3 Organized Crime in the Modern Age
William Chambliss once said, “as long as providing things that are heavily in demand is illegal, crime networks of one sort or another are inevitable.” Throughout history Chambliss’ comment remains true, people have sought to obtain products that governments say they cannot have. What Chambliss’ comment insinuates is seen in reaction to the passage of the eighteenth amendment in 1919. The eighteenth amendment states, “the manufacture, sale, or transportation of intoxicating liquors [within]… the United States and all territory subject to the jurisdiction thereof … is hereby prohibited.” Passage of the eighteenth amendment entered the United States into the prohibition era where Illicit businesses rose with the goal of providing the alcohol people demanded as Chambliss predicted. These illicit businesses became known as organized crime, yet they operated like licit businesses. Organized crime had a business model and a product or service just like General Motors does. The prohibition-era Outfit, run by Al Capone, sold bootlegged alcohol in the 1920s. Additionally in other time periods, the Colombo Family during the 1970s and 1980s sold bootlegged gas, and South American cartels sell drugs into the present. The products have changed over time, but has the business model? I will explore the prohibition era of organized crime and a primary business model and investigate other crime organizations and how their business models relate to their prohibition era counterpart.
Prohibition Era Crime
Shortly after prohibition began, many people continued to want alcohol creating a high demand and no supply. Organized crime stepped up and supplied the alcohol people demanded. Al Capone served as a leading figure in Chicago’s bootlegging business. In the early 1920s Al Capone and his partner, Johnny Torrio sought to vertically integrate their business. Capone’s gang controlled the means of producing, distributing, and selling alcohol. To do this Capone utilized violence and threats. A documentary following Capone’s life shares that he would send people to tell saloon owners to buy Capone’s beer. Saloon owners who said “no” received a second visit, and if the answer remained “no” then the saloon would be bombed. Capone’s gang would then provide them with the money to fix the damages forcing them into business with Capone’s gang. Capone’s actions at the time were a reaction to high demand for alcohol and no supply. His reaction to supply and demand of alcohol made Capone and his gang millions.
Despite Capone’s use of violence, he maintained a decent public image. For example, Capone spilled a drink on a dancer at a club, and she had no clue what to do to fix the issue. Capone gave her the money to get the dress fixed after piercing her hesitance to accept the money. By helping the dancer Capone maintained a positive image in many people’s eyes. The dancer, Kay Karckow, even shares “he [Capone] never did anything, it was always his men” (Harris 1995). Collectively Capone was seen in two ways: a good guy that helped people and a ruthless gangster who wanted to expand this business.
However, it is much more than just selling alcohol. Capone was a businessman and like most businessmen, he reinvested profits into his organization and operated it as a licit business. Capone had breweries, brewery managers, and truck repairmen on the books to keep the business afloat. An economic analysis, by Conor Doyle, of the Prohibition Era shares that the mafia was “monopolistic due to multiple gangs selling the same thing and/or buying products from the same person” (Doyle 3). Doyle’s analysis expands on the mafia’s monopolistic tendencies by discussing local newspapers’ suggestions of monopoly control by alcohol suppliers. This way of conducting business worked well for Capone, he took in millions a week from bootlegging. Doyle’s analysis provides, “Chicago alone took in about 5.3 million dollars per week” (Doyle 3). Overall, Capone operated like a businessman utilizing killer instinct and nicety to build a bootlegging empire raking in millions of dollars. While his business was booming, good things came to an end in 1933 when the twenty-first amendment was passed allowing people to consume alcohol again.
1980s Gasoline Scheme
With alcohol being legalized US organized crime had to find other ways to make money. The 1980s gave them what they wanted. Members of different crime organizations discovered they could make money off gasoline rather than alcohol, prostitution, or gambling. While those other sources of income continued a 1989 New York Times article uncovered how the mob made money off gasoline. Members of the Russian mob as well as members of the Colombo, Genovese, and Lucchese Families acted together pocketing taxes on gasoline rather than paying the government. These four organizations worked together since each organization had a part to play in the scheme. First, the Russians had the gasoline, but they could not get the licenses needed. Michael Franzese, a member of the Colombo Family, had the means to acquire the necessary licenses to take the gas tax as profit. Once licensing was acquired “fake companies were established that transferred gasoline, on paper, from dealer to dealer” (Raab 1989). The paper trail gives the appearance that taxes were paid, but the company really did not exist, thus allowing the four crime organizations to pocket the tax. This scheme was the “biggest in New York City, however, the gas scheme took place in Long Island, Northern New Jersey, and Southern Connecticut” (Raab 1989). The gas scheme involved multiple organizations each with specific resources.
