Organized crime generates roughly $29 to $33 billion in income through its illegal gambling operations each year in the United States (Business Week. 1989: 114). Although organized crime occasionally runs casino-type games, its primary income generators in the illegal market are the numbers game and bookmaking. The numbers game is one of the simplest of all gambling operations (Reuter, 1983: 45-54). A customer places a small bet, usually between $1 and $5, on a three digit number. If that number comes up, he or she is paid between $500 and $600. The profitability for the syndicate running the game is obvious in that it retains between 40 and 50% of the money bet for expenses, salaries, and profit. The number is calculated in a variety of ways. Some numbers are determined by the outcomes of various races at a particular race track (for example the winner's payoffs in the third, fifth, and seventh races added together or the last three digits of the track's handle for that day). In contemporary numbers gambling with the prevalence of state lotteries, most numbers bankers rely on the official daily number to determine winners.
Betting with an illegal numbers bank rather than the state provides several advantages. First, numbers banks do not collect taxes on winnings. Second, they are more convenient to the bettor and will extend credit. And finally, they provide a daily means for social interaction among friends and acquaintances rather than a sterile encounter with a state lottery ticket machine.
In a numbers organization, common procedures are followed. Numbers bets are written on the street, in bars, at newsstands, in tobacco shops, in luncheonettes, and the like. Writers are paid a commission of 25% of their receipts. Customers come into the establishment, make their bets, pay their money, and have their transactions recorded. At specified times during the business day, "pickup men" come to collect the bets from the "writers." Pickups are also paid by commission, usually 5 - 10 %. The bets are then taken to a central office or bank where they are totaled and recorded. After the winning number for the day was been determined, the "office men" identify the winners and send their winnings back to the writers through the pickup men. In a small numbers syndicate, these procedures represent the totality of the organization. A single banker oversees the whole organization and exercises total authority since it is his or her money in play. In larger numbers syndicates, the procedure is the same; it is simply replicated. Many neighborhood "banks" follow the additional step of reporting their daily take to a central bank which provides overall financial backing to the whole operation. In very large numbers organizations, there may be yet another level added involving the use of a "layoff bank." The layoff bank covers extraordinarily high betting action on a particular number, providing a kind of insurance against a large "hit," in return for an ongoing percentage of the numbers organization's profits (Fund for the City of New York, 1972; Pennsylvania Crime Commission, 1987; Rubinstein and Reuter, 1978; Simon and Witte, 1982, 212-214).
A couple of specific cases may clarify the concept. For three decades Caesar Nelson ran a massive numbers gambling organization in North Philadelphia. Nelson's annual wagering volume was estimated to be about $40 million, or $160,000 a day. In order to achieve this volume, he had about 2,000 "writers" on the streets, making for a very large organization. Those 2,000 writers turned in their betting action to separate neighborhood numbers banks, which in turn passed the daily take to Nelson's central bank. By operating in this way, Nelson was able to run an extensive gambling organization from which he, as the principal financial backer, was buffered. No actual bets ever went beyond the smaller banks. Transactions which involved Nelson were strictly large cash transfers, never including betting slips themselves, only daily tally sheets (Pennsylvania Crime Commission, 1970; 1974; 1980; Potter and Jenkins, 1985).
Another even more complex operation involved the Baldassari family of Scranton, Pennsylvania. Their organization handled not only number bets, but sports and horse bets as well. Gambling action was written in a myriad of local businesses. A series of vending machine companies owned by members of the Baldassari syndicate picked up the bets several times a day. These bets were distributed to a series of banks, each run by different combinations of syndicate members acting in partnership. The profits were then directly deposited (more appropriately laundered) by transactions with a series of real estate corporations owned by participants in the gambling syndicate, including apartment complexes and land development companies (Pennsylvania Crime Commission, 1980).
The key point, however, is that even in these two highly complex, very large, high volume gambling operations utilizing thousands of writers, the procedures for conducting business were the same as in any other gambling syndicate. The way business is conducted is exactly the same for small numbers banks handling only a few thousand dollars in action. The nature of the service being provided has dictated an efficient means of doing business, which can be found with only minor variations in all gambling syndicates everywhere in the U.S.
