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Howard Abadinsky

Eighth Edition


Labor racketeering: Infiltration, domination, and use of a union for personal benefit by illegal, violent, and fraudulent means. Labor rackets assume three forms: The sale of strike insurance The sweetheart deal Direct or indirect siphoning of union funds OC conducts most substantial union corruption

The Civil War led to industrialization of the U.S.

Dramatic industrial expansion required a large labor force.

Children often worked 12-hour days and six-day weeks under appalling and unsafe conditions.
Labors struggle for better working conditions and wages has been called a specific response to a specific set of injustices. Until the Civil War, criminal conspiracy laws were used to defeat efforts to organize and strike. Equityin the form of injunctions restraining unions from strikingreplaced this approach.

Not until the Norris-La Guardia Act of 1932 did Congress strip federal courts of their power to issue injunctions in labor disputes.
In 1935, the National Labor Relations Act (the Wagner Act) explicitly protected the rights of workers to organize and collectively bargain. Until the Wagner Act, employers responded to labor confrontations by immediately: firing union leaders; hiring strikebreakers; increasing the guard force; and obtaining a federal injunction.

Many companies used spies to report labors intentions to management. To avoid the problem, unions employed walking delegates who were empowered to call a strike without a formal vote. Some used this power to extort from employers.

These early racketeers intimidated union members and employers but were usually not connected to a syndicate. To combat management thugs, labor initially provided muscle from their membership.

Labor also formed alliances with New York street gangs to protect pickets from management goons.
They quickly came to understand that it was easier to hire gangsters than it was to fire them, and racketeers soon dominated many industries. Racketeers initially avoided large companies such as steel mills, foundries, and auto factories.

But they exploited their control over labor to extort money from small businesses vulnerable to threats of delay (i.e., those dealing in perishable goods such as seafood and produce).
New Yorks Fulton Fish Market is a classic display of OCs power to control an industry.

Industrial unions proved difficult to intimidate, but geographically dispersed unions or those whose employment is sporadic or seasonal proved highly susceptible to racketeering. The Big Four unions in this category are the:
International Brotherhood of Teamsters (IBT); Hotel and Restaurant Employees Union (HEREIU); Laborers International Union of North America (LIUNA, also Laborers); and International Longshoremens Association (ILA). The U.S. Congressional Permanent Subcommittee on Investigation concluded that these unions are completely dominated by organized crime. (1983)

No hard-and-fast line separates labor racketeering from business racketeering.

Many schemes involve corrupt union officials and cooperative legitimate businessmen who derive benefits such as decreased labor costs, inflated prices, or increased business. Moses (Moe) Steinman, who dominated New York Citys wholesale meat industry, personifies this phenomenon. His connections with important OC figures allowed Steinman to affect meat industry labor relations, earning him a position as a supermarket chain executive and millions of dollars in commissions.

Business racketeering in New Yorks garment industry is centered on control of local trucking.
Whoever controls trucking controls the industry, since the fast-paced fashion industry must avoid even short shipping delays. Until 1992, control over garment-center trucking was held by the Gambino Family.

The absence of competition kept prices high and service poor.

Some companies fled the garment center; others refused to move in. This cost the loss of a substantial number of jobs, which negatively affected the citys economy.

OC involvement in restraint-of-trade schemes typically includes the use of private resources for coercion and violence.
Trade restraint is relatively easy to accomplish, and almost unfailingly successful, because the participants against whom the coercion or violence is applied are operating outside of the law and cannot easily complain to authorities. Some restraint of trade schemes occur without OCs involvement, as major corporations conspire to fix prices or rig bids within their business niche.

The construction industry is highly competitive. OC racketeers limit competition by enforcing a collusive bidding system.

Collective bargaining agreements let construction unions control access to skilled labor; that access actually rests with OC because it controls unions. OCs control of unions lets racketeers offer benefits to or impose prohibitive costs on contractors.
Additionally, OCs ability to assign (or not assign) workers to jobs is a powerful weapon against union members who challenge racketeer leadership.

OCs infestation of the private solid waste carting industry has dramatically impacted business costs in New York City.

Based on a Salomon Smith Barney study, the New York District Attorneys Office estimated routine overcharges to New York businesses of 30 to 40 percent.
As a result, NYC business customers paid $500 million more than they should have each year!

The tremendous wealth amassed by some OC members gives them the opportunity to invest heavily in legitimate business. Some say this is equivalent to legitimation of the family fortunes amassed by the Robber Barons. Others suggest the true concern lies in the fact that the OC mentality makes their involvement in legitimate business a societal menace.

This concern is illustrated by the activities of a Genovese Family crew in New Jersey:

A Hoboken-based Genovese crew controlled a firm that arranged managed group health care for Teamsters, Laborers, and Hotel Workers union employers and locals. According to New Jerseys attorney general, the firm significantly increased its profit margin by coercing plan administrators into approving inflated service fees. Six reasons are cited for OC involvement in legitimate business:

Profit: Not all members of OC are able to make a respectable income from illicit activities, so a legitimate profit opportunity is strong motivation.
Diversification: A legitimate business gives OC members security of income (though less certain, now, as forfeiture statutes allowing seizure of criminal assetsincluding those derived from legitimate businessesare being increasingly invoked by federal and local governments.) Transfer. Illegitimate enterprises are difficult to transfer to dependents, especially females, while legitimate investments can be legally inherited. (Here, too, forfeiture actions may void the plan.)

Services: Legitimate businesses put OC members in position to act as patrons for persons needing a legitimate job (e.g., parolees or probationers, or relatives the member wants to shield from the stigma and risks associated with OC).
Front. A legitimate business provides a front (camouflaged base of operations) for a host of illegal activities. Taxes. A legitimate business provides a tax cover that reduces the risk of being charged with tax evasion. Illegitimate earnings can be easily mixed with legitimate earnings to obscure the illegal source of the funds (especially if the legitimate business operates on a cash basis).

Bankruptcy frauds that victimize wholesalers and insurance companies are called scams. Variations include the three-step, the one-step, and the same-name scams. Stock fraud is another lucrative OC activity. One tactic involves compromising brokers in a legitimate firm and forcing them to use boiler room (high-pressure) tactics to inflate the value of a worthless stock held by OC.

The wiseguys stock would then be sold at an enormous profit.

The U.S. Treasury Department defines money laundering as the process by which criminals or criminal organizations seek to disguise the illicit nature of their proceeds by introducing them into the stream of legitimate commerce and finance.
While OC still wrestles with the problem of disposing of huge sums of cash, increased use of modern banking technology helps launderers transfer large credits to safer banking havens. And the sheer volume of wire transfers makes accounting difficult. One major New York bank handles approximately 40,000 wire transfers each business day.