The organizations’ collaboration to pull of the gas scheme makes this method of business significantly different from Al Capone’s method. Three mafia families worked with the Russian mob to achieve one goal, profit. In their partnership the Italian and Russian mobs took 27 cents from every gallon of gas: 18 cents were local and state tax and the remaining 9 cents were federal taxes. The partners divided up profits to benefit all parties instead of one. The gas scheme is different from the Prohibition era as Capone hardly worked with other gangs; instead, Capone utilized threats and violence to force integration. From the 1980s gas scheme, it is evident that 1980s crime organizations were much different from their 1920s counterparts.
Mafia Disruption
While the mafia saw success in the US from their many rackets, they also garnered attention from the FBI. Lin Devecchio, an FBI agent, describes the relationship between law enforcement and organized crime as a “cat-and-mouse game” (Hobkinson 2020). Organized crime had been nearly untouchable since the twenties, but the seventies and eighties made crime organizations reevaluate. Law enforcement had a hard time putting mobsters behind bars because all law enforcement could do was arrest mob soldiers. The soldiers served under Captains who served the underboss who served the boss. The mob’s setup made putting mafia bosses behind bars extremely difficult. However, in 1970 Professor G. Robert Blakey formed the Racketeer Influence and Corrupt Organizations Act (R.I.C.O). R.I.C.O. handed US law enforcement a better way to deal with organized crime. R.I.C.O.s purpose was to prosecute a group for committing crimes as a business. Once law enforcement was trained on how to use R.I.C.O. the cat-and-mouse game changed permanently. R.I.C.O. allowed law enforcement to gather evidence on members of criminal organizations by planting bugs. Bugs allowed the FBI in the eighties to essentially use the criminal on trial as a witness against themselves since they spoke about crimes they were committing. R.I.C.O. helped the FBI and other law enforcement agencies alike prosecute members of organized crime.
The flip side to R.I.C.O. was that organized crime made changes to how it operated. FBI wiretaps were difficult to get around as there is only so much that could change to keep the FBI out of the loop of the organization’s activities. To counter wiretaps all members of the mob had to be aware the FBI was always watching. Hobkinson’s Fear City docuseries mentions John Gotti, a captain in the Gambino Family. He informed his soldiers to be cordial with the FBI when they crossed paths. Gotti’s reasoning was that negative interactions could have given the FBI leverage they needed to make cases against criminal organizations. Despite efforts to stay away from the FBI R.I.C.O. still made prosecuting organized crime much easier. As a result, the FBI took what they learned from their wiretaps and built a case against the Commission, which were the bosses of the five families of New York, using R.I.C.O.
The Department of Justice’s case against the Commission ended up being a huge success that separated organized crime in the twenties from the eighties. At his end Al Capone was imprisoned for eleven years for tax evasion. He was never caught for murder, distributing alcohol, or racketeering of any sort. Capone’s sentence was big at the time, yet his sentence was nothing compared to the sentences from the Commission Trial against all five families. The Commission Trial put 150 people behind bars, some for one hundred-plus years. Michael Franzese shared, “this was the first time anything like this had been done. And it put the icing on the cake that if they [government] can start doing that [100-year sentences] organized crime was in real trouble” (Hobkinson 2020). In the end, the trial served as a sign to organized crime that the government will win.
Colombian and Mexican Drug Cartels
Criminal organizations thought they were untouchable, but R.I.C.O. proved them wrong in the US. However, around the same time, the United States put its focus on the mob in New York City organized crime grew in South America. Rather than being referred to as organized crime or the mafia, these organizations were called cartels. Colombia was notorious for cartels in South America, as Colombia housed the Medellin Cartel and the Cali Cartel run by Pablo Escobar and The Gentlemen of Cali. Most often do not associate the mafia and cartels as being the same, but Lieutenant Michael S. Post shares a different view. Post shares “cartels are no different from the mafia in its attempts to facilitate its business arrangements through the corruption of public officials and institutions” (Post 22). Colombian Cartels utilized violence to intimidate and achieve their organization’s goals. In 1986 Medellin, Colombia recorded “1,700 narcotic-related deaths” (Post 27). Nationwide Colombia recorded the murders of “57 judges, 26 journalists, and hundreds of police and other government officials” (Post 27). Use of violence and taking advantage of corrupt officials were common mafia tactics.
