Organized crime in the 1930s

Organizations operating illegal enterprises or extorting money by means of criminal tactics

Organized crime had been a presence in many American cities since the late nineteenth century. During the 1930’s, it made significant changes in the operation of its illegal enterprises. These changes allowed criminal organizations to strengthen their holds on certain forms of illicit activity and further enmesh themselves in legitimate businesses, unions, and political affairs, especially at the local and state levels.

When the decade of the 1930’s opened, headlines about organized crime activities were commonplace in the newspapers of most major American cities, most prominently in New York and Chicago, home to the country’s best-known gangster, Al Capone. He was but one of a group of men who dominated underworld activities at the time. A decade of Prohibition had allowed many criminal groups to add illegal alcohol sales to their other illicit activities. In 1931, however, Capone was arrested and sent to prison for tax evasion, effectively removing him from the scene in Chicago. Furthermore, in 1933, the Eighteenth Amendment was repealed, ending Prohibition. The legalized sale of alcohol drastically reduced an important source of revenue for organized crime. Nevertheless, while the rest of the country suffered through several more years of the Great Depression, the 1930’s proved to be one of the most prosperous decades for organized crime in the United States.

Organized Crime’s New Structure

During the first two years of the 1930’s, organized crime was rocked by some of the most violent internecine struggles ever witnessed in the United States. By the end of the 1920’s, Italians dominated organized criminal activities in most major cities, although other ethnic groups were active, particularly the Irish, Jews, and African Americans. As early as 1928, leaders of Italian criminal organizations in large American cities had tried to reach some accord among themselves about limiting intergroup violence, but no substantial action was taken until after the murders of New York crime bosses Giuseppe Masseria on April 20, 1931, and Salvatore Maranzano on September 10, 1931. These men had been leaders of the two most prominent Italian “families” in New York. Maranzano’s assassination was directed by Lucky Luciano, a rising star in organized crime circles, and carried out by both Italian and Jewish mobsters.

The death of these kingpins ushered in a period of great prosperity for organized crime. Luciano brokered an arrangement among the five remaining Italian families in New York and brought together the heads of criminal groups from other major cities to form an informal syndicate. The commission, as it was known by its members, consisted of representatives from the five major crime families in New York and heads of crime groups from Buffalo, New York; Chicago, where Capone had been replaced by Frank Nitti; and later, Detroit, Kansas City, and Los Angeles. This divided up organized crime geographically and laid ground rules for managing the activities from which organized crime traditionally made money: gambling, prostitution, extortion, and racketeering. The group was empowered to settle disputes among the major criminal outfits in the country. Though the commission did not include representatives from every major city, its influence was felt indirectly in places such as San Francisco, New Orleans, and even Hot Springs, Arkansas. Although this accord did not end all brutality, it did reduce the level of violence committed by one criminal group on members of rival organizations, which had been a characteristic of organized crime in the previous decade.

Criminal Activities

Even though the repeal of Prohibition in 1932 eliminated one important source of revenue for organized crime, the ability of criminal groups to provide other illegal products and services, notably gambling and prostitution, allowed them to maintain high revenues, draining the legitimate economy and the government of millions of dollars. Many who had been bootleggers during Prohibition became legitimate liquor manufacturers and distributors during the 1930’s; that included quite a few organized-crime leaders. Not everyone made the transition successfully, however. A kingpin among Prohibition-era bootleggers, William “Big Bill” Dwyer spent most of the 1930’s avoiding jail for income tax evasion; he was finally convicted in 1939. On the other hand, by 1930, Meyer Lansky had emerged as the leading figure in Jewish organized crime, after taking over for Arnold Rothstein, who was assassinated in 1929. Lansky made his money in the gambling industry and was by turns a bootlegger, money launderer, and farsighted strategist who helped establish organized crime in several locations outside New York City.

Behind the scenes, though, these men used customary criminal tactics to eliminate competition and strong-arm retailers into carrying their products. Operations such as these provided criminal groups with a way to launder money, disguising illegal profits by mingling them with earnings from legitimate businesses. Additionally, at the urging of Luciano, organized crime took up an activity that earlier leaders had considered off-limits: drug trafficking.

Throughout the 1930’s, criminal organizations maintained and, in some cases, even strengthened ties with corrupt union officials. Unions representing teamsters, building trades, hotels and restaurants, and even the theater industry often had funds siphoned off to make payments to organized crime groups that ostensibly provided “protection services.” These services included intimidating business owners who refused to hire unionized laborers or nonunion workers who attempted to break strikes. At the same time, Mafia leaders were able to operate with little fear of arrest because so many had helped elect politicians who would ignore their activities.

While African American crime groups did not share the same rigid hierarchal structure as found in Italian, Jewish, or Irish organizations, there were nevertheless a number of groups operating in cities such as New York, Philadelphia, Detroit, and Chicago. Predominant among illegal activities run by these groups was a form of numbers gaming known as “policy,” in which participants bet on closing-day totals for large bank clearing houses. When these games proved to be financially lucrative to African American promoters, white gangs such as the one run by Dutch Schultz made several attempts to take them over. Schultz was able to use corrupt politicians and police to intimidate African American leaders in Harlem into turning over their operations to him.

