Legitimate Business

How Wall Street Put Organized Crime Out of Business

Gus Alex was the head of the Connection Guys, in the Loop, and had been for decades, ever since Jake Guzik keeled over dead at work and got carried home. That was in 1956; they’d carted Greasy Thumb Jake home, all three hundred odd pounds of him, informed his wife he’d passed away by dragging him through her kitchen and propping him up in bed. With instructions — he had died at home, in bed, got it? Not anywhere else, and certainly not in a place of business like St. Hubert’s in Federal Street, the chophouse off a downtown alley back of the Union League Club.

St. Hubert’s, styled as an English gent’s dining club, didn’t just serve inch-thick mutton chops to Chicago’s ruling elites. Ever since Prohibition, Jake Guzik had been in charge of all payoffs disbursed throughout Chicago by the Outfit, the vicious crime syndicate bequeathed by Al Capone to the city. Only a few blocks away from City Hall, the courthouses, and police headquarters, St. Hubert’s functioned as the downtown pick-up and drop-off point for the most important Chicago graft. Holding court at a table there, Guzik would be visited throughout his workday by a string of bagmen, cutting past the red-coated waiters to deliver or receive the appropriate tribute. After a hard day of bribery, Guzik would retire to home, a fresh web of corruption around Chicago, insulating the underworld from any meaningful interdiction of its rackets.

After Guzik’s death, Gus Alex, son of a Greek diner owner in Armour Square, assumed the syndicate role of corrupter-in-chief. Having ascended from waiting on Capone’s sluggers at dad’s restaurant to becoming a mob hitman himself, Alex would be schooled by Guzik on how to warp straight institutions to the Outfit’s liking. And as Chicago’s master architect Daniel Burnham famously advised, the postwar Outfit would “make no little plans.” Charged with expanding westward, seizing rackets from Hollywood to Texas, with stops at all points in between, the Outfit would need greater legal and political cover than ever before.

Among all the new markets falling under their sway was a former stop-over for G.I.s headed toward the Pacific Theatre, Las Vegas, a city built almost entirely in the mob’s image. No investment would end up more lucrative for the Outfit. The seemingly limitless line of untaxed gambling revenue pilfered from mob-controlled casinos — “The Vegas Skim,” as it was known — was a golden goose. And as FBI Agent Bill Roemer recalled, Gus Alex was very clear explaining how the Vegas Skim flowed as from a faucet:

“It's a sucker's game. You can't win out there, you understand. We got the percentages rigged all in our favor. The longer you stay, the more you play, the more chances you got of losing. I don't let nobody around me who gambles. A couple thousand, okay, but no gambling!”

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The news this week made me think of old Gus Alex and the criminal fraternity for which he ran cover, and especially about his admonition on rigging the Vegas freak-show. It’s been the rare news story of late to approach feel-good status: a hardy band of Redditors put aside any lingering libertarianism to come together and grab a big piece of Wall Street for themselves. By buying up stock in GameStop, that video game outlet at the mall, they’d squeeze some of our economy’s biggest vultures, hedge funds, who’d shorted GameStop’s stock in anticipation of the company’s collapse.

It was a daring heist, and apparently legal, but best of all, the master touch, was that it would catch the Wall Street crooks who profit off everyone’s misery with their pants down. Like the end of Trading Places, the little guys would be enriched in direct proportion to how immiserated the fatcats would be.

But of course, anything that delicious comes with an asterix or three. America’s good for that; nothing that cinematic, that poetically just, can ever really happen without complications. And it was the response to GameStopocalypse—the high-finance equivalent of when all the teenage slobs raid the country club swimming pool in Caddyshack—what made me think of the Chicago underworld of yore.

Gus Alex is long dead now, a few years into his first prison sentence, an old man in a Kentucky federal prison. Virtually nothing remains of the criminal empire to which he devoted his life. The Outfit is basically all gone now.

Yet in a sense, I think Gus Alex is alive and well, and not consigned to prison, either. Our economy—our system—is a Gus Alex/Jake Guzik operation. The Outfit, whether it knew it or not, was a blueprint for the future—our present—at a scale unimaginable to the old pot-bellied goombahs who ran things back when. In a stunning twist, the biggest, baddest mobsters of the American underworld, the kingpins who ran things for much of the twentieth century, were pathetically small-time. In the America of 2021, their kind of rackets, their brand of organized crime, has become entirely legal, the exclusive bailiwick of the Brooks Brothers Mafia, well-connected, well-starched, well-financed.

It’s received wisdom at this point that the downfall for the American Mafia came in the early Eighties, when federal prosecutors started to get serious about dismantling the mob. The weapons deployed to smash the mob in this effort remain well-known: blockbuster RICO prosecutions, telephonic surveillance, bugs placed in the drop ceilings of mob back offices, and, most of all, the cultivation of turncoats, willing to testify against their criminal confederates.

