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Porn Merchants

In his final chapter, Potter asks about porn "whether it is simply an enterprise precariously balanced on the dividing line between legitimacy and illegitimacy, or whether it is in fact organized crime."

First comes the difficult question of defining organized crime. A consensus definition includes these characteristics - organized hierarchy, use of force or threats, corruption of public officials - enlisted in the sale of illicit goods and services, frequently combined with the infiltration of legitimate business.

Potter found that "the pornography industry has a high degree of organization... That organization is pyramidal in type wiht international and national production and distribution cartels distributing goods to regional wholesalers, who in turn, supply local porn retail networks. The local operatives are entirely dependent upon decisions made at the higher levels of the industry. The available stock of merchandise depends on distributors. The parameters of the product line depends on producers. The prices charged and the profits realized are closely regulated by regional and national networks. Pornography is highly organized industry, with clearly defined roles and a vertically integrated chain of command."

Potter found "that the industry is relatively closed. Unlike drug trafficking, which is open to anyone with sufficient guile, money and connections, pornography does not readily suffer intrusion by outsiders. To enter the pornography industry without the cooperation, and indeed collaboration, of the major distributors such as, Sovereign News, is almost impossible. The facts presented with regard tot he Progressive News anti-trust action against Sovereign News indicate that competition is not only stifled, it is simply not tolerated. In order to successfully enter this highly structured and organized industry, one must first become a vassel to the corporate giants of the industry.

"Finally, the degree of organizationa nd hierarchy inherent in the pornography industry is made clear by looking at the overlapping corporate structure... Literally hundreds of corporations proliferate in pornography. But, ast he case study of Sovereign News so clearly demonstrates, they are all interrelated through a variety of mechanisms. In particular these separate corporate entities are tied together by interlocking and overlapping directorships and officers; by co-location of corporations; by co-billing practices; and by differentiation through various corporate entities."

Later in chapter eight, Potter writes: "Controlling all phases of pornogrpahy, from production through to retailing, allows the pornography syndicate to exact heavy profit margins on each item it produces... The pornography industry may be among the most rationally organized profit-seekers in the contemporary economy.

"...Illict profits are available to organized crime groups for providing "protection" and street-level stability to retailers. The Chicago "Outfit" takes 50% of the retail take in return for industry tranquility. Similar "arrangements" appear to inhere in Boston and Los Angeles."

Potter writes that "The use of force in the pornography industry is rampant and is an abvious and accepted means of doing business. Bombings have been used extensively in Chicago, Los Angeles, and other cities as a means of bringing all industry participants into line. Arson, such as the Tilton Theater fire, is a common occurrence. Even murder...is a common practice in the pornography industry. The murders of Jack Molinas, John Krasner and Paul Gonsky, among many others, offer positive proof of murder as an effective means of controlling competition.

"But beyond the actual use of fore, the threat of force is also a major consideration in how the porn industry is organized. It is clear that coercion in the form of threats of physical violence or property damage to businesses has helped the porn syndicate control distribution. The sale of the rights to Deep Throat for $25,000 are a case in point. More than almost any other organized crime enterprise, pornography makes use of threats, violence, and force as a means of doing business."

Potter writes: "Another characteristic of organized crime is the provision of goods and services, such as gambling, drugs, prostitution, pornography and the like, which are not regarded as legitimate by society. It is abundantly clear that the pornography industry provides these services. In our look at retail pornography operations there was a significant incidence of illicit services being provided to customers. These services include pornographic materials which are illegal (i.e., "kiddie porn," extremely violent porn), and extended to prostitution, gambling, fencing and drug trafficking.

"The involvement of organized crime in waste disposal, labor racketeering, the meat industry, etc., is well documented. Similar patterns of behavior are easily discernable in the pornography industry. Quite clearly extortionate business practices, violence and other means of persuasion have readily been used to either dissuade individuals from competing in the industry, or to persuade individuals to become part of pornography syndicates.

"Observations of the retail pornography trade make it abundantly clear that an overlap exists between porn and other forms of vice. Retail porn outlets in our sample also provide prostitution and gambling services, and in some cases drugs. In addition there is abundant evidence that ready referrals to other forms of vice are provided by individuals working in the retail porn industry. The pornography industry exists in an environment of vice, in fact, the industry itself helps to create and define that environment.

"It is also obvious that the retail pornography industry is part and parcel of the business which provides illicit sexual services... At the retail level we have observed that connectiosn with prostitution occur in 71% of the cases; connections with gambling occur in 36% of the cases; connections with drug trafficking occur in 64% of the cases; and fencing operations occur in 36% of the cases. The connections between retail pornography and other forms of vice is clear. In 36% of the cases pornography involving children was available either on site or by referral.

