How the Mob Extorted the Hollywood Studio System
By John William Tuohy
Willie Bioff. His name is barely known today, but for almost a decade he was at the forefront of what remains the largest extortion case in the history of American criminal justice, that set the foundation of modern organized crime.
When the national depression knocked the bottom out of Chicago's once enormous prostitution racket, Bioff, a pimp, started to shake down Fulton Street shopkeepers, restricting himself to the Jewish stores and thus allowing George Brown, another goon whom Bioff knew only in passing, to work the Gentile side of the street.
Since Brown and Bioff collected their payoffs from Fulton Street at the same time of the day, on the same day of the week, they starting talking and soon formed a partnership dubbed B&B, for Brown and Bioff.
Together, Brown and Bioff merged their shake down operations on Fulton Street and expanded their control of the stagehand's union by increasing dues by $5.00, and then pocketing the increase for themselves. Since that plan worked out so easily, over dinner one night they came up with another plan to raise more money, by threatening the theaters with a strike. Bioff came up with an even better idea. Instead of collecting money once from the theater owners, they would sell them a "a no strike guarantee," which they would collect monthly.
The two hoods approached Barney Balaban, owner of Chicago's largest and most successful movie house chain, Balaban and Katz theaters.
Sam Katz, who would go on to own MGM Studios, and Barny Balaban, who would one day run Paramount, had begun operating nickelodeons as teenagers, and in 1916, were among the very first to produce silent films. Balaban was a tough, two fisted, self-made man and when Bioff and Brown showed up with their extortion threats, he personally threw them out of the building, no small chore.
Bioff and Brown talked about it and decided that they entered into the shakedown the wrong way because they were unsure of themselves and nervous, and it showed. A few days later, they went back, more self-assured, and promised Balaban that if they didn't get their way, there would be a strike, it would last for months . . . unless Balaban forked over $20,000 to B&B Enterprises.
To soften the blow, Bioff told Balaban that the money was to go directly to unemployed union members, for emergency help, like a soup kitchen. It was a lie of course. They intended, in fact they did, steal every penny of the money. But Bioff was smart enough to know that if Balaban gave the $20,000 to a charitable cause, like a soup kitchen, then the company could write the money off of their corporate tax bill and win public admiration at the same time.
Barney Balaban was also a pretty shrewd dealer. He quickly figured out that neither Bioff nor Brown would keep any written documents of the transaction since they intended to steal the money anyway. That meant that Balaban and Katz could fork over $20,000 to Bioff and Brown's "soup kitchen" and tell the government they had donated $100,000 and then pocket the additional $80,000 for themselves. The beauty of it was, Bioff and Brown would swear that they had been given any amount Balaban said they had been given. They had to. They had no other choice.
Brown and Bioff got the twenty grand. In cash. It was delivered by Balaban's lawyer Leo Spitz, who, before handing the money over, reached into the suitcase and pulled out $1,000 and stuffed it in his pocket "for carrying charges," he explained.
Like the small timers they were, after the payoff, Bioff and Brown went out on the town and gambled away thousands of dollars in a mob-run casino inside the Loop, a place called the Club 100, run by Nick Circella, a surly hood who worked directly for syndicate boss Frankie Rio, a former Capone bodyguard.
Rio and Circella were in the club that night, both of them had known Bioff for twenty years. As they sipped their espressos from the owner's table, and watched Bioff lose another grand on the roulette wheel, Circella wondered aloud, "where two losers like Willie and Brown would get that kind of cash." Rio was thinking the same thing and ordered Circella to find out what the two had been up to. Two days later, Frankie Rio called Bioff and Brown, and told them they were going to see Frank Nitti's home.
After the federal government railroaded Al Capone off to prison and out of power forever, his place was taken by Frank "The Enforcer" Nitti, who got the position more out of attrition due to thinning mob ranks than anything else.
Bioff and Brown, dressed in their best suits, waited in the drawing room of Nitti's twenty room mansion, having arrived 15 minutes early. George Brown was terrified. He was certain the summons to Nitti's place was the kiss of death, although he didn't know what he done to deserve it. But Bioff, always the smarter of the two, saw the summons for what it was, the opportunity. Otherwise, he reasoned, if they had crossed Nitti in some way they didn't realize, they would have been dead already, left in a back alley in the loop someplace, not waiting in a living room on a Saturday morning.
