NCJ Number
76111
Journal
FORBES Dated: (October 13, 1980) Pages: 120-125,127-128
Date Published
1980
Length
8 pages
Annotation
In part two of a series, the methods organized crime uses to infiltrate legitimate business are described, along with specific areas which have attracted mob investment.
Abstract
Organized crime is investing an increasing amount of its surplus cash flow into legitimate businesses. The mob has certain advantages over the competition because it can obtain a monopoly through threats or temporary price cuts. Organized crime is successful in legitimate business because it always has this edge -- the ability to absorb losses, influence over labor unions, control of needed services, or access to illegal immigrant labor. Furthermore, legitimate business activities provide a means to legitimize illegal money and avoid tax investigations and thus are not required to show a profit to survive. In order to wash its money, the mob looks for businesses that leave no traces and are based on cash, such as bars, vending machine companies, and legalized gambling casinos. Since U.S. banks now disclose their accounts to Federal agencies, organized crime has moved its money overseas to tax havens like Switzerland and countries in the Caribbean. Capital gains from offshore corporations in the Netherlands Antilles, Cayman Islands, and Panama are not subject to U.S. taxation, so these investments not only launder money but generate additional profit. Offshore money is usually moved back into the United States through a loanback, when a mob member borrows from his overseas account to invest in a U.S. business venture. In these circumstances, organized crime has naturally infiltrated foreign and U.S. banking institutions. Bankruptcy fraud continues to be a favorite tool of organized crime. Mobsters move into a company, skim its cash and liquidate its assets, and then leave it an empty shell besieged by creditors. Examples of this scam are described, including the Sterling-Harris Ford case in Chicago, Brooklyn's Style Mart fraud, and the famous Westchester-Premier Theater case. A brief discussion of the Racketeer Influenced and Corrupt Organizations statute is appended. For part one, see NCJ-74174.