Gotham Unbound : How New York City Was Liberated from the Grip of Organized Crime

Cosa Nostra. Organized crime. The Mob. Call it what you like, no other crime group has infiltrated labor unions and manipulated legitimate industries like Italian organized crime families. One cannot understand the history and political economy of New York City-or most other major American cities-in the 20th century without focusing on the role of organized crime in the urban power structure.Gotham Unbounddemonstrates the remarkable range of Cosa Nostra's activities and influence and convincingly argues that 20th century organized crime has been no minor annoyance at the periphery of society but a major force in the core economy, acting as a power broker, even as an alternative government in many sectors of the urban economy.James B. Jacobs presents the first comprehensive account of the ways in which the Cosa Nostra infiltrated key sectors of New York City's legitimate economic life and how this came over the years to be accepted as inevitable, in some cases even beneficial. The first half ofGotham Unboundis devoted to the ways organized crime became entrenched in six economic sectors and institutions of the city-the garment district, Fulton Fish Market, freight at JFK airport, construction, the Jacob Javits Convention Center, and the waste-hauling industry. The second half compellingly documents the campaign to purge the mob from unions, industries, and economic sectors, focusing on the unrelenting law enforcement efforts and the central role of Rudolph Giuliani's mayoral administration in devising innovative regulatory strategies to combat the mob.

James B. Jacobs is Professor of Law and Director of the Center for Research in Crime and Justice at New York University.

Chapter One

A Cosa Nostra Outfit

Seven Decades of Mob Rule in the Garment District

The maintenance of right conditions in New York's great garment industry has required eternal vigilance--not only of public officials but of labor organizations.... Despite the efforts of these agencies, some segments of the garment trade have become the spawning grounds for racketeers intent to make an illicit living off this enterprise. These elements sometimes gain a strong foothold in certain sections.... At times, violence and intimidation have donned the honorable cloak of unionism for the purpose of betraying it.

--Justice Samuel H. Hofstadter's opinion in Barton Trucking Corp. v. O'Connell (1958)

    CHRONOLOGY

1920

Organized-crime boss Arnold Rothstein emerges as a major force in the Garment District. Clothing designers pay him to fight against labor unions, and labor unions pay him to derail company strikebreakers. When Rothstein is murdered in 1928, Louis "Lepke" Buchalter and Jacob "Gurrah" Shapiro take over his rackets and expand their power base to include ownership of design companies and control of trade associations and truckers' unions.

1950s

The U.S. Justice Department investigates and prosecutes several trucking companies on antitrust charges. United States v. Cloak and Suit Trucking Ass'n., Inc. results in a consent decree, but enforcement is negligible and results unimpressive.

1957

Midlevel city employee in the Office of the New York City Commissioner of Licenses denies license renewal to mob-dominated trucking firm. The city wins the ensuing court battle, but the agency does not follow up this regulatory initiative.

1972

The New York City Police Department wages an aggressive parking-ticket campaign against the trucking cartel. Gambino sues New York City for violating his Fourteenth Amendment due process rights. The ticket campaign is dropped as part of the settlement.

1973

Federal and local law enforcement agencies launch Project Cleveland, a sting operation that reveals the role of the International Ladies Garment Workers Union (ILGWU) Local 120 and the Master Truckmen of America in maintaining Cosa Nostra's trucking cartel in the garment industry. New Jersey mobster Anthony "Tony Pro" Provenzano is convicted, but other cases fail.

1982

New York state senator Franz Leichter issues a report detailing Cosa Nostra's control over New York City's garment industry. He charges that Joey Gallo, the Gambino crime family consigliere, controls the Greater Blouse, Skirt and Undergarment Association.

1987

Joey Gallo is convicted of bribery and given long prison sentence.

1988

The Manhattan District Attorney's Office launches a sting operation by establishing a Garment District trucking company and a Chinatown contracting company. Investigators record incriminating conversations between the Gambino brothers.