In gambling organizations, money is once again a crucial organizational factor. The banker is the individual who has put up the liquid capital needed to establish the business. The officemen, lieutenants, and the like are salaried employees. The pickup men and writers are the rough equivalent of commission salespersons (Pennsylvania Crime Commission, 1987; Reuter, 1983; Jenkins and Potter, 1986; Simon and Witte, 1982: 212-214). In a gambling syndicate, a writer may decide who he or she will take bets from, but the writer has no power to change the odds, the point spread, or the method of moving his or her action to a central bank, although the "writer" has the option to take action for more than one bank. If luncheonette owners wish to offer a free cup of coffee to individuals betting with them, that is their prerogative, but it is a marketing cost that cannot be passed along to the organization.
Bookmaking involves the placing of bets on horse races, fights, basketball, football and baseball games, etc. The bookmaker is a broker who accepts wagers. "Runners or writers" funnel bets to a bookmaker on a commission basis. In addition, bettors can place a bet over the telephone. Most bookmakers will use several methods for concealing their whereabouts.
In years past horse racing was the primary business of most bookmakers, but the widespread availability of inter-track and off-track betting has resulted in a shift among most bookmakers to sporting events. About $26.8 billion is wagered annually of sports events and horse races through bookmakers (Business Week, 1989: 114). Bets on sporting events are handled this way. The bookmakers sets the line, indicating the parameters of the bet. The customer is not betting on which team will win a game, but by how much the team will win. For example, if one wished to place a bet on a professional football game involving the Packers and the Bears, he or she might find that the line is the Packers by 7 1/2. This means that in order for a bet on the Green Bay Packers to win, the team must beat the Chicago Bears by more than 7 1/2 points. It is through the setting of the line that bookmakers guarantee their profit margin. They may also adjust the line at various times during the week to discourage bets on teams which have drawn too much betting action (Reuter, 1983: 17).
Bookmaking syndicates, like numbers syndicates, are fairly simple in organization. The bookmaker provides the capital for the operation. Below the bookmaker are clerks who record the bets and pay the winners. At the bottom of the operation are the "writers" who actually take the bets from patrons. Some large bookmaking operations also employ "tabbers" (Reuter, 1983: 20), individuals who keep track of both the betting action and information about the game and then adjust the line to guarantee that the bookmaker will not take a major loss on an unexpected outcome of a particular game. Most bets on horse races are paid at whatever the track odds happen to have been. But once again, in order to insure against a major loss, the "tabber" may advise the bookmaker to stop taking bets on a certain horse or to limit the amounts of the bet or send someone to the race track to insure the bets by "laying" them off at the legitimate betting windows.
Bookmaking is one of the few enterprises of organized crime with the extensive documentation, in the form of records of betting action which must be held at least temporarily. In addition, bookmaking usually entails more equipment than other enterprises. Usually many telephones are required for a large book. In rare cases, personal computers have been used to store records and run programs calculating bets and payoffs. In days past the wire services and the attendant equipment were required, now replaced by televisions tuned to all cable sports channels.
A sports and/or horse book of any size is not as mobile and easy to conceal as other forms of enterprise. On the other hand, while bookmaking exists in a hostile environment, it is considerably less hostile than, let us say, a crack house. There is widespread public tolerance and acquiescence toward sports bookmaking, especially in the areas of the country in which it flourishes (New York, Pennsylvania, California, Florida, Kentucky, New Jersey, all states which allow some kind of wagering on a legal basis and have some legitimate enterprises dependent on gambling). Furthermore, police generally believe that the gambling laws are not sufficiently important to enforce with any real vigor. As a result, the bookie can take greater chances in the business than other criminal entrepreneurs because he or she is unlikely to be the target of public moral outrage or proactive police campaigns (Commission on the Review of the National Police Toward Gambling, 1976; Department of Justice, 1977; Fund for the City of New York, 1972; Gardiner, 1967; Light, 1977; Simon and Witte, 1982: 212-214).