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But the underworld power dynamics shifted dramatically with the onset of Prohibition and the overnight outlawing of every bottle of beer, glass of wine and shot of booze in America. With legitimate bars and breweries out of business, someone had to step in to fuel the substantial thirst of the Roaring Twenties. And no one was better equipped than the mobsters. The gangs were thugs in the employ of the political machines,” says Abadinsky, intimidating opposition candidates and funneling votes to the boss. In return, the politicians and police chiefs would turn a blind eye to illegal gambling and prostitution rings.The term “organized crime” didn’t really exist in the United States before Prohibition. Criminal gangs had run amok in American cities since the late 19th-century, but they were mostly bands of street thugs running small-time extortion and loansharking rackets in predominantly ethnic Italian, Jewish, Irish and Polish neighborhoods.
In fact, before the passing of the 18th Amendment in 1919 and the nationwide ban that went into effect in January 1920 on the sale or importation of “intoxicating liquor," it wasn’t the mobsters who ran the most organized criminal schemes in America, but corrupt political “bosses,” explains Howard Abadinsky, a criminal justice professor at St. John’s University and author of Organize Crime.
“The gangs were thugs in the employ of the political machines,” says Abadinsky, intimidating opposition candidates and funneling votes to the boss. In return, the politicians and police chiefs would turn a blind eye to illegal gambling and prostitution rings.
READ MORE: Al Capone
But the underworld power dynamics shifted dramatically with the onset of Prohibition and the overnight outlawing of every bottle of beer, glass of wine and shot of booze in America. With legitimate bars and breweries out of business, someone had to step in to fuel the substantial thirst of the Roaring Twenties. And no one was better equipped than the mobsters.
Mobsters Hired Lawyers
The key to running a successful bootlegging operation, Abadinsky explains, was a paramilitary organization. At first, the street gangs didn’t know a thing about business, but they knew how to handle a gun and how to intimidate the competition. They could protect illegal breweries and rum-running operations from rival gangs, provide security for speakeasies and pay off any nosey cops or politicians to look the other way.
It wasn’t long before the mobsters were raking in absurd amounts of money and it was bosses and cops who were taking the orders. As the money kept pouring it, these formerly small-time street thugs had to get smart. They had to hire lawyers and accountants to launder the millions in ill-gotten cash piling up each month. They had to start thinking about strategic partnerships with other gangs and shipping logistics and real estate investment.
“They had to become businessmen,” says Abadinsky. “And that gave rise to what we now call organized crime.”
Mafia gangster Dutch Schultz, seen bottom left, in the District Attorney's office after being questioned about a shoot-out with Detectives.
Popperfoto/Getty Images
Before Prohibition, criminal gangs were local menaces, running protection rackets on neighborhood businesses and dabbling in vice entrepreneurship. But the overwhelming business opportunity of illegal booze changed everything. For one thing, sourcing and distributing alcohol is an interstate and even international enterprise. Mobsters couldn’t work in isolation if they wanted to keep the liquor flowing and maximize profits.
Making money was easy, says Abadinsky. The hard part was figuring out what to do with all the cash. Money laundering was another way in which organized crime was forced to get far more organized. When gambling was legalized in Nevada in 1931, loads of Prohibition-era mob money was funneled into the new casinos and hotels. Underworld accountants like Meyer Lansky wired money to brokers in Switzerland who would cover the mobster’s tracks and reinvest the cash in legitimate business. Others, like Capone, weren’t as savvy and got sent up river on tax evasion charges.
BY DAVE ROOS
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