After a half hour, a young, smartly dressed thug they didn't recognize came out and led them into a large, formal living room where Phil D'Andrea, former Capone bodyguard, Paul Ricca, Charles "Cherry Nose" Gioe, a top executive in the outfit and Louis "Little New York" Campagna were waiting. The boss himself, Frank Nitti, sat in his desk chair, glaring up at Brown and Bioff. "Where'd you get the money?" Nitti snapped. "And don't you fuck'n lie to me."
George Brown was too terrified to speak, so Bioff did all the talking, explaining the entire shakedown in a matter of minutes, but blaming everything on his partner, George Brown.
Nitti understood everything, even before Bioff had finished talking. He also saw the big picture at once. There were hundreds of movie theaters in pre-television Chicago, thousands in Illinois and tens of thousands across the United States. The potential was endless. Nitti leaned back in his oversized leather chair and declared that he was cutting the outfit in on B&B's deal for 50%, although he would later increase that to 75% and then 90%. From that amount, 10% of the gross went into the mob's general treasury and the rest was divided up among those who had invested in the scheme.
Furthermore, Nitti said, he was taking the stagehand's union from Bioff and Brown and reducing them to his bagmen within the union. They, Brown and Bioff, would handle the day-to-day problems in the local, but if they had any serious troubles, they were to report them to Nick Circella.
When he was finished talking, Nitti leaned up towards his desk and said, "All right, now get out."
The Chicago outfit had always had its eye on Hollywood. It started with Capone. Just before he went to jail forever, Big Al had called a general meeting of the boys and told them he intended to extend his power westward to Los Angeles and ordered Nitti to draw up a plan to look into taking over Chicago's enormous entertainment industry. Then the Tax men came around and slammed away Capone for good, but Nitti never forgot the plan to invade Hollywood.
Now, in 1933, Nitti looked at Hollywood and its stars and producers with skeletons in their closets, and said, "The goose was in the oven waiting to be cooked."
He was right, too. Los Angeles was a wide-open city. Disputes were settled in gunshots, wildcat gangsters simply moved into town and bribed politicians, elections were rigged by competing gangs. The district attorney, Baron Fritts, was already on his way to becoming one of the country's most corrupt lawmen and the police chief, Jim Davis, was a loudmouth clown who carried two six-gun revolvers, and, was so corrupt that a detective's badge could be purchased for five dollars. The Mayor, Frank Shaw, admitted to newspapers that he rigged elections and placed his brother in charge of a spy squad within the police department that kept track of, and intimidated, his enemies. Compared to Los Angeles, Frank Nitti's Chicago was a bastion of order. But that was Los Angeles. Hollywood was a different place, hell it was a different planet.
An avid reader of the daily financials, Nitti learned that the movie business was ripe for extortion, for a wage increase shakedown, because the depression had hit the industry hard, and profits were off. The danger in low profits for the studios, was that the entire motion picture business was only 15 years old. Other, older and more established businesses might be able to withstand a drain on its cash, but the Hollywood studios weren't ready for the same trial. Still, even with sagging profits and a shaky foundation, movie pictures were one of America's top ten grossing industries. Every day, tens of millions of dollars poured into its bank accounts, and Nitti and the syndicate wanted a piece of the cash. With control of the national union entertainment unions, they would get it, just the way Capone had planned it back in 1929.
A few days after the meeting with Brown and Bioff, Frank Nitti met with his council at the Capri restaurant inside Chicago's loop so he could introduce his plan to take over the entire union on a national level.
Over lunch, Nitti pulled out the newspaper clipping he had on Balaban's nationwide operation and said he had spent the morning on the phone with Lucky Luciano in New York. He told the boys, Paul Ricca, Louis Campagna, Frankie Rio and Nick Circella, that he and Luciano had decided that their mobs, New York and Chicago, would work together to take over the movie business across America.
The entertainment business was too big, Nitti explained, and covered too many miles, for Chicago to try and take it alone. Besides, he added, Luciano and the other New York families already controlled the East Coast Stage Workers and projectionists' locals whose control was vital to a successful takeover.
