each race. In addi- 
tion, any special activity which has for its purpose the gathering and dissem- 
inating of racing information, other than that gathered and disseminated by the 
regular newsgathering agencies, is prohibited. Only the authorized press serv- 
ices and newspapers have access to the track press boxes. The so-called spe- 
cialized racing information services are barred. 

The testimony indicated that there has developed in the United States special 
racing news-gathering services. Among these are the Continental Press Service 
and the Pioneer News Service. According to the testimony, the Continental 
Press Service consists of a wire service which is leased from the Western Union 



i Exhibit No. 2. 

2 As used in this report, bookniaking refers to any arrangements for the taking of off- 
track bets on horse racing. 

9 Exhibit No. 3 showed this information as related to cases handled by district attorneys 
throughout the State : exhibit No. 4 showed the same information as to cases handled by 
sheriffs' offices ; and exhibit No. 5 showed the same information as to cases handled by 
police departments. 



266 



ORGANIZED CRIME IN INTERSTATE COMMERCE 



and which has outlets at various cities throughout the United States ; specifically, 
this press service has the following drops in California : 



Name of subscriber 


Address 


Date service 
started 


Tejon News .. 


1911 Edison Highway, Bakersfleld._ 


May 12,1945 


Consolidated Publishing Co 


615 North La Brea Ave., Los Angeles 


Do. 


Los Angeles Journalist 


208 West 8th St., Los Angeles 


Do. 


George Zouganiles 


181 Andreas Rd., Palm Springs . 


Sept. 3, 1946 


Arrowhead News 


362 D St., San Bernardino 


Aug. 12,1946 




211 Piatt St., San Bernardino.-. 


Do. 


Southwest News 


919 4th Ave., San Diego. 


Nov. 5, 1945 






May 12, 1945 









This press service is a Morse wire and the drops consist of both sending and 
receiving telegraph sets. 

The Pioneer News, having headquarters at 333 Montgomery Street, San 
Francisco, Calif., is a service consisting of a wire leased from Western Union, 
over which is operated teleprinter or ticker sets. These teleprinters are the 
same instruments as are used in reporting stock-market news and are located 
at various drops in California ; specifically, these locations are : 



Name 



Address 



Date service 
started 



Date 
temporarily 
disconnected 



Roy Simon 

J. Bozeman 

W. Musso 

J. Farrell 

Mint Smoke Shop. 

Del Kennedy 

M. Magee 

C. Atkin 

Pioneer News 

F. Masonie 

101 Service Station 

Andy's Service 

Geneva Club 



1910 Tuolumne St., Fresno 

326 Virginia St., Vallejo 

215 Georgia St., Vallejo 

216 Georgia St., Vallejo 

237 Georgia St., Vallejo 

1160 Old Country Rd., Belmont 

1617 Old Country Rd., Belmont 

145 Montgomery St., San Francisco... 
127 Montgomery St., San Francisco... 

145 Mason St., San Francisco 

Bayshore Highway, Bayshore 

2637 Bayshore Highway, Bayshore 

3201 Geneva Ave., Bayshore 



June 22, 1946 
May 25, 1946 

do___ 

do. 



Aug. 
Oct. 
July 
Oct. 
Jan. 
Mar. 
Jan. 
Aug. 
Nov. 



14, 1947 
8, 1945 
19, 1947 

8. 1945 

30. 1946 

4. 1946 

31. 1947 
16, 1947 
17, 1947 



Feb. 19, 1948 
Jan. 29,1948 

Do. 
Jan. 23,1948 
Jan 29, 1948 
Feb. 19,1948 

Do. 

Do. 

Do. 

Do. 
Apr. 16,1947 
Jan. 30,1948 
Feb. 19,1948 



It will be noted from an analysis of the above table that most of the drops of 
the Pioneer News Service were temporarily disconnected after the commence- 
ment of these hearings on February 18, 1948. 

