On 28 July 1983, Pres. Ronald Reagan issued Executive Order 12435, creating the President’s Commission on Organized Crime under the auspices of the Federal Advisory Committee Act. The commission was given the charge to make a “full and complete national and region by region analysis of organized crime; define the nature of traditional organized crime, as well as emerging organized crime groups, the sources and amounts of organized crime’s income …; develop in-depth information on the participants in organized crime networks; and evaluate Federal laws pertinent to the effort to combat organized crime”. The commission was to have up to twenty members.
The president appointed U.S. Court of Appeals judge Irving Kaufman to chair the three-year work of the panel. Kaufman was certainly one of the most prominent federal jurists on any bench. As a federal district judge, he had presided over the trial of Julius and Ethel Rosenberg. The two were executed in 1950 for being spies for the Soviet Union, stealing atomic secrets. Kaufman had also been the judge during the trials arising from the raid on the organized crime meeting at Apalachin, New York, in 1957. The commission membership also included U.S. Supreme Court Associate Justice Potter Stewart, U.S. Senator Strom Thurmond (R-South Carolina), U.S. Representative Peter W. Rodino (D-New Jersey), Louisiana State Attorney General William J. Guste, associate Watergate prosecutor Thomas McBride, and law professor Charles Rogovin of Temple University. The other members included the sheriff and district attorney for San Diego County, a former U.S. attorney, members of congressional investigating staffs, police officials, private attorneys, and the editor of Reader’s Digest magazine.
The commission had an overall budget of $5 million. Its staff of thirty-six included sixteen investigators and seven lawyers. The commission met in a series of hearings on selected topics over a three-year period. Hundreds of subpoenas were issued by the commission. Major topics examined included money laundering by organized crime, Asian gang activity in the Unites States, labor union violence, involvement of legitimate business with organized crime, illicit drugs, and gambling. The commission issued reports on the separate topics during the course of its work; however, it limited the scope of its recommendations to only a few topics.
Special importance was given to money laundering. Forty-one banks were investigated. One in Boston was shown to have “knowingly and willfully” allowed $1.22 billion in cash transfers with Swiss banks on behalf of clients who were not asked why they were bringing in large sums of money in paper grocery bags. In a court action the bank was fined $500,000 for failing to abide by provisions of the Bank Secrecy Act of 1970. That was not enough. In October 1984, the commission recommended that a new law be passed making money-laundering activities more clearly illegal under federal law. A first offense could be punished by fines of up to $250,000 or twice the value of the laundered money and imprisonment up to five years. Illegal gambling was seen as a problem area in money laundering, and legal casinos were viewed as agents of potential money laundering. In 1985, regulations of the Treasury Department were amended so that casinos with revenues in excess of $1 million a year were to be considered banks for purposes of the Bank Secrecy Act of 1970. In 1986 Congress passed the Money Laundering Act of 1986, which made money laundering illegal for the first time. The new law indicated in excess of 100 specific activities that would constitute illegal sources of moneys restricted from exchanges by banks and casinos. Illegal drug sales and illegal gambling proceeds were included.
Hearings on Asian gangs found a high level of involvement in gambling operations that were both legal and illegal. Gang members were involved in running Chinese games such as mah jongg in legal poker rooms in California, and they also attempted to use a front business to buy a casino in Las Vegas. It was feared that Asian organized criminals such as the Japanese-based Yakuza and the Bamboo gang of Taiwan could grow into an influence that would exceed that of the Mafia.
The commission focused its investigatory energies on the misuse of labor unions in order to achieve the goals of organized crime interests. The commission recommended more rigorous implementation of provisions of the antiracketeering statutes already on the books. They sought to have such involvement by labor considered as “unfair labor practices” under provisions of the National Labor Relations Act.
Hearings on gambling activity looked closely at Cuban-American racketeers who were discovered to be operating a $45-million-a-year gambling syndicate in New York City. This activity was a major component of organized crime’s control over $1.5 billion in the New York metropolitan area. There were also hearings on gambling and its effect on professional and amateur sports activity.
A study made by Wharton Econometric Forecasting of Philadelphia for the commission concluded that organized crime activity exceeded $100 million a year in drug trade alone. Overall organized crime activity cost Americans 414,000 jobs each year and $6.5 billion in lost tax revenues.
The commission ended its work somewhat in disarray. A final report recommended that bar associations take steps to self-police lawyers who would work for Mob groups. The commission also endorsed wiretapping to discover illicit practices by lawyers. Moreover it sought expanded drug testing in the workplace. Nine of eighteen commission members refused to endorse the final recommendations. The commission was criticized for having too many hearings and not enough meetings to discuss the substance of its investigations.
The topic of gambling pervaded all the investigations. The commission did not issue a separate report on gambling, however. Although commission chairman Irving Kaufman hinted that illegal gambling was a major source of income for organized crime, the commission chose to allow the transcripts of its hearings to suffice to cover the area. The federal administration did not consider organized crime to be a major factor in legal casinos in the United States. The silence was a statement.
The commission did not conduct any original research into gambling activities, but it did contract for a consultants’ report on policy options. The report was written by professors John Dombrink of the University of California–Irvine and William N. Thompson of the University of Nevada–Las Vegas. The report lamented that a wave of legalizations of gambling across North America had not been accompanied by serious research and thoughtful consequences of legal gambling for society. A program of federally supported research was recommended. It was especially important that the extent and impacts of compulsive gambling be known before more gambling was legalized, making it advisable to have a moratorium on new legalizations for a time during which research could take place. Also during the time of a moratorium (three years was suggested), state officials, industry personnel, and other interested parties should be brought together by the U.S. Department of Justice to create a set of minimum standards for gambling activity to ensure a uniform integrity and to ensure that organized criminals would be excluded from operations. The minimum standards could then be enforced by state governments or, alternatively, by the Department of Justice if the states chose to ignore the standards. States could be given incentives to follow the standards through law enforcement grants. The consultant’s report rejected the notion that the federal government should be involved in either direct regulation or taxation of gambling operations. There is no evidence that the commission used the consultant’s report. Later in 1996, however, a bill to regulate Native American gambling was introduced in Congress. The bill included a moratorium provision such as the one in the report.