1992

In mid-trial, Joseph and Thomas Gambino plead guilty to a single antitrust count. They agree to pay $12 million in fines, leave the industry permanently, and allow a "Special Master" to monitor the sale of their companies and to monitor the industry. Former New York City police commissioner Robert McGuire is appointed special master for a five-year term. He and Michael Slattery institute major reforms, set up a victim's compensation fund, and closely monitor garment industry operations.

1993

Thomas Gambino is convicted of racketeering, loan-sharking, and running illegal gambling operations in Connecticut and sentenced to five years in prison.

1997

Robert McGuire's five-year term as special master ends. He cites significant drops in trucking costs in the garment industry.

1998

The U.S. Attorney's Office for the Southern District of New York brings two separate indictments, both alleging the continuation of mob-run labor racketeering in the Garment District. One indictment charges the acting boss of the Lucchese crime family, Joseph "Little Joe" DeFede, and six other defendants, including New York attorney Irwin Schlacter, with imposing an annual "mob tax" of nearly half a million dollars on contractors and designers in exchange for labor peace. The second indictment charges five defendants, including a capo from the Genovese family and a capo from the Gambino family with extorting payoffs from a garment factory and its affiliates from 1991 through 1994.

Since the second half of the nineteenth century, the garment industry has been an important component of New York City's economy. The "needle trades" played a crucial role in absorbing millions of immigrants over the past century and a half. While tens of thousands of immigrants labored in sweatshops for minimal pay, many of them viewed employment in the Garment District as an opportunity to settle into American society and pursue entrepreneurial ambitions. Over time, the ethnic makeup of the workforce changed: in the 1840s, Irish and German workers dominated the garment trade; by the mid-nineteenth century, Jewish immigrants from Germany and Austria-Hungary were entering the industry in ever-increasing numbers. Russian and Polish Jews succeeded them, followed by Italians, African Americans, Puerto Ricans, Dominicans, and Chinese.

    In 1890, New York City's Garment District employed 83,000 people, and capital investments in the industry amounted to $630 million; in 1914, New York City employed 62 percent of the women's-apparel workers in the country. The Garment District saw its heyday in the middle of the century, when it employed more than 300,000 people. While an expanding market for low-priced imported clothing eroded the city's dominant role in the decades that followed, the industry still employed 86,000 people in 1993.

    From the early twentieth century to the present day, the garment industry has proved fertile soil for organized crime. Arnold Rothstein, the first dominant organized-crime figure of the twentieth century, became involved in the industry when designer companies invited his thugs to crush emerging unions. Rothstein ultimately played both sides of the fence by providing muscle to the unions. Following his murder in 1928, Louis "Lepke" Buchalter and Jacob "Gurrah" Shapiro took over his labor rackets and eventually gained full control over trade associations, truckers' unions, and designer firms.

    Buchalter's and Shapiro's power was brought to the attention of the public by Thomas E. Dewey, who served as special prosecutor of the State of New York from 1935 to 1937, and as the Manhattan district attorney from 1938 to 1942. One of Dewey's biggest cases was the prosecution of Buchalter and Shapiro for extorting tens of millions of dollars from businesses. Shapiro was convicted of extortion in the baking industry, another mob-dominated sector of the local economy. Federal prosecutors first tried and convicted Buchalter for racketeering in the fur industry; later, Dewey successfully prosecuted him for racketeering in the baking industry. Ultimately, Brooklyn District Attorney William O'Dwyer convicted Buchalter of murdering Joseph Rosen, a truck driver in the garment industry who had cooperated with Dewey's investigations. Buchalter was executed in 1944.

    After the demise of Buchalter and Shapiro, Italian American organized-crime figures rose to power in the New York City garment industry. Among them, the seven most important were Thomas Lucchese, James Plumeri, Dominick Didato, Natale Evola, John "Johnny Dio" Dioguardi, and Thomas and Joseph Gambino. Although Dewey prosecuted and convicted Plumeri and Dioguardi for extorting money from truckers working in the Garment District, the two served only brief jail sentences. Dewey referred to Dioguardi as a "young gorilla" and "a racketeer on a long way up to `success' in organized crime."