Nitti said that he and Lucky had decided that the first place to start was with Barney Balaban. They would send Bioff back into Balaban's office with a demand for a 20% increase for the projectionists. Nitti said that he expected Balaban to refuse to pay. When he did, the New York syndicate, working the Chicago syndicate, would arrange a general strike against all of Balaban's theaters on the East Coast and the Midwest.
Nitti said that the projectionists would be out of work for a few weeks and the theater chain would close down. Then, at the last minute, Nitti would send in George Brown to act as peacemaker and stabilizer who would end the strike through peaceful negotiations, while at the same time getting the projectionists a small raise. With that done, the mob would run him for the Stagehand Union presidency in the next election.
That's what they did and it worked. The strike ended and George Brown was the hero of the working man and the studios alike.
In June of 1934, the union held its national election in Louisville, Kentucky. With the weight of the entire national syndicate behind him, George Brown was elected national President of the IATSE, the union which, effectively, controlled the entertainment business, and Willie Bioff was appointed Brown's "Special Representative", at a salary of $22,000. The Chicago mob's takeover of a giant American industry had begun.
After the convention, Frank Nitti called Bioff and Brown into his office and told them that he had decided that it was best if they, Bioff and Brown, moved out to California where they would be closer to the studio's offices and production centers. The pair did as they were ordered, and while Brown spent most his time locked behind his office doors drinking beer, Willie Bioff made himself busy. In less then three months, he took $250,000 in cash from the movie moguls at Warner, 20th Century Fox, Paramount, everybody paid, all of it in cash, wrapped in brown paper bundles.
Nitti, who always expected the worst in everything, was amazed to find out that he didn't need a ramrod to knock down Hollywood's golden gates. He just knocked gently and they sprung open for him. The reason for that was that Hollywood, as Nitti would quickly learn, was, like him, all about money.
Although it later became known as the Bioff and Brown extortion scandal, it wasn't really extortion, at least not in the classic sense, because the studio heads, by paying off Bioff and Nitti's not to raise prices, were actually saving money, perhaps millions of dollars over what they would have to have paid a legitimate union in wage increases. Furthermore, the scandal benefited the studios in other ways because the mob, for everything that was evil about it, usually kept its word once it was paid, and the mob had agreed not to raise labor prices. That promise assured the studios that productions would finish without stoppage or a problem from IATSE's 12,000 members, and as result of a toothless union, the studios fired workers at will and pushed others to work over time without compensation; as a result, films were made for less money because not as many people were needed. In fact, the payoffs to the mob, saved the studios about $15,000,000.00 in what they would have paid out in wage increases.
With the mob behind them as a working partner, the studios no longer had to deal with Communists who had infiltrated the locals and stirred up trouble, or the small time thugs who kept coming back for more nickels and dimes or the weak labor leaders who couldn't keep their promises because they had no real control over their membership. Producers knew that with the mob in charge, they could get a picture wrapped up on schedule because there would be no strikes and as an added bonus the mob ordered Bioff & Brown to raise prices for live theater, opera, plays and concerts, which were competing with the movie business. Everybody, except the membership, was happy.
Joe Schenck was one of the founding Fathers of Hollywood.
Joe Schenck got involved with, in fact he almost helped to design, the mob's shakedown of the Hollywood studios in April of 1936. Unlike the gangsters who lived from day to day on their incomes, the studio heads relied on budgets.
Bioff's surprise visits were starting to tax the bottom line. The studio heads gathered together and decided to let Nick Schenck come up with a plan that would satisfy the outfit and the studios.
Schenck was about to pay Bioff anywhere near a million dollars, however, he did a quick take on Bioff and decided that he could be bribed.
Schenck told Bioff that the DuPont representative in California wanted to increase his raw film business with MGM and the other studios, and DuPont was willing to pay Bioff a 7% commission to act as the designated "agent" between DuPont Chemical and the Hollywood studios; better yet, all of the actual footwork would be done by a "sub agent" assigned by DuPont, all Bioff had to do was cash the checks.
Bioff agreed to the deal under the conditions that his income never fell under $50,000 a year and that Schenck was not to mention the commission deal to anyone else, meaning Frank Nitti, or his west coast boy, Johnny Roselli.
Schenck called the other studio heads, explained the situation and all of them agreed, reluctantly, to switch their business from Eastman Kodak raw film to DuPont. In the last part of 1937, the raw film commission deal that Schenck had put together gave Bioff $159,025 in commissions, an enormous amount of money for that time.
