Franchising crime
The Outfit's grip extends from Chicago to Northwest Indiana
NWI Times
May 26, 1991
http://www.nwitimes.com/uncategorized/franchising-crime-the-outퟌt-s-grip-extends-from-chicago-to/article_ac22f5cd-557e-51a1-a84c-15d144dd6c3c.html
Even before the existence of organized crime in America was admitted to by the FBI, everyone in the know was aware the Chicago mob had a grip on Northwest Indiana through its South Suburban operations.
But it was not until this year that federal investigators were able to confirm that the influence of the Chicago mob, better known as "the Outfit," reached as far east as the South Bend-Elkhart area.
In sworn testimony to an FBI agent, Elkhart gambling figure Ralph Montagno Jr. said his father, who ran the Flytrap Restaurant and Lounge in Elkhart, had been shaken down in 1984 for "street tax" by Chicago mob collector Peter "Cadillac Pete" Petros.
Street tax is an extortion the Outfit charges operators of illegal activities such as gambling or auto "chop shops" to remain in business and can be a flat rate or percentage of take.
Montagno and three others pleaded guilty to federal illegal gambling charges in March in U.S. District Court in South Bend.
Petros was among 15 people indicted in December by a federal grand jury in Hammond investigating the presence of organized crime in Northwest Indiana. The trial is set to begin July 22.
"We had thought the Detroit (organized crime) family controlled the South Bend area," said FBI Supervisor Robert Pertuso, who heads the agency's organized crime program in Merrillville. "But if you've got a street tax collector there, that means the Chicago influence goes all the way to South Bend."
Petros was a suspect in the bombings of two Elkhart gambling bars that allegedly did not pay the Chicago street tax and may have somehow been related to the bombing of a Hammond gambling operation that also tried to dodge the street tax.
Falcone's, an Elkhart bar, was firebombed in 1982. On Sept. 30, 1984, the Flytrap, owned by Ralph Montagno Sr., was firebombed.
"At the time of the bombings, we felt it had to do with gambling," said Elkhart police Capt. Gregory Thomas, head of the department's detective division. "They were running parley cards, football cards. I remember the name of Petros coming up, but I don't know how he fit into it. Organized crime has been speculated on as a motive for years, but no one's ever been able to prove it."
On July 9, 1984, the Greek Coffee House, 113 State St., Hammond, was bombed.
The owner, John "Mustache John" Mantis, was named in the December indictment as the victim of mob intimidation in that alleged street tax collector Anthony Leone tried to muscle Mantis' gambling business. Leone was one of the 15 indicted.
All of the large gambling operations pay street tax, and Northwest Indiana gamblers are no exception. But even though mob assessments can top $1,000 a month, the business is so lucrative many are willing to take the chance.
"We're talking major money," said Robert Pertuso, supervisor of the Merrillville FBI office and a specialist on organized crime. "We know for the Chicago mob, it is their major source of income."
Numbers games are an illegal version of a state lottery. To bet, a person picks numbers - perhaps a "pick three" version - and places his bet with a runner. The runner delivers bets to the writer, who pays off winners. Bettors are usually given a carbon with numbers on it.
The writer turns the profits over to the lottery owner, minus a cut, normally 25 percent or a flat weekly rate.
The winning numbers are determined by the drawings for the legitimate lottieries, as opposed to the old, pre-lottery days when winning numbers were selected from a policy wheel.
The policy wheel bettors were dependent on the uncertain honesty of the person operating the wheel, and scams were often run to keep profits high.
"If a lot of people played a one-nine combination, they (wheel operators) would take one-nine off the wheel," said former Gary police vice commander Lt. Fred Bemish. "When the Illinois lottery began, policy went right down the tube" because bettors naturally chose to bet on independently selected numbers.
But the illegal numbers game got even bigger when the lotteries were legalized, said FBI Special Agent James Cziperle, the Merrillville office's organized crime expert.
"You get the word you don't pay off, they go to someone else," Cziperle said. "You've got to earn the trust of the bettor."
Pertuso said the payoff is instant and tax free, a big incentive for bettors. "If you hit the big one, you've got it made," he said.
Bemish said illegal operators also offered cash incentives to play the illicit games, offering to pay $600 on the same game Illinois or Indiana offers $500 on.
Mob gambling typically brings police corruption. "You cannot have a major gambling operation without assistance from corrupt law enforcement," Pertuso said.
A 1988 lottery operation conviction that saw mob figure Anthony Leone, of Valparaiso, sent to prison for eight years was largely the result of undercover work by former Gary police officer Fred Bemish. Bemish, then with the department's Public Morals Squad, posed as a cop on the take, raking in money from more than a dozen illegal lottery operators and building a case against Leone and several others, including gambling figures Vincente "Pee Wee" Lozada and William Brookshire Jr., and former Gary police officer Michael Mione, who admitted bribing undercover Gary officer Willie Ray Turley to protect Leone's operation.
Pertuso admits fighting illegal gambling is like shoveling sand back into the ocean, but he said his unit focuses on mob-related gambling to cripple the Outfit's source of income.
Pertuso, before coming to Northwest Indiana, served the FBI in Atlantic City, one of two areas - Nevada being the other - where casino gaming is legal and he said if something like casino gambling is ever legalized in Gary, it will spawn even more illegal gambling.
"If we get casino gambling, illegal gambling will flourish," he said. "It will also bring loansharking, People will lose all their money in casinos, and be looking for places to borrow.
"Legal gambling also draws people in who love to gamble, and they're not going to stop at the legal casinos. When I was in Atlantic City, there were houses set up right across the street from the casinos, running gambling, loansharking."
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