While the technical equipment of these two wire services, the Continental Press 
and the Pioneer News, are different in that one uses telegraph keys and the 
other uses teleprinters, still, in other respects, the basic method of operation is 
similar. Information as to this method of operation was produced at the hear- 
ing. Since the Continental Press and the Pioneer News are among those services 
which are barred from the race tracks, they use various unorthodox methods 
to obtain information. The most common of these methods, according to the 
testimony, is to use "signalers" or "wigwaggers," individuals who attend the 
races at the track and, by a system of signals, relay information to confederates 
outside who, in turn, send the information to the wire services. 

Exhibits Nos. 33 to 37, introduced in evidence, consist of photographs showing 
a phone installation and a telescope in a house within view of the Santa Anita 
Race Track. The equipment shown in the photographs was used by one Ed 
Coplansky who, apparently, employed a telescope to observe signals from wig- 
waggers within the track. The information so obtained was telephoned to a 
drop of one of the wire services. The phone used by Coplansky was one which 
illegally had been tapped into the phone line of the owner of a nearby house. 

The apparent reason these specialized wire services go to such extreme to 
obtain information is that special information is needed by their clients in order 
to conduct successful bookmaking activities. According to the testimony the 
information sent out over the regular news services and published in the 
regular newspapers, and even the detailed description of the running of races 
given over the radio, do not supply sufficient details to permit successful 
bookmaking. A bookmaker needs the following information: (1) Direct race 
odds and fluctuations in these odds; (2) the post time; (3) the exact off time 



ORGANIZED CRIME IN INTERSTATE. COMMERCE 267 

■within a matter of seconds; (4) a brief description of the race; (5) results of 
the race; (6) prices paid. In addition, a bookmaker needs information as to 
last-minute jockey changes and track conditions. These details are only fur- 
nished by the special racing wire service agencies. 

As previously indicated, this detailed information is obtained at the rack track 
by one device or another, then it is phoned to one of the offices of the wire 
service. At this office the information is placed on the wire and is immediately 
relayed to all of the drops of that particular wire service. Testimony was 
presented showing the operation of these drops. As soon as racing information 
is received it is called over a loud-speaker system. In front of the loud speaker 
are various phones, with the receivers off the hook, and, apparently, at the 
other end of these phones, bookmakers are listening for the information. Thus, 
in a matter of seconds, it is possible to get the information from the track to 
the bookmakers. 

Testimony was presented by various police officers and sheriff's office employees 
as to visits they had made to these various wire-service drops. In each of these 
places, according to the testimony, there are multiple-phone installations. In- 
stances were reported of as many as 26 phones in one room and other testimony 
presented by the telephone company showed the subscribers to these various 
phones. Photostatic copies of the telephone cards listing the names of these 
subscribers were received in evidence as exhibits Nos. 38 to 79, inclusive, and 80 
to 92, inclusive. A general examination of these cards discloses that, while 
there were several phones in one place, most of them were listed under various 
fictitious names, including such terms as secretarial services, process service, 
research companies, printing companies, welding works, and also the names of 
various individuals. 

Apparently, multiple-phone installations are a necessary part of the equip- 
ment used in disseminating racing information to bookmakers. Testimony was 
presented indicating that, in some cases, these multiple-phone installations re- 
sult from unauthorized extensions of existing facilities, while in other cases 
they are made by the telephone companies. 

Exhibits Nos. 16 to 27, inclusive, consist of photographs taken by a sergeant 
of the Los Angeles Police Department, showing the facilities at some of the wire- 
service drops in Los Angeles. In each of these instances equipment consists of 
an instrument for receiving information over the telegraph wire and several 
phones for relaying this information to outside subscribers. These outside sub- 
scribers pay for this service at rates varying from $4 per month to $339.24 per 
month. There is set out below the rates paid by the eight subscribers to the 
Continental Press Service previously listed : 

Subscriber : Monthly charge 
Tejon News ! $144. 40 

Consolidated Publishing Co 63.00 

Los Angeles Journalist 4. 00 

George Zouganiles 72. 27 

Arrowhead News 65. 93 

Colton News 4. 00 

Southwest News 197. 67 

Krelling & Cohen 339. 24 

Additional testimony was presented by police officers as to raids they had made 
on various locations within the State of California. At some of these locations, 
including drops on the previously mentioned wire services, it was found that 
bookmaking was being carried on. 