    Cosa Nostra maintained its power over the Garment District by operating a trucking cartel, which it enforced through control over a trucking trade association, the drivers' union, and a contractors' association. Profits derived from extortion and from ownership interests in trucking companies and designer firms. In the 1980s, capo Thomas Gambino and his brother Joseph were the most important Cosa Nostra figures in the Garment District. Ultimately (as we shall see in chapter 9), they were brought down in an elaborate sting operation executed by the New York County District Attorney's Office.

HOW THE GARMENT INDUSTRY WORKS

New York City's Garment District consists of three major components: designers ("manufacturers") in midtown Manhattan (the "Garment District"), contractors in lower Manhattan's Chinatown, and trucking companies. All three of these businesses have been controlled or influenced by organized crime since the early decades of the twentieth century.

    "Manufacturers" are businesses that design women's and men's fashions, contract for their production, and sell the finished goods to retailers. The term manufacturer is misleading, since most of these companies design but do not actually manufacture clothing. They include such household names as Liz Claiborne, Calvin Klein, and Donna Karan, and numerous smaller and lesser-known companies.

    Designers first assess the fashion trends and develop designs for the clothing they will sell for that season. Second, they purchase large rolls or bolts of fabric known as "piece goods" from suppliers from all over the country, which are delivered by the colorful "pushboys" who are a Garment District institution. Third, designers employ cutters, who use electric knives or heavy shears, to cut the fabric into individual pieces of a dress or blouse that, when sewn together, result in the final product. Fourth, designers send this cut-work to contractors, who might be thought of as manufacturers. They sew the cut-work together into a finished product and affix the designers' labels. Finally, the designers place their apparel with retail outlets. Throughout this process, timeliness is essential because the clothes have a narrow window of marketability; today's trend-setting garments are tomorrow's castoffs. If apparel is not delivered on schedule, a season's business may be lost, or stores may fill up their racks with other items. Thus, designers are highly vulnerable to threats of delay.

    Contractors essentially are sewing factories, which receive raw materials from the designers and make them into finished garments. In recent decades, the majority of contractors are located in Chinatown "sweatshops," where Chinese women, some of them illegal immigrants, use sewing machines to stitch cut-work.

    Trucking companies transport the cut-work from midtown designers to Chinatown contractors. They also take finished apparel back to the Garment District for inspection or transport it directly to retailers. Over the years, the Gambino crime family expanded its garment interests to New Jersey, where additional sweatshops, trucking companies, and warehouse outlets are located.

COSA NOSTRA AS BANKER

Cosa Nostra served as a bank for many garment industry participants. All five New York City Cosa Nostra crime families engage in loan-sharking. Many designers and contractors are undercapitalized. If costs escalate sharply, orders dry up, or fashions change, firms find themselves short of cash. Given the precarious nature of the business, and the sudden vulnerability of the companies when cash needs arise, banks are not often a viable option. Moreover, many firms, especially Chinatown contractors, are not considered good risks.

    Organized crime kept a steady supply of cash flowing in the garment industry, in effect serving as its covert financier and banker. Capos distributed cash to soldiers charging interest of perhaps 0.5 percent a week. The soldiers then distributed the money to street-level loan-sharks, who lent it out at rates of approximately 3 to 5 percent a week. At such high rates, the interest ("vigorish," or "vig") added up rapidly so that the borrower paid interest as high as 222 percent a year. Companies that could not meet their payments were sometimes forced to place a few "no-show" workers on the payroll, or share or cede ownership of their firms to organized-crime figures.