Several of Luciano’s close associates were instrumental in extending the reach of the New York crime syndicate far beyond the city limits. During the decade, Lansky developed a close relationship with Cuban dictator Fulgencio Batista y Zaldívar that allowed the syndicate to control gambling operations in Havana, an arrangement that lasted until Fidel Castro came to power in 1959. Sometime after 1936, Bugsy Siegel moved to the West Coast to extend the reach of East Coast organized-crime groups to that area. Over the next two decades Siegel managed operations that eventually resulted in the Mafia moving into Hollywood and Las Vegas. During the 1930’s, Luciano’s deputy Frank Costello established a business relationship with the young gangster Carlos Marcello in New Orleans, arranging for shipment of slot machines from New York to Marcello’s fledgling criminal operation in the South. Owen “The Killer” Madden, not part of Luciano’s crime syndicate but a feared gangster in his own right, left New York in 1935 to settle in Hot Springs, Arkansas, where he established a criminal network whose earnings came principally from gambling.

Law-Enforcement Efforts

At the same time organized-crime leaders were expanding and consolidating their empires, law-enforcement officials in several locales were stepping up activities to bring these criminals to justice. Over the years, many leaders of organized-crime groups had struck up cozy relationships with local politicians and law-enforcement officials, using both bribery and intimidation as means of shielding their organizations from prosecution. The situation was somewhat better on the federal level. Although J. Edgar Hoover systematically resisted efforts to have the Federal Bureau of Investigation become involved in pursuing organized crime, the U.S. Treasury had been active since the 1920’s in disrupting criminal activities. Its prosecution of Capone in 1931 was one of several campaigns waged successfully against mob leaders. Under Harry Anslinger, the Federal Bureau of Narcotics led an active campaign to disrupt operations of organized crime, especially those engaged in selling illegal drugs.

Options for dealing with organized crime at the federal level were limited. Congress passed the Anti-Racketeering Act of 1934 to combat the use of interstate commerce by organized crime, specifically racketeering. The act proved to be too vague to be enforceable in many instances, however, and not until amendments were passed during the 1940’s and 1950’s did it became an effective tool for combating organized-crime activities crossing state borders.

As had been the case in previous decades, much of the activity mounted to stymie organized-crime groups during the 1930’s was left to individual state governments. Some attempt was made by the state of New York to root out corruption in government caused by the association of politicians with known criminals. In 1930, Governor Franklin D. Roosevelt asked the judiciary to launch a probe into public corruption, and appellate court judge Samuel Seabury began a series of investigations that brought to light several links between long-time criminals and political figures throughout the state. His efforts eventually led to the resignation of New York City mayor James J. Walker, who had done little to hide his ties to organized-crime leaders.

In 1935, New York governor Herbert Lehman appointed Thomas E. Dewey as a special prosecutor charged with going after organized crime in New York City. Dewey’s first target was Schultz, and although he was gunned down before Dewey could arraign him, other mob bosses soon felt the heat from Dewey’s efforts. First among them was Lepke Buchwalter, a longtime extortionist. Dewey’s most important coup, however, was the arrest and conviction of Luciano, who was sent to prison in 1936 on charges of running a massive prostitution network. Luciano’s deputy, Costello, stepped in to run operations for the imprisoned leader, however, and through a network of prisoners and corrupt prison officials, Luciano was able to get information to Costello and retain control of his operation from behind bars.

Impact

Although the violence often associated with organized-crime activities has been portrayed as the greatest menace to society posed by these groups, the economic impact of criminal activities conducted by organized-crime elements most affected the United States. Viewed in that light, the 1930’s marked the beginning of the period of greatest success for organized crime; during those years, individual groups made significant advances in organizational structure and inter-group cooperation. Key Mafia leaders in cities across the country developed systems for cooperating in conducting operations and sharing profits. Organized-crime elements infiltrated a number of unions, draining their coffers and helping to breed tension between union and management in a number of industries. Fledgling efforts by law enforcement began to make headway, but no federal or state agency was able to establish a program to arrest and convict leaders of criminal groups that was strong enough to be sustained when the United States began gearing up for World War II. That conflict quickly diverted law-enforcement resources from fighting organized crime, and the operating policies set in place during the 1930’s by men such as Luciano and Costello allowed their outfits to flourish during the years when the United States was at war.

Bibliography

Fox, Stephen. Blood and Power: Organized Crime in Twentieth-Century America. New York: William Morrow, 1989. Concentrates on the growth of organized crime after 1920; describes activities of criminals and law-enforcement officials during the 1930’s.

Gage, Nicholas, ed. Mafia, U.S.A. Chicago: Playboy Press, 1972. Twenty-five essays on important figures in organized crime; several describe the organizational structure of various criminal groups operating in major American cities.

Peterson, Virgil. The Mob: Two Hundred Years of Organized Crime in New York. Ottawa, Ill.: Green Hill, 1983. Describes organized crime activities during the 1930’s. Explains the relationship between leaders of criminal groups and elected officials and highlights efforts by state and federal officials to combat organized crime.

Raab, Selwyn. Five Families: The Rise, Decline, and Resurgence of America’s Most Powerful Mafia Enterprises. New York: Thomas Dunne Books, 2005. Offers detailed accounts of the activities of the most important criminal organizations in New York City; includes a chapter summarizing the activities of these groups during the 1930’s.

Reppetto, Thomas. American Mafia: A History of Its Rise to Power. New York: Henry Holt, 2004. Detailed account of the rise of organized crime, providing extensive information on its activities during the 1930’s and efforts by law enforcement to curb its power.

Schatzberg, Rufus, and Robert J. Kelly. African-American Organized Crime: A Social History. New York: Garland, 1996. Includes a chapter describing organized-crime activities within African American communities in a number of American cities during the 1930’s.