Howard Abadinsky. ORGANIZED. CRIME. Eighth Edition. CHAPTER. ELEVEN. GAMBLING, LOANSHARKING, FENCING, SEX, and TRAFFICKING IN PERSONS. The business of OC: providing goods/services that happen to be illegal. Three forms of OC/illegal business connection:
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GAMBLING, LOANSHARKING, FENCING, SEX, and TRAFFICKING IN PERSONS
OC’s true business is extortion.
When an OC group talks of “taking over” a criminal enterprise, they mean they will begin regularly collecting “street taxes” (a cut of the profits) from the criminal in exchange for allowing him to continue his pursuits in a state of health.
The boundary between providing a good or a service and being parasitic is not sharply defined.
OC gambling includes bookmaking—the “booking” of bets—on two types of events: horse (sometimes dog) races, and sporting events (e.g., football, boxing).
Bookmakers act as brokers, not gamblers.
Betting the horses is oldest bookmaking activity, but ranks behind sports betting. A bookmaker’s net profit can be 10 to 15%.
From a gross dollar perspective, sports betting is bookmaking king, but net profit for bookmaker is often less than 5 percent.
Casino gambling was a major moneymaker for OC during its reign in Las Vegas.
In recent years, however, OC has been pushed out of Nevada casinos.
Similarly, New Jersey aggressively blocked OC participation in its Atlantic City casinos.
OC maintains a strong hold as distributors of coin-operated video poker games.
These are cash cows that can earn $2000 weekly, split fifty-fifty with the proprietor.
OC’s access to huge amounts of cash and
willingness to employ violence are keys to
its dominance of loansharking.
Consumers who are unable to secure small
loans through a reputable lending agency
often turn to OC’s disreputable agents.
The two central features of loansharking are
extending loans at exorbitant interest rates
and using threats or violence to collect debts.
The two types of usurious loans are the vig
and the knockdown.
The vig is a “six-for-five” loan: borrow $100
today, pay back $120 a week from today.
The $20 interest is called vig (vigorish; juice).
The catch is that you must repay the entire principal and all interest due simultaneously.
If you are unable to do that, you must pay the vig—and it doesn’t count against either the principal or next week’s vig.
The next slide shows the total amount you would pay if you borrowed $100 today and were unable to simultaneously pay the total principal and interest for four weeks.
This week’s vig $ 20.00
Next week’s vig 20.00
Third week’s vig 20.00
Fourth week’s vig 107.36
That’s if you hold $100 for one month.
If you held $100 for one full year, you would pay a total of $2,533.10…
… a 2,433.1% annual interest rate!
And THAT’S why OC loves loansharking!
Sharks willingly let the principal remain outstanding for an indefinite period, as long as that steady vig keeps rolling in.
The other type of loan, the knockdown, is a straight scheduled repayment at, of course, a high interest rate. For example, a $1,000 loan might require 14 weekly payments of $100.
(That’s a little better: only a 1,489.8% APR!)
OC’s involvement in sex as a moneymaker has changed with the times.
House prostitution was profitable during the days of large-scale immigration, so OC was heavily involved.
The Mann Act of 1910 and the immense profits from bootlegging during Prohibition cooled OC’s interest in prostitution.
Interest revived during the Great Depression, as OC partially replaced lost bootlegging income by extorting protection money from madams of independent brothels.
The brothel industry reached its peak in 1939.
Since then, the importance of brothels as an OC income source has steadily declined, but not entirely disappeared.
The pornography business, once dominated by OC, suffers from a great deal of “amateurism,” as video and digital technology have become widely available to creative consumers.
OC involvement today is almost exclusively limited to extorting protection money.
Trafficking in persons is modern-day slavery.
U.S. government data indicate approximately 50,000 people, mostly women and children, are trafficked into the U.S. annually.
International trafficking in women for the sex industry is characteristic of transnational OC.
Human rights organizations estimate 500,000 women and children per year are trafficked from Southeast and Southwest Asia alone for sexual exploitation.