    Financial services often provided Cosa Nostra's first contact with new design firms and contractors; other services followed. The design firms needed sewing services, the contractor shops needed raw materials, and both needed trucking services. Cosa Nostra's trucking companies often provided the only means by which contractors could obtain orders from designers. A new contractor would ask a trucker to help the contractor secure sewing work from the midtown designers; the trucker would oblige and transport a shipment of cut-work from midtown to Chinatown. Having once accepted the assistance, that sewing factory was "married" for life to that trucker, who would provide all future shipping services.

    Manufacturers had the same experience. For example, when Aaron Freed opened his sportswear firm, the Gambino brothers helped him find contractors to do his sewing work. When he had trouble paying bills, the Gambinos let his credit run for months. Even when he used a "gypsy" trucker, as he did occasionally, he still had to pay his assigned trucker as if the latter had performed the work.

COSA NOSTRA'S TRUCKING CARTEL AND THE "PROPERTY-RIGHTS" SYSTEM

The mob's power in the Garment District stemmed from its control of the trucking companies and influence over their drivers. Members of the trucking cartel provided essential services to the midtown designers and Chinatown contractors. The coercive marriage of contractors and designers to truckers constituted an elaborate "property-rights" system enforced by the trucking cartel. In reality, the truckers themselves decided which trucking company would service each Chinatown contractor and Garment District manufacturer. Cosa Nostra-controlled trucking companies treated their customers as property. The property-rights system became so institutionalized that trucking companies, through front organizations described below, signed written agreements allocating territories and customers. Fixed prices were maintained and competitive behavior was suppressed through financial penalties and violence.

    The sanctity of "marriage" was enforced through economic coercion and, occasionally, through intimidation and violence. For example, if a contractor sought to terminate its relationship with its trucking partner, the truckers' cartel would ensure that the firm received no work from midtown designers--in effect, an economic death sentence. The unhappy contractor would have no choice but to return to its former partner. On occasion, a contractor was so anxious to break free of its trucker that it shut down in one area and reopened elsewhere. If this ruse was discovered, the contractor would be forced back into the arms of its original marriage partner. If a designer tried to divorce its contractor, no contractors or truckers would come courting; the only options were to reconcile with the original trucker, close the company, or appeal to Cosa Nostra bosses to work out a solution.

    In addition to price fixing, truckers had two other lucrative schemes. The first involved the billing system. The designers had to pay up front, not after services were provided. Thus, when a Chinatown contractor received an order from a designer, the designer subtracted its trucking cost from its payment to the contractor. Contractors, frozen out of the pricing process, never knew exactly what it cost to have cut-work shipped to and from Chinatown.

    "Round-trip pricing" also enriched the truckers. Cut-work had to be transported from the contractor's shop back to the Garment District or directly to retailers. The designers had to pay for the round-trip, regardless of whether the trucker actually moved the finished apparel. A contractor who needed to rush finished goods uptown might not be able to wait for its assigned trucker. If the contractor delivered the goods personally, or employed another person to do so, the assigned trucker still had to be paid. In fact, by billing designers rather than contractors, truckers ensured that the latter would not have an opportunity to object until after such payments had been made.

THE MASTER TRUCKMEN OF AMERICA (MTA) AS CARTEL ENFORCER

Cosa Nostra relied on a trade association to enforce the cartel. The Master Truckmen of America (MTA), controlled by the Colombo family, policed and managed Cosa Nostra's trucking cartel. Any "alien" truckers who tried to break into the industry faced an array of anticompetitive practices. The MTA would inform would-be entrants to the Garment District that they could not do business there; some lucky or connected firms were allowed to join the cartel, but unless they had bought out a cartel member, they would have no customers. If a trucking company refused to join the MTA, or failed to pay its dues, the drivers--who were all members of the International Ladies Garment Workers Union (ILGWU) local--would strike. If that was insufficient to bring the rebel trucker into line, trucks would be vandalized or stolen. Cartel truckers also engaged in "monopolistic parking practices," blocking curbs or entire streets so that an "unconnected" firm could not deliver its shipments. Thus, the trucking cartel ensured that the marriage system

Copyright © 1999 New York University. All rights reserved.