When the Colombian cartels were not murdering judges, police, and journalists they were pushing their product, cocaine. The process of making cocaine starts with the coca leaf which needs to be farmed. For reference in the United States, people hardly farm as farming is no longer seen as profitable. However, in Colombia, a “farmer could make $25 growing coca instead of growing traditional crops for $3.50 a day” (Post 31). After the leaves have been procured, they go through a process of drying and adding additional chemicals to make cocaine as people recognize it. The cocaine would be distributed to the United States primarily in Miami, Florida before cartels expanded to Los Angeles, California. The sale and distribution of cocaine to the US made people involved with the cartels very rich. For example, a “24-year-old rose from poverty to being a millionaire just 2 years after meeting Mario Ernesto Villabona Alvarado of the Cali Cartel” (Post 38). In all parts of operation cartels of Colombia relate to their mafia counterparts. Post tells us we should of the cartels the same way.
Cartels of Colombia and the mafia share pain-staking resemblances, yet still operate in some different ways. Colombian cartels used violence to intimidate and achieve their organization’s goals. This is like Capone whose gang would bomb saloons to force compliance and grow his business. While similar in their use of violence, the two differ as cartels used violence much more often. Cartels often murdered police, judges, and journalist to get what they wanted. On the other hand, the mafia usually threatened to be violent and only used violence when their initial request was not yet met. Furthermore, both the mafia and cartels bribed people in government and law enforcement to help their businesses grow. Al Capone bribed the Chicago police to turn a blind eye; he even estimated that “he owned fifty percent of the Chicago police department” (Harris 1995). In the gas scheme from the 1980s all licensing for the racket came from the Colombo Family, but where else would they get access to licensing as criminals if they did not bribe officials? Just like the Chicago outfit during prohibition and the five families in the late 1900s, the Medellin and Cali Cartels made millions of dollars and utilized similar methods to do so. In Colombia, the cocaine business boomed but the Colombian cartels needed a way to get their product over to California. To get their product to California the Colombians turned to Mexican cartels.
Before Colombian cartels infiltrated the US illicit drug market, Mexican cartels smuggled marijuana and heroin into the United States. As they already brought drugs into the US, Colombian cartels saw Mexico as a “major transshipment route for cocaine” (Post 52) to be smuggled into the US from Colombia. While Mexico was home to multiple cartels, the Sinaloa cartel was one of the most notable cartels in Mexico, especially as they still have strong operations today. The Sinaloa Cartel used violence in moderation to make people understand what happened when the cartel was crossed. Their moderate use of violence further ensured that people did not constantly run fearing death. When the Sinaloa Cartel used the threat of violence to force cooperation, they often “threatened to kill your family or burn down your business” (Felbab-Brown). Outside of violence, the Sinaloa Cartel used “El Mayo, Rafael Caro Quintero, El Guano, and the Los Chapitos” (Felbab-Brown) to operate the cartel. All the people provided different insights into operating a cartel. El Guano is El Chapo’s brother, giving El Chapo someone he can trust anytime. The Los Chapitos are El Chapo’s four children that help operate minor things in the cartel for their father. Additionally, El Mayo and Rafael Caro Quintero were old-timers that have given insight into operating a cartel successfully. Just like the other Mexican Cartels Sinaloa moved marijuana, heroin, and Colombian cocaine into the United States and brought money back to Mexico for laundering. As the Sinaloa Cartel continues to operate in Mexico and the US, the cartel has worked to vertically integrate its operations. Today the Sinaloa cartel buys up businesses to gain licit incomes while creating other methods to move products into the US for illicit revenue. The Sinaloa Cartel’s expansion does not stop with variations of transportation; they also remain relevant by moving other drugs like fentanyl.