With the unbelievable profits open to any mobsters willing to traffic drugs, often in contravention of crime family orders, the die was cast. Facing stiff sentences following any major drug bust, more and more “men of honor” gave up their friends to the feds. By 1992, when John Gotti, the doyen of idiotic, new wave mob bosses, was finally betrayed by his hand-picked successor and sent to prison, the American Mafia had been more or less decimated.

We know all this; these events cursed the world forever, with the bane of Rudy Giuliani: Rising Star. But as of late, I’ve wondered if some larger, structural issues might have been more to blame for the decline of organized crime, starting in the late Seventies and early Eighties. What if a better explanation is that crime was legalized, allowing corporations to seize their lucrative markets?

Put simply: the massive economic “reforms” initiated by neoliberal politicians in that era, now responsible for the massive inequality in the world today, also essentially legalized most forms of fraud and vice. Having been bolstered at the expense of everyone else, Big Business found that it could out-compete the mob, purchasing the kind of no-consequence, laissez faire attitude from politicians and police which organized crime had once had—only at a scale of which the wiseguys could only dream.

Sound fantastical? Consider the criminal landscape of America today, bearing in mind that the changes to which I’m pointing in no way exculpate crime syndicates of the past. It’s just that they were, like so many victims of our current economy, made redundant. If the postwar era marked a significant opening of opportunity for a few street crooks to behave like little Carnegies and Rockefellers, the neoliberal revolution of Reaganomics marked a return to capitalism untrammeled by much in the way of limits.

Consider how the “straight” world has taken over the mob’s usual rackets:

Corruption: A fait accompli. From the days of bagmen and greased palms, corporate America has turned corrupting public officials into not merely a multi-billion dollar industry, but one that is entirely legal. The days when the Chicago Outfit controlled the First Ward alderman and packed Congressman Roland Libonati (D-Mafia) off to DC look depressingly unimaginative. Today, any elected official’s continued survival as such depends, almost invariably, on raising enough corporate cash to make reelection possible. It’s basically all they do at work.

Contract Murder: The privatization of warfare has meant that defense contractors, private military forces, and the tech industry can extract more or less endless billions of dollars from US tax coffers. Even better, virtually no elected officials will dare say boo on doing so, lest they be attacked as an anti-American pinko, or worse, endanger military-industrial largesse in their home district.

That’s of course to say nothing of the military itself as a highly disciplined special interest group—the federal equivalent of the mob hitmen picking their teeth with switchblades, or flipping a half dollar under the streetlamps. Amidst the panic of Trump’s Capitol insurrection, many wondered whether the military would step in; in truth, there was no incentive for them to do so on Trump’s behalf. The Pentagon already gets everything it wants, and always will—the ultimate safeguard of the US dollar. As General Smedley Butler, the highly decorated Marine, wrote later in life, upon his conversion to anti-imperialism:

“I spent thirty- three years and four months in active military service as a member of this country's most agile military force, the Marine Corps. I served in all commissioned ranks from Second Lieutenant to Major-General. And during that period, I spent most of my time being a high class muscle- man for Big Business, for Wall Street and for the Bankers. In short, I was a racketeer, a gangster for capitalism.

I suspected I was just part of a racket at the time. Now I am sure of it. Like all the members of the military profession, I never had a thought of my own until I left the service. My mental faculties remained in suspended animation while I obeyed the orders of higher-ups. This is typical with everyone in the military service.

I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefits of Wall Street. The record of racketeering is long. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912 (where have I heard that name before?). I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested.

During those years, I had, as the boys in the back room would say, a swell racket. Looking back on it, I feel that I could have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.”

Protection Rackets: Pay up, or something might happen to ya! And hell, something might happen to you anyway, even if you slip the neighborhood hoodlum the envelope every week. Such protection rackets were a nice use of the most knuckle-dragging thugs in the mob phalanx. Today, it’s called the insurance industry, and the idea is you pay them a lot of money, lest something happens to your health, home, or car. Then when something bad does happen, they figure out a way for you to pay them even more.

Fraud: They say that con games rely upon the greed of the victim, in some part—luring in a mark with the promise of easy money, perhaps with the tacit understanding this is not exactly legal. Take a look at the sycophants crowding Elon Musk’s interminable Twitter account, and you might get a better idea of how this dynamic works. Conning unsophisticated rubes like Musk does relies heavily upon said rubes thinking they are smarter than anyone else. For now, that kind of credulity has inflated Musk’s paper net worth to that of richest man on Earth—the kind of obvious lie which will only draw more moths to the flame.

Better is simply to get some unfortunate business-owner in your mob’s grasp, and then run up all their lines of credit until you torch the place for insurance money. It’s your classic bust-out, as any Goodfellas fan knows, and start-up founders, from Uber’s Travis Kalanick to that WeWork asshole may know a thing or two about it. Having gobbled up tens of billions of dollars from venture capital funds and small-time retail investors, despite their companies having no path to profitability, the founders inevitably exit as billionaires. Guess which type of investor will be left holding the bag when these unicorns inevitably drop dead?