Testimony was received from representatives of the Western Union, setting 
out the manner in which these wire services are furnished. Arrangements for 
the Morse wire used by Continental Press were made in Cleveland, Ohio, and 
the charges for that lease are paid at Cleveland. The Pioneer News lease, which 
started October 8, 1945, was arranged for by Stanley Cohen, and, apparently, the 
main office of Pioneer News is 333 Montgomery Street, San Francisco, Calif. 

Respondent utilities in this case, so far as they were present at the hearing, 
indicated that their companies had no desire to furnish service for illegal uses 
and, almost unanimously, they indicated willingness to remove or refuse service 
•whenever a bona fide law-enforcement agency instructed them to do so. How- 
ever, they further contended that they were not policemen and it was without the 
scope of their authority to attempt to specifically police their subscribers in an 
effort to determine whether or not the facilities were being used for illegal 
purposes. 



268 ORGANIZED CRIME IN INTERSTATE COMMERCE 

Another problem concerns the question as to whether or not a utility may be 
held liable for damages in an action brought by a subscriber to or applicant for 
service in those cases where the utility has discontinued or refused to extend 
service to such subscriber or applicant and, in this connection, it is the position 
of the utilities that they sholld not be subjected to any rule which would force 
upon them such actions for damages. We are well aware of the position of the 
utilities in this matter. However, it is our view, in the light of the evidence 
adduced in this matter, that certain lawful steps can be taken by the utilities 
which will curtail the use of their facilities by bookmakers. 

From the foregoing evidence, we find that bookmaking is being conducted 
throughout, the State of California on a large scale and, in order to conduct 
successful bookmaking, the operators thereof must have information in excess of 
that which can be obtained through regular news and radio channels. Accord- 
ingly, there has grown up a specialized wire service which has for its principal 
purpose the dissemination of detailed racing information within a matter of min- 
utes after the occurrence of the actual events. This information includes details 
of the track conditions, betting odds, jockey changes, and other facts occurring 
immediately prior to the running of the race, a description of the running of the 
race, and the results thereof. These wire services sell this information to book- 
makers, who, in turn, use it in conducting their business. We also find that 
successful bookmaking cannot be conducted without access to these wire services 
or without access to telephone facilities. 

We further find that it is in the public interest to require communications 
utilities to refrain from furnishing or continuing to furnish any telephone or 
telegraph service that will be or is being used in furthering bookmaking or related 
illegal activities. The use of communications facilities in furtherance of book- 
making being illegal, it follows that such use is contrary and detrimental to the 
public interest. Additionally, the evidence shows that, as of January 31, 1948, 
there were held by the 15 largest telephone companies operating in this State 
241,248 applications for telephone service that could not be filled because of lack 
of instruments, facilities, and materials. This situation makes it imperative that 
all communications instrumentalities and facilities be employed in the public 
interest. 

The right of a person to utility services, such as telephone and telegraph, 
is not an inherent right but is due solely to the fact that the State, in the 
exercise of its police power, has seen fit, under the provisions of the Public 
Utilities Act, to require the utility to serve the public without undue or unrea- 
sonable discrimination. It, therefore, must be concluded that the State, having 
the authority to compel a utility to render service, has the authority to impose 
conditions under which such service. may be furnished or terminated. (See 
Partnoy v. Southwestern Bell Telephone Co., Missouri Public Service Commis- 
sion, June 13, 1947, 70 P. U. R. (N. S.) 134.) It is established by statute in this 
State that a telephone or telegraph company is not required to accept mes- 
sages , which will "instigate or encourage the perpetration of any unlawful 
act * * * " (sec. 638, Penal Code). 

