Modus Operandi (31 page)

If you have $1 million, all in twenties, you have fifty thousand twenty-dollar bills, a large bundle of money. By purchasing one thousand $1,000 money orders, you still have your million dollars, but you have dramatically reduced the bulk of the money. The only problem is that you need different people with different addresses to purchase one thousand money orders.

RICO

Congress enacted and passed the Racketeer Influenced and Corrupt Organizations statute, otherwise known as RICO, as Title IX of the Organized Crime Control Act of 1970. Congress wanted to have a way of controlling the money and power obtained from illegal activities, since these monies corrupt not only legal businesses, but aid in corruption of law enforcement. Congress also felt that organized crime became more powerful from the profits they received from their illegal activity.

RICO, since its earliest beginnings, has become the most controversial federal statute to date because first time criminals and small time dealers are losing their property and homes. Under RICO, racketeering activities cover any act or threat of act that involves murder, kidnapping, arson, extortion, robbery, gambling, bribery or narcotics. If a person receives any monetary gains from one of the prohibited activites, directly or not, they have violated RICO.

RICO allows the law enforcement community to confiscate any monies or properties obtained from gains made from illegal activities. It also provides for prison time and fines. These forfeited properties will be divided and shared through the various agencies involved in the arrest and prosecution of the criminal. In the early days of RICO, G-men drove around in seized luxury cars, but this is no longer a practice because it gave the government a bad public image.

Loan Sharking

Loan sharking is the lending of money at unusually high rates of interest. The victim is a person in serious financial straits. Loan sharking is considered one of the largest sources of revenue in organized crime next to gambling.

Loan sharking is a violation of laws regarding usury, that is, the lending of money at rates higher than those set by the government. Most loan sharking also involves extortion because of threats and violence used to obtain the loaned monies. The typical victim, short on credit and collateral and attempting to discharge a heavy short-term obligation, undertakes another more formidable financial burden through loansharks.

For each loan made by a loan shark, a pyramid of distributors or lenders exists. At each level a higher interest rate is used so that ultimately the customer is charged about 300 cents on the dollar per year. Ultimately, the million dollars laid out by the boss loan shark should generate half a million dollars in profit from myriad borrowers at the end of the year. The two objectives of the operation are the acquisition of money and the acquiring of legitimate business. To collect the payments due, loan sharks use
enforcement,
which is a term covering the truly criminal aspect of loan sharking, namely extortion. As a highly lucrative branch of organized crime, loan sharking is controlled by well-organized units each divided into about four levels of operating personnel and headed by a chief or boss.
The Boss Loan Shark
is at the top of the unit and is a high-ranking person in the crime group. Although he may be the head of a legitimate business, such as a bank or mortgage company, his loan sharking operation is conducted without established headquarters. He provides the financing and the overall supervision of the operation. For example, in the beginning of the year he will distribute a million dollars among his ten lieutenants with the simple instructions: "It doesn't matter to me what you get for loaning out the money, but I want a certain percentage per week."

Lieutenants.
The second level is held by ten lieutenants who distribute about a hundred thousand dollars among the subordinates with similar instructions requiring that they get slightly more percentage per week interest.

Subordinates.
Each of the lieutenants has about thirty subordinates who may themselves do the lending, if the loan is large enough, or who may have their own subordinates who do the lending. Again the interest requirement will be slightly higher.

Bookmakers.
The fourth level is where most of the actual lending is conducted. This may consist of working bookmakers and street corner hoodlums. The interest rate at this level is usually 5 percent of the principal per week and may be higher.

Since any successful business is based on sound business policy calculated to yield predictable results, so too has loan sharking developed a reliable procedure for dealing with default on the loan.

The first rule is that the lender makes the rules. Let's take a case where a business owner is given a $6,000 loan by a loan shark. The borrower, the businessman, made three payments and then missed two. As a penalty, the loan shark declared that the debt was now $12,000 with the 5 percent interest per week now on this larger sum. Again the businessman failed to pay and the declared principal was increased to $17,000. Finally when the debt had gone to $25,000 the debtor was called to account.

The loan shark then declared himself a half partner in the victim's business. Now he was to collect half of the business profits as well as the weekly payments on the old loan. Eventually the situation becomes hopeless and the loan shark states that his final offer is that "if you forget about the business we'll forget about the loan." The business is now the loan shark's!

A sit down occurs when it appears the victim is in serious trouble and can no longer meet the payments. This meeting is presided over by a recognized underworld chief who decides what lump sum the loan and the accumulated interest can be settled for. It is a court for which there is no appeal, of course.

Let's consider the case of a company whose chief executive received a loan of $22,000 with interest of $1,100 per week. Later another $6,500 was lent and the total interest payments became $1,425 per week without ever diminishing the amount owed. Soon the executive was convinced that he could not maintain the payments. Although he had already spent $25,000 in interest, he still owed the
entire
principal of the loan.

A sit down was called with the chief loan shark. It was ruled that the chief should take over the company and operate its plant. In a few months the company was looted of all its assets and driven into bankruptcy.

Failure to meet payments is met with grave disapproval and followed by the imposition of severe sanctions. Depending on the nature of the case and especially on the victim's assets, a decision is made and a penalty imposed. This penalty may take the form of assault, murder or appropriation of the customer's property.

Loan sharks are very successful because the police find them difficult to investigate. It is a personal transaction to which there are usually no witnesses other than the two persons involved. In fact, many loans are negotiated under circumstances the victim is actually reluctant to reveal. For example, gambling losses are a common cause of approaching a loan shark. A husband takes five hundred dollars from his paycheck and gambles it away. He finds that he owes the loan shark seven hundred dollars within twenty-four hours and will not want to admit to his spouse where the first five hundred actually went. This is the last type of person that will report to the police that he is a victim of loan sharking.

All states have statutes covering extortion and conspiracy in an attempt to control the criminal activities of loan sharks. However, in cases of loan sharking that
are
reported to the police, the only person arrested, indicted and sent to prison is the enforcer of the loan shark, who, when being sent to break a few arms and legs, was set up by the police. In these cases our experience has shown that the victim, even though he has gone to the police, will not be bothered any further. After all, why should the loan shark bother with a victim who is under police surveillance when the city is filled with customers ready, willing and able to pay 5 percent interest per week!