Loansharking: Go to the sharks when you desperately need money, but be warned: there’s no such thing as a free lunch. The goombahs make their money on the vig, also known as the juice—the interest you’ll be paying on the principal, and which can stack up quicker than Chicago snow. By week three, when you’re owing 1000% interest and have not even dented the principal, you’ll get your kneecaps broken unless you can cough up more. Any millennial knows how this works; we call them student loans. If you are really desperate, you may go to a competing shark for help with those Navient bills; that would be the payday loan man, eager to charge you Mafia-level interest rates off whatever lowly income you’re scraping together. Despite record profits, banks will simply not lend to you at any reasonable interest rate, so take it or leave it.

Labor Racketeering: The corruption of union officials by organized crime is typically used by conservatives to vilify the labor movement, but ignores that the first victims of such exploitation are always the laborers themselves. The use of the Teamsters pension fund as the Outfit’s personal piggy bank more or less created Las Vegas, but did little to safeguard the personal financial security of truck drivers across the country. The manipulation of union labor for work stoppages and strikes, unless paid off by developers and executives, was another favored Mafia tactic, from Hollywood to the Manhattan skyline. Today, big business has simplified how they exploit labor: they’ve smashed unions, doing everything they can to make organization impossible, while extracting millions upon millions throwing pension fund money onto Wall Street.

Sex: The operation of brothels, trafficking of sex workers, and control of the pornography industry have all been lucrative underworld sidelines—never the bread and butter of mob revenue, but an important diversification of their portfolios. The gradual legalization of pornography led to corporations solidly controlling the industry, with no need for underworld connections, but the paid sex trade remains a continuing (and disturbing) target of attack by police forces. No matter; the people who will suffer most from such raids are the poor women staffing massage parlors, the sex workers selling their bodies on the street, or the hustlers forced from the bare safety of outlets like Craigslist or Backpage into more dangerous modes of earning. As always, high-class escort services—catering as they do to the wealthiest and most powerful elites—will not be affected.

Narcotics: As with the sex trade, drugs stand out as an underworld money-maker which have not been entirely legalized, thus paving the way for a total takeover by corporations. However, the halting legalization of marijuana gives us some idea of what a legalized drug market might look like: GOP pigs like John Boehner will somehow get rich selling pot, while people (mostly of color) who sold negligible amounts will languish in prison. The marketing rebrand of “cannabis” is skin-crawling enough, even without knowing who will profit.

For those harder drugs, however, the world, as Thomas Friedman memorably crowed, really is flat. No matter how many fences, moats, walls, German Shepherds, black helicopters, or armored Humvees are deployed to the southern border, there remains an inescapable truth: the United States is the biggest market on Earth for illegal drugs, and billions are to be made from that demand. Mexican drug cartels will, no matter what, ship drugs northward. Which is not to say there is not symbiosis between foreign drug traffickers and American big business. The Sackler family, progenitors of America’s opiate epidemic, can be proud knowing “El Chapo” Guzman stepped up to peddle heroin to the millions of desperate opioid addicts they created, ensnared in a predatory push of their drugs upon unsuspecting patients.

Gambling: Well —

Well, gambling deserves a bit more attention here, as I start to wind down. See, gambling was always the biggest moneymaker for organized crime, more that anything else. That was the bread and butter, the vice which kept on giving. And now, it’s been almost entirely corporatized. The transformation of Las Vegas from a mob-run town to a Dow Jones conference center, a Disney World for adults, is just a small part of the shift. Financialization of our economy has seen the locus of American gambling shift to Wall Street; the gradual legalization of sports betting going on across the country is peanuts, in comparison.

Bear that in mind as they wheel out one after another of these old ghouls, screaming about how unfair the GameStop stock chicanery is. They are gangsters, who owe their scads of dirty money to being criminals by another name. They think they earned their billions, when really, they had the morals of a snake and no scruples about cheating to improve their position. They sucked the money out of everyone else, and once established, rigged the game to further inure themselves against reversals. The regulatory agencies, politicians, the press—all of it got bought, to parrot the lie that greed really is good.

No less a figure than Bertolt Brecht saw, in the machinations of Chicago gangsters, the makings of “respectable” capitalism—and with it, fascism, Hitler serving as enforcer for big business against labor unions and communists. Brecht would have found an a strange bedfellow in this view—Al Capone himself, interviewed at his Chicago headquarters in 1930 by British journalist Claud Cockburn:

"Listen, don't get the idea I'm one of those goddamn radicals...Don't get the idea I'm knocking the American system. My rackets are run on strictly American lines. Capitalism, call it what you like, give to each and every one of us a great opportunity if only we seize it with both hands and make the most of it." 

Seize it with both hands, and make the most of it—the capitalist creed. If you should find yourself in the Loop, in Downtown Chicago, and find yourself with a spare hour, you can see where that got Capone in the end. The St. Hubert’s chophouse is vacant now. All that remains are the stone faces, of knights and maidens carved into the mock-gothic masonry, worn now by decades of Chicago winter. If you feel too forlorn looking at them though, mute witnesses to every dirty deal done in the past, don’t worry. You’re only a few blocks away from the Chicago Board of Trade, and it’s massive.