It is the positive duty of a communications utility to exercise vigilance to pre- 
vent the unlawful use of its instrumentalities and facilities. Such utility exer- 
cises a valuable and extraordinary privilege and, in turn, incurs corresponding 
obligations to the public. Surely, one of its highest obligations is to exercise 
vigilance to see that its instrumentalities and facilities are not used in aiding 
and abetting the commission of crime. We are not so naive as to believe that 
the operators of wire services, as discussed in this decision, can conduct their 
business of disseminating racing information without general knowledge as to 
the acitivities of their customers. The evidence in this case shows that some 
of these users of these wire services are engaged in bookmaking. The evidence 
further discloses instances of multiple telephone installations, which installa- 
tions are aiding the activities of bookmakers. Therefore, we believe that any 
such installations should be scrutinized very carefully by the utilities furnishing 
the services and that additional installations should not be made without care- 
ful inquiry as to the nature of their use. 

It is the conclusion of this Commission that communications instrumentalities 
and facilities should not be furnished to persons, who will use them for book- 
making or related illegal purposes ; nor should they be furnished where there 
is strong evidence to indicate that the use will be for such illegal purposes. 
Neither should the furnishing of such instrumentalities and facilities be con- 
tinued where reasonable cause exists for believing that such facilities are being 



ORGANIZED CRIME IN INTERSTATE. COMMERCE 269 

so used. There is a duty resting upon communications utilities to refuse instal- 
lations or to discontinue service when these conditions exist. There is a further 
duty on the utility to make reasonable inquiry as to the use of facilities and, in 
particular, this is true where the facilities are being installed in unusual cir- 
cumstances. 

ORDER 

The above-entitled case having been instituted on the Commission's own 
motion, public hearings having been held therein, said case now being ready for 
decision, the Commission being fully advised in the premises and basing its 
decision upon the evidence of record in this case and upon the findings of fact 
contained in the foregoing opinion, 

It is hereby ordered, That any communications utility operating under the 
jurisdiction of this Commission must refuse to establish service for any appli- 
cant, and it must discontinue and disconnect service to a subscriber, whenever 
it has reasonable cause to believe that the use made or to be made of the 
service, or the furnishing of service to the premises of the applicant or sub- 
scriber, is prohibited under any law, ordinance, regulation, or other legal require- 
ment, or is being or is to be used as an instrumentality, directly or indirectly, to 
violate or to aid and abet the violation of the law. A written notice to such utility 
from any official charged with the enforcement of the law stating that such 
service is being used or will be used as an instrumentality to violate or to aid 
and abet the violation of the law is sufficient to constitute such reasonable 
cause. 

It is further ordered, That any person aggrieved by any action taken or 
threatened to be taken pursuant to the provisions of this decision shall have the 
right to file a complaint with this Commission in accordance with law. This 
remedy shall be exclusive. Except as specifically provided herein, no action at 
law or in equity shall accrue against any communications utility because, or as 
a result of, any matter or thing done or threatened to be done pursuant to the 
provisions of this decision. 

It is further ordered, That each contract for communications service, by opera- 
tion of law, shall be deemed to contain the provisions of this decision, whether 
or not the same be actually included as a parti of the application for such service, 
and the provisions of said decision shall be deemed in law to be a part of any 
application for communications service and the applicant for such service shall 
be deemed to have consented to the provisions of said decision as a consideration 
for the furnishing of such service. 

The term "person," as used in this decision, shall include a subscriber to 
communications service, an applicant for such service, a corporation, a com- 
pany, a copartnership, an association, a political subdivision, a public officer, a 
governmental agency, and an individual. 

The term "communications utility," as used in this decision, includes a "tele- 
phone corporation" and a "telegraph corporation," as those terms are defined 
in the Public Utilities Act. 

The secretary is hereby directed to serve, by registered mail, a certified copy 
of this decision upon each communications utility operating under the juris- 
diction of this Commission and upon each appearance of record herein. 

This decision shall become effective after the expiration of twenty days from 
and after the date hereof. 

Dated at San Francisco, Calif., this 6th day of April 1948. 

R. E. MlTTELSTAEDT, 

Justus F. Craemer, 
Ira H. Roweix, 
Harold P. Huls, 
Kenneth Potter, 

Commission ers. 
X 



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