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What is Racketeering?
What is Racketeering?

Use the word Racketeering and your mind will automatically associate it with the Mafia. It’s a term you'll hear frequently in movies and television shows about gangsters and the mob. But racketeering is actually a crime that can be committed by anyone. The word racketeering appeared in the 1920s. At that time, it described illegal activities like prostitution, drug and weapons trafficking, counterfeiting and smuggling. Since then, the definition has grown. Today racketeering takes on many forms where extortion is a tool to gain money illegally.

01

Creating a Need

William Waugh With Al Capone Chicago History Museum / Getty Images

In 1927, the Employer’s Association of Chicago used the term racketeering to describe the influence of organized crime in a labor union called Teamsters. A basic definition of racketeering is the offering of a dishonest service to fill a need that would not usually exist. Criminals or organizations create a problem and then provide the solution. The term derives from the word racket which is any criminal activity that cheats individuals out of money.

02

Beginning of Racketeering in the US

FBI photo of organized crime boss and ''La Cosa Nostra'' leader Charles ''Lucky'' Luciano National Archive / Getty Images

The Mafia connection with racketeering is there for a good reason. Originally from Sicily, the Mafia is an organization of families who helped to protect the island from invaders. In 1906, Lucky Luciano emigrated from Sicily to the US. Although others came before him, Luciano is the father of the American Mafia.

By taking out older mob bosses, Lucky Luciano was able to organize the younger generation of gangsters into five crime families. Between them, they established numerous rackets with bootlegging and prostitution being the most profitable.

03

The Protection Racket

Newspapers and Magazines about Mafia on June 1, 1991 in New York, New York Santi Visalli / Getty Images

A protection racket is probably the most well-recognized forms of racketeering. Take the Mafia as an example. They would target businesses on their ‘turf," and show there was a credible threat towards them. Maybe swindling, injury, sabotage or robbery. The Mafia would then offer them the protection that law enforcement was unable to provide. Often, the initial threat of violence was carried out by someone employed by the Mafia themselves. They would create the problem and then provide the solution. The Mafia perfected the art of the protection racket, but others carry on the practice today.

04

Other Examples of Racketeering

Blackmail written newspaper, shallow dof, real newspaper

A protection racket may be the most obvious example, but racketeering can also take on many other forms. Prostitution rackets involved providing illegal sexual services. The numbers racket was an illegal lottery that was popular before national and state lotteries became legal. Another example may be a corrupt dealer using colleagues disguised as gamblers to cheat others out of their money. Kidnapping, loan sharking, blackmail, embezzlement, bribery, selling stolen merchandise (fencing), drug trafficking, sex-slavery, and murder-for-hire are also types of racketeering.

05

Using a Legitimate Business for cover

legitimate business racketeering ViewApart / Getty Images

Rackets often operate as part of legitimate businesses.

  • A well-respected auto repair shop may be a front for a ‘chop shop’ which breaks down and sell the parts from stolen cars.
  • Drug manufacturers bribing doctors to over-prescribe a particular medicine.
  • A security firm offers protection after a spate of break-ins in the local area. In reality, they have organized the break-ins themselves.
06

Modern-day Racketeering

Hacker using laptop. Lots of digits on the computer screen

Advances in technology have made racketeering even more interesting with racketeers finding new ways to extort money out of people. Cyber extortion has become big business. In some scams, hackers gain access to a computer and corrupt the data held on it. Then they refuse to release the data until they receive a large sum of money. In other instances, they use information found on the computer against the owner as a form of blackmail.

Credit card fraud, identity theft, wire fraud, and money laundering are all examples of modern-day racketeering.

07

RICO act of 1970

Anthony "Fat Tony" Salerno, boss of the Genovese Crime Family, is photographed February 28, 1985 leaving the U.S. federal courthouse in Manhattan, New York after his arraignment. Salerno faces two counts of racketeering. Yvonne Hemsey / Getty Images

Prosecutors faced a huge problem when trying to bring charges against crime bosses. As the law stood, they could charge the individual who carried out a racketeering crime. But even though a mob boss may have ordered the crime, they themselves had committed no illegal act.

All that changed in 1970 when President Richard Nixon signed into law the Racketeer Influenced and Corrupt Organizations (RICO) Act. This gave law enforcement the authority to charge any individual or group involved in any acts of racketeering. As head of the racket, a crime boss could now face prosecution.

Anyone convicted under the RICO act can face up to 20 years in prison. If murder is part of the charges, this can increase to life imprisonment.

08

Mafia Commission Trial

Paul Castellano is photographed February 27, 1985 outside the US Federal Courthouse in Manhattan, New York, arriving for 'The Commission trial.' To the left of Mr. Castellano (in a brown coat) is his bodyguard, confidant, and chauffeur Thomas Bilotti. Yvonne Hemsey / Getty Images

Evidence gathered by the FBI allowed prosecutors to indict the heads of the five families of New York. Under the RICO act, charges of labor racketeering, extortion, and murder-for-hire were bought against them. The subsequent trial became known as the Mafia Commission Trial. In 1985, the trial resulted in life sentences for the big crime bosses of New York’s once untouchable Mafia families.

09

Prosecution of an Individual

Michael Milken speaks at the "California Educator Awards Luncheon" October 5, 1988 in Los Angeles, CA. Milken was the target of a ninety-eight count criminal indictment and a civil case filed by the Securities and Exchange Commission (SEC) for allegedly violating federal securities and racketeering laws John Barr / Getty Images

One of the more famous cases of racketeering was not against the Mafia or a mob boss. Michael Milken was an American financier working for the Drexel investment bank. He became a prominent and influential player on Wall Street but didn’t always play by the rules. In 1989, Milken was indicted on 98 counts of racketeering and fraud under the RICO act. He was accused of insider trading, stock manipulation, and securities fraud. With the possibility of a life sentence, Milken took a plea bargain accepting jail time and a fine.

10

FIFA corruption

Vegas Mob Museum Opens Exhibit On FIFA Soccer Scandal Ethan Miller / Getty Images

More recently, the RICO act was used in the corruption case against 14 corporate executives and officials of the Federation Internationale de Football Association (FIFA). They were indicted under the RICO act for taking bribes totaling $150 million. The kickbacks were to secure profitable marketing and media rights for international soccer tournaments including the world cup. The case threw a dark cloud over FIFA which they are still struggling to get out from under today.

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