"Our discussion of local pornography networks in Chicago, Baltimore, Los Angeles, and Pennsylvania also raises serious questiosn about criminal activity connected to the pornography industry. In Chicago, for example, trafficking in "kiddie porn" was a major sidelight of the local networks. In addition, a clear interface existed between Chicago porn entrepreneurs and the "Outfit." In fact, the "Outfit" provided a major degree of control over the local industry, providing protection and immunity in return for a sizeable cut of the profits. In Boston's "Combat Zone," Anthony Russo represents local organized crime network interests int he porn trade, and in fact regulates that trade in the city of Boston. Extortion is a mainstay of the local pornography industry.

"In addition, other crimes were manifest at the local level. In Los Angeles local pornographers engaged in the use of threats to gain control over certain porn properties, such as the box office hit "Deep Throat." In Chicago and Los Angeles, bombings and arson were important mechanisms used by local crime networks to maintain control over the porn industry. Michael Thevis used bombs as a way of doing business and driving competitors out of the trade. And most strikingly, murder was frequently used as the ultimate sanction. Paul Gonsky, John Krasner, Jack Molinas, Barney Gusoff, Joe Torchio, "Jap" Hanna, James Mayes and others were victims of a pattern of violence in the pornography industry.

"The interconnections between pornography and other kinds of organized crime are also quite clear at the local level. Loansharks, representing powerful local crime groups were found to be investors in the pornography industry. Gamblers were also found to mutual investors in New England, Chicago, and Los Angeles. Guarino and his associates, for example had both gambling and pornography in their portfolio of illicit businesses. Even drug money found its way intot he porn industry.

"There are at least four ways in which a pattern of racketeering is apparent at the local and regional levels:

"There is a clearly delineated and defined hierarchy of control in the industry which stifles competition and insures uniformity among pornography retailers;

"Violence and extortion are vital parts of the pornography business, and serve as a means of doing business;

"There is close collaboration between criminal actors in pornography and other local organized crime operations; and,

"Many of the key actors in the pornography business are also key actors in forms of vice.

"The evidence produced in the MIPORN probe alone is sufficient to demonstrate the existence of a national pornography syndicate. Rothstein and DiBernardo, through Star Distributors service much of the needs of retailers on both the east and west coasts, as well as having developed business relations with Sturman's Sovereign News operation. The Peraino brothers, with their organized crime links, played a key role in determining what films would and could be distributed and by whom. Harry Mohney and Kenneth Guarino ran large regional distribution networks with direct ties to the giants of the porn industry. Teddy Gaswirth and Michael Zaffarano played key roles in both production and distribution, and had close ties to organized crime operations in New York City. And, of course, Reuben Sturman seems to connect up with every othe rmajor actor in the industry.

"Sturman's Sovereign News empire dominates the pornography industry. While Sturman has consistently denied any connection to organized crime, and has in fact disparaged the idea that organized crime is involved in pornography, it has been alleged time and again by federal law enforcement agencies that he built his empire on "pattern of racketeering" and "the strongarm shakedowns of other dealers." Reuben Sturman dominates production, importation and distribution through a complex of corporations with considerable financial power. He sits at the top of the porn pyramid and runs an enterprise which, at the very least, gives the appearance of being a pornography syndicate."

Potter writes that the evidence suggests that "the organized pornography industry is not only influenced by organized crime groups, but may well be a form of organized crime itself. This conclusion can be based on two basic concepts: money and racketeering.

"The Pennsylvania Crime Commission (1980) pointed to pornography as a major new source of income for organized crime. The flow of hard cash and the complexity of corporate relationships in pornogrpahy make it a prime industry for laundering illicit cash and skimming money off the top. Cleaning gambling money, or drug money, through an industry with literally thousands of retail outlets, each doing a heavy volume of business, is a relatively simple and convenient procedure. Similarly, the exchange of so much hard cash makes "skimming" too lucrative a possibility to be ignored by organized crime. The assertions made by the federal government in Sturman's income tax indictment suggest strongly that organized skimming, on the same level as the casino skims orchestrated by Meyer Lansky, are occurring in the pornography business. Concealing profits and laundering funds among hte hundreds of interlocking corporations has been raised to an art form in the porn industry.

"Equally important is the role of racketeering and extortion in the industry. The pornography syndicate requires producers to distribute their products through the syndicate. Failure to do so could result in the pirating or "duping" of iflms, with pirated versions being distributed by syndicate outlets, thereby cutting intot he market for the original product; burglary in which the disputed property is simply stolen; or "strong-arm" tactics, such as arson, bombings and even physical violence to persuade independents to affiliate with the syndicate.

"In more subtle ways syndicate distributors can strangle independents by cutting off supplies, controlling prices, and monopolizing product lines. Because the syndicate not only controls distribution, but also production and often retail outlets, it is able to exercise total economic dominance over the indsutry. Competitors are forced out of the market and the syndicate maintains a near monopoly over the production and distribution of pornographic goods."