Flush with more cash then he ever dreamed possible, Willie Bioff "went Hollywood." He started to wear expensive clothes and carried three diamond-studded, solid gold, union business cards in his wallet. Using mostly union funds and by applying yet another special collection on the studios, Bioff was able to raise enough funds to buy a ranch, where the city boy from Halstead Street grew alfalfa and flowers and relaxed in his mahogany-paneled mansion where, although he could barely read, Bioff had a pine-knot library filled with the world's greatest books and rare and expensive volumes. He bought a Louis XV bedroom and rare Chinese vases and fancied himself a connoisseur of rare vases and had a kidney shaped swimming pool built in the back yard for his seven children.
Willie Bioff's new ranch and the unusual methods he used to finance it weren't missed by Montgomery Clift, the Screen Actors Guild President, who had his own informants within the studios. Clift figured, correctly, that the ranch was a payoff from Schenck to ensure Bioff's secrecy. Then, one of Clift's informants provided him with a copy of the check that Schenck had made out to Willie Bioff for $100,000. Clift reported the deal to the IRS and eventually Schenck was secretly indicted for tax evasion.
When questioned about the check he had written to Bioff, Schenck said it was a loan. Later on, he made the mistake of testifying to that under oath. When the government was able to prove that Schenck paid Bioff the money as a means to avoid taxes, he was indicted on several counts of tax evasion. Schenck, always the businessman, decided to cooperate with the government in exchange for his a light sentence.
The government agreed and Joe Schenck sat before the grand jury and outlined the entire scam. The grand jury eventually found Schenck guilty of tax evasion and he was sentenced to five years at a federal prison, but Joe Schenck wasn't just anybody. He wasn't going to serve out his term in jail and the whole world knew it. He served just under a year, was granted a Presidential by Harry S. Truman and then went to running his studios as though nothing had happened.
Based on Schenck's testimony, the federal grand jury issued subpoenas for all the major studio heads, but still, up until almost the very end, the government had no real clear understanding of the extent of Bioff's extortion scam or the fact that the mob, New York and Chicago, were involved. Then Harry Warner stood before the grand jury and filled in the gaps. Warner's evidence was enough to put everybody involved behind bars. On May 23, 1941, Brown, Bioff, Paul Ricca, Frank Nitti, Nick Circella, Charlie Gioe, and Phil D'Andrea were indicted for extortion and tax evasion.
Willie Bioff had no intention of doing any jail time.
He called US Attorney Boris Kostelanetz from a jail house visitor's phone and opened the conversation by saying, "This is Bioff . . . Okay, Boris, what do you want to know?"
Bioff laid out the entire scheme for Kostelanetz, times, dates, places, names and amounts; of course he worked a good deal for himself first. In exchange for his testimony, the government agreed to let Bioff keep the money he had stolen over the past decade, furthermore, he would walk away from any charges against him.
After three weeks, Bioff finished giving his testimony to the grand jury, and when he was finished talking, indictments were handed down for Johnny Roselli, Frank Nitti, Paul Ricca, Louis Campagna, Charlie Gioe, Phil D'Andrea, Ralph Pierce and Frankie Diamond.
There was a trial, but none of the outfit members took the stand in their own defense, the case against them was that overwhelming. On December 30, 1943, the verdict against them was returned. They were each found guilty and sentenced an average of ten years in federal prison plus $10,000 fine and were liable for the back taxes owed. It was, as the Chicago Herald American wrote, "The total demolition of the Chicago syndicate."
Frank Nitti never went to trial on the Bioff charges, because a day before he was indicted, he took a .45 and blew his brains out, just as he had always promised he would if he ever faced another long prison sentence.
Paul Ricca decided he wasn't going to do any jail time.
Working through Campagna's wife they were put in touch with a Missouri legislator named Edward "Putty Nose" Brady who in turn placed them in contact with a St. Louis lawyer named Paul Dillon who wasn't new to the mob. He knew Murray Humpreys, the Chicago outfit's bag man, very well and had defended two IATSE union officers at Humpreys' request, after they were caught beating up a movie theater owner in St. Louis in 1939.
Dillon, then 68, also had strong political connections to the Missouri underworld including Johnny Lazia, the Kansas City gambling king who was killed in 1934 and Tom Pendergast, the boss of Kansas City.