While the Sinaloa Cartel still operates today, that does not mean they do not have similarities to their mafia and Colombian colleagues. Intertwining two different parties was seen in the 1980s when the Russians worked with the Italians to pocket taxes on gasoline sales. Again, intertwining was seen when Colombia and Mexico worked in tandem to move cocaine into the US. Sinaloa’s Colombian and US counterparts utilized bribery of officials to maintain smooth operations. While both the mafia and cartels used violence to achieve their business goals, Sinaloa aligned more with the mafia as the Sinaloa Cartel was not excessively violent. Violence instead was used more as a just-in-case measure if issues arose. When operating their business, the Sinaloa Cartel, like the Colombians, used people to transport, distribute, produce, and protect the products for their US customers. The Sinaloa Cartel looks like the mafia and Colombia in every other way and continues to as government pursues their organization today.
Analysis of Business Operations
In different time periods, the operations and business models of criminal organizations vary quite a bit. When we look at the mafia their setup in the United States, mafias had a boss at the top to oversee all operations. However, the boss gave orders to an underboss, to keep the boss’s hands clean. The underboss would take the boss’s directives and hand them down to captains for the crime family. Mafia captains would give that information to the soldiers who would do the dirty work and then report up the chain I just broke down.
The mafia’s breakdown differs from cartels in Colombia and Mexico which had a more intricate way of conducting operations. At the very top of the cartel was the boss who oversaw all operations same as the boss in the mafia. Cartels differ as there is one underboss to oversee each branch of the Cartel. One underboss oversaw production, while another oversaw the security of the products and the labs. A third underboss was used to ensure that products were distributed to the US. Once the product was transferred to the US, the cartels had a representative that oversaw selling the products. The same representative would provide profits from the sales which were sent back to Mexico or Colombia. After the money got back to Colombia or Mexico there was a branch responsible for laundering the money earned from drug sales in the US. Accountants ran this branch to make sure the books were balanced, and money was not missing. Lastly, the cartels had a lawyer, as a licit company would, that served to cover the cartel if law enforcement began to ask questions. While the mafia and cartels are both considered organized crime, the Mafia’s way of carrying out operations was much more laid back and less intricate. Whereas Colombian and Mexican cartels’ system of operations were much more elaborate with multiple legs to the operation.
Final Thoughts
When comparing organized crime from the 1920s until the present day we can see similarities and differences in their business models. The mafia of the prohibition era and the mafia of the eighties kept the same organizational breakdown, but the eighties mafia took more precautions to cover their tracks to keep the government off their back. The same approach was used by drug cartels to make sure their profits and organization were protected. The biggest difference between the Mafia and the cartels is cartels are not housed in the United States giving them more room to breathe as laws were not the same. However, all the criminal organizations utilized some form of influence through threats and violence against governments and people to make sure operations could continue as normal. While laws changed to make prosecuting organized crime easier, we can see that organized crime from the 1920s until the 2020s seems to have maintained its system of operation in some capacity
Work Cited
Doyle, C. (2005). ORGANISED CRIME IN THE USA DURING PROHIBITION: AN ECONOMIC ANALYSIS OF THE RISE OF AN ILLEGAL INDUSTRY. Retrieved December 5, 2022, from https://www.tcd.ie/Economics/assets/pdf/SER/2005/Conor_Doyle.pdf
Felbab-Brown, V. (2022, April 6). How the Sinaloa Cartel Rules. Brookings. Retrieved December 5, 2022, from https://www.brookings.edu/opinions/how-the-sinaloa-cartel-rules/
Harris. (2016, November 9). Al Capone full documentary/mafia documentary. YouTube. Retrieved December 5, 2022, from https://www.youtube.com/watch?v=cBtsfVMv7VI&t=18s
Hobkinson . (2020, July 22). Fear City: New York vs the Mafia. Fear City: New York vs The Mafia. Retrieved December 5, 2022, from https://www.netflix.com/title/80218338
Post, M. S. (n.d.). Coloumbian Organized Crime and Drug Trafficking. NCJRS. Retrieved December 5, 2022, from https://www.ojp.gov/pdffiles1/Digitization/129253NCJRS.pdf
Raab, S. (1989, February 6). Mafia-aided scheme evades millions in gas taxes. The New York Times. Retrieved December 5, 2022, from https://www.nytimes.com/1989/02/06/nyregion/mafia-aided-scheme-evades-millions-in-gas-taxes.html
