What Is Racketeering?

Racketeering has long and a negative connotation since it describes activity that goes on outside the law. The basic word, “racket” is used to describe the business itself, while the word “racketeering” helps us understand the act of conducting this business.

racketeering1According to most legal history documents, the term was created nearly 100 years ago in reference to a group called the “Employers Association of Chicago.” During the “Roaring ‘20s” organized crime was a major source of income for many, especially in Chicago. The word “racketeering” was used to help people understand some of the activities conducted by the Teamsters, most of which was outside the law.

While it took several decades, the United States government passed a law that dealt specifically with rackets and the people who conducted the “underground” businesses. The Racketeer Influenced and Corrupt Organizations Act (RICO) was passed in1970. This law mentioned certain business activities that were considered illegal. These businesses primarily involved moving products across state lines, putting the actions under federal supervision.

Originally, organized crime groups conducted such businesses as “protection,” in which they got money, by force, from legitimate businesses by promising to protect the business from any other illegal activities. In some cases, this racket involved telling the legitimate business owner that no harm would come to them (from the racketeers own thugs) if they just paid a percentage of their revenue to the “mob” or other organized crime group.

Racketeers also operated the “numbers” racket, which was quite similar to the well-known lotteries of today. For example, the racketeer might collect money from individuals who were betting that certain numbers would show up in a particular place in the newspaper, or that the score of a game would include certain numbers. There were many variations on this lottery-type of racket, which works much the same way as keno in a Las Vegas casino.

The problem for racketeers in many cases came from the failure to pay income taxes on these illegal businesses. This allowed the federal government to pursue racketeers on the basis of failure to pay and was one of the key elements in the case against the infamous Al Capone during the 1920s.

Among the common rackets of the past few decades was bribery, in which the racketeer set up a system of payments to government officials, judges and business owners in order to get certain services or to convince the legal authorities to look the other way during an illegal operation. Illegal gambling was also a popular way to make a lot of money. It was a racket because it occurred behind the scenes and the revenue was not reported to any government entity. Counterfeiting was considered a major racket, as organized crime groups printed and distributed their own money. Moving alcohol in large shipments without paying the required federal and state taxes saved racketeers millions of dollars.

In many cases, the individuals made millions of dollars conducting rackets under the cover of a legitimate business. Sometimes the money was “laundered” through the legitimate business. At other times, the authorities might not know of the illegal activities because they believed the individual or family was only involved in something legal, such as trucking or even a licensed gambling site. The word “racket” has the same language roots as “rattle.” It got its interesting use when organized crime was at its peak in the early 20th century.

Category: History, Government & Society

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