But, what Ricca needed Dillon for was his close, personnel relationship with President Harry Truman. In 1934, at the personnel request of Missouri crime king, Boss Pendergast, Dillon had acted as Harry Truman campaign manager in his race for the senate. Dillon had also worked as a lawyer for Boss Pendergast, and represented Pendergasts's chief lieutenant, "Smiling Johnny" Lazia, on an income tax fraud charge.
Dillon loved the power, the money and the clout working with these clients gave him. He bragged, often and loudly, that he could visit Truman at the White House whenever he wanted to.
In October of 1945, Dillon met "Putty Nose" Brady, who had ties to the Chicago outfit that went back to the Capone organization. With Brady at the meeting was an ex-prizefighter, and occasional Brady business partner, James Testa. Dillon, according to Testa, provided them with a price list with a set amount of money he would need to have each of the Chicago hoods released by using his influence in Washington with the Truman White House.
While Dillon was collecting his bribe money from Testa and Brady, another lawyer named Maury Hughes of Dallas, traveled to Washington and met with Attorney General Clark. The two men had grown up together. Shortly after the meeting, the Attorney General requested the gangsters transfer to Levenworth.
For decades no one in law enforcement was clear on what hand Clark had played in the transfer or where Hughes fit in until Murray Humpreys summed it all up when he, knowingly or unknowingly, told an FBI microphone on October 16, 1964: "Attorney General Tom Clarke was, he always was, 100% for doing favors . . . the guy Maury Hughes who went to Clarke was an ex law partner (from Dallas) and then the scandal broke."
Humpreys also said that another lawyer they hired, Bradley Eben, was paid the astounding fee of $15,000, an enormous amount of money in 1945, to "consult" on the case. Eben's mother was a Truman White House employee who worked as a liaison between Attorney General Clarke and the President.
On August 6, 1947, Dillon, made an application for parole for Ricca, Gioe, Campagna and D'Andrea. The application was strongly opposed by Boris Kostelanetz, the special assistant attorney general, even the federal judge who passed sentence wrote to the attorney general Clark objecting to the application for parole. But, on August 13, 1947, exactly one week after the application for parole had been placed, Ricca, Campagna, Gioe and D'Andrea were released on parole. A three man, federal parole team voted unanimously to release the hoods and acted so quickly and quietly on their decision, that the parole office in Chicago didn't have time to submit its standard analysis of the case, which meant that the parole team reached its decision having seen only a fraction of the inmates' records.
The public, especially in Hollywood and Chicago, were outraged over the hoods' release, and Representative Fred E. Busbey confronted the Parole Board members and asked them, directly and without mincing words, if it was true that they had accepted a $500,000 bribe to grant paroles to the hoods. Remarkably, not one of the parole board members denied accepting the money, nor would they admit to it.
The House Expenditures Committee recommended that the four hoods be sent back to prison and that their paroles be revoked. The carefully worded report held that the paroles had been given under highly questionable circumstances, and identified Dillon and Hughes as being personal friends of President Truman and Attorney General Clark. It concluded, however, that it could find no grounds to indict the President, Clarke or Hughes and could find no evidence that anyone had been bribed but concluded that "A good Samaritan" had spent big money to get the hoods released.
That "good Samaritan" turned out to be Tony Accardo, who ordered each of his capos to visit the attorney's office and drop a specific amount on the desk to free Ricca and the others. They were to say nothing except, "This is for Paul Ricca," drop the money on the desk, and leave. By the end of the day, Ricca's lawyers had the $200,000 needed to pay off his tax lien. Now the hoods' Attorney could truly say that "a bunch of strangers and good and concerned citizens donated the money."
When Louis Campagna was called before committee he said he didn't know who any of the estimated forty-two men were who dropped the money on the lawyer's desk or what their motivation was.
"Do you believe in Santa Claus?" Representative Hoffman asked Campagna.
"Yes, Yes. After all this," Campagna said "I suppose I do . . . I mean if you were me, wouldn't you?"
In its final report, the Congressional Committee charged to look into the entire mess wrote: "The syndicate has given the most striking demonstration of political clout in the history of the republic."
Mr. Tuohy can be reached by writing to MobStudy@aol.com
Copyright © 1998 - 2002 PLR International