08 Ppt Ch13

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  • 8/3/2019 08 Ppt Ch13


  • 8/3/2019 08 Ppt Ch13


    Howard Abadinsky

    Eighth Edition

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  • 8/3/2019 08 Ppt Ch13


    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

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    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-dayweeks under appalling and unsafe conditions.

    Labors struggle for better working conditionsand wages has been called a specific response

    to a specific set of injustices.

    Until the Civil War, criminal conspiracy laws wereused to defeat efforts to organize and strike.

    Equityin the form of injunctions restrainingunions from strikingreplaced this approach.

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    Not until the Norris-La Guardia Act of 1932didCongress strip federal courts of their power to

    issue injunctions in labor disputes.In 1935, the National Labor Relations Act (theWagner Act) explicitly protected the rights of

    workers to organize and collectively bargain.Until the Wagner Act, employers responded tolabor confrontations by immediately:

    firing union leaders; hiring strikebreakers; increasing the guard force; and obtaining a federal injunction.

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    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 unionmembers and employers but were usually not

    connected to a syndicate.

    To combat management thugs, labor initiallyprovided muscle from their membership.

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    Labor also formed alliances with New York streetgangs to protect pickets from management goons.

    They quickly came to understand that it was easierto hire gangsters than it was to fire them, andracketeers 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 extortmoney from small businesses vulnerable tothreats of delay (i.e., those dealing in perishablegoods such as seafood and produce).

    New Yorks Fulton Fish Market is a classic display

    of OCs power to control an industry.

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    Industrial unions proved difficult to intimidate, butgeographically dispersed unions or those whose

    employment is sporadic or seasonal proved highlysusceptible 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 Subcommitteeon Investigation concluded that these unions arecompletely dominated by organized crime. (1983)

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

    Many schemes involve corrupt union officials andcooperative legitimate businessmen who derive

    benefits such as decreased labor costs, inflatedprices, or increased business.Moses (Moe) Steinman, who dominated New

    York Citys wholesale meat industry, personifies

    this phenomenon.

    His connections with important OC figures allowedSteinman to affect meat industry labor relations,earning him a position as a supermarket chainexecutive and millions of dollars in commissions.

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    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 avoideven short shipping delays.

    Until 1992, control over garment-center trucking

    was held by the Gambino Family.

    The absence of competition kept prices high andservice poor.

    Some companies fled the garment center; othersrefused to move in.

    This cost the loss of a substantial number of jobs,which negatively affected the citys economy.

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    OC involvement in restraint-of-trade schemestypically 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 orviolence is applied are operating outside of thelaw and cannot easily complain to authorities.

    Some restraint of trade schemes occur withoutOCs involvement, as major corporations

    conspire to fix prices or rig bids within theirbusiness niche.

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    The construction industry is highly competitive.

    OC racketeers limit competition by enforcing acollusive bidding system.

    Collective bargaining agreements let constructionunions 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 unionmembers who challenge racketeer leadership.

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    OCs infestation of the private solid waste

    carting industry has dramatically impactedbusiness costs in New York City.

    Based on a Salomon Smith Barney study,the New York District Attorneys Office

    estimated routine overcharges to NewYork businesses of 30 to 40 percent.

    As a result, NYC business customers paid

    $500 million

    more than they should have each year!

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    The tremendous wealth amassed by some OC

    members gives them the opportunity to investheavily 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 factthat the OC mentality makes their involvement inlegitimate business a societal menace.

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

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    A Hoboken-based Genovese crew controlled

    a firm that arranged managed group healthcare for Teamsters, Laborers, and HotelWorkers union employers and locals.

    According to New Jerseys attorney general,the firm significantly increased its profitmargin by coercing plan administrators intoapproving inflated service fees.

    Six reasons are cited for OC involvement inlegitimate business:

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    Profit: Not all members of OC are able to make arespectable income from illicit activities, so alegitimate profit opportunity is strong motivation.Diversification: A legitimate business gives OCmembers security of income (though less certain,now, as forfeiture statutes allowing seizure of

    criminal assetsincluding those derived fromlegitimate businessesare being increasinglyinvoked by federal and local governments.)

    Transfer. Illegitimate enterprises are difficult totransfer to dependents, especially females, whilelegitimate investments can be legally inherited.(Here, too, forfeiture actions may void the plan.)

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    Bankruptcy frauds that victimize wholesalersand 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 alegitimate firm and forcing them to use boilerroom (high-pressure) tactics to inflate the

    value of a worthless stock held by OC.

    The wiseguys stock would then be sold at anenormous profit.

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    The U.S. Treasury Department defines moneylaunderingas the process by which criminalsor criminal organizations seek to disguise theillicit nature of their proceeds by introducingthem into the stream of legitimate commerceand finance.

    While OC still wrestles with the problem ofdisposing of huge sums of cash, increased useof modern banking technology helps laundererstransfer large credits to safer banking havens.

    And the sheer volume of wire transfers makesaccounting difficult. One major New York bankhandles approximately 40,000 wire transferseach business day.

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