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Jewish World Review Sept. 24, 2002 / 18 Tishrei, 5763

Eric Dezenhall

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Consumer Reports

Mob Rules for Corporate Kingpins | Psst. Hey, Ace. Wanna know why all these corporate capos are doing the crime but not the time? Well, you ain't gonna hear it in a Stanford ethics class. And CNBC? Fuggedaboudit.

Long before Tony Soprano poured his heart out to a shrink, Meyer Lansky, the infamous "Chairman of the Board" of organized crime, predicted that a few rogues would find a way to give his beloved capitalism a bad name -- in his diary. That's right, it turns out that the underworld's little big man took notes. And if there was one outfit he nailed cold, it was the mugs who dress in Brooks Brothers.

In notes that span the Mafia's heyday from the 1940s through the 1970s, Lansky's thesis was that the key to future business schemes is the veneer of respectability -- working the system from the clubby inside rather than from the rough edges the way his mob did.

Wrote Lansky, "The only 'organized' crime that I'm aware of is this: the white collar crime which includes many politicians and sophisticated college graduates who use their education for material advantage. They swindle and humiliate people -- those who may have helped pay for their education but don't possess the mental ability to detect their tricky frauds, stock and land swindles."

Sound like something you might hear from a populist reformer? Actually it's a man whose clinical and, yes, ruthless approach to business gave him an eerie moral clarity. While Lansky's rackets used hijacking, extortion and murder -- blatant outlaw activities -- corporations, he foresaw, have smoke and mirrors accounting, insider trading and obscene fringe benefits.

"They will sell stock to the public and then comes the rip off -- if you do see a dividend you also see $1,000,000 salaries, all kinds of fringe benefits like pensions, summer homes, winter homes and what not. The S.E.C. just sits by, does nothing -- why?"

In his diaries, released to me by his granddaughter, Cynthia Duncan, Lansky answered his own question: Because shrewd corporate interests had the cash and the contacts to buy the system. The key to the growth of gaming, the industry Lansky's boys established, was not shifting social mores, but corporate pedigree and, most important, buying off the government. Lansky wrote in the late 70s, "My 'crime' is now accepted and made legal in most of our states, and gambling is being taken over by a hypocritical mob of stock swindlers with the protection of the same law enforcement who until now would call casino gambling immoral."

"Suddenly the good church-goers entered the gambling fraternity," he notes. "The Rockefellers, Hiltons, Loews and many more from 'Who's Who'."

Lansky's diatribes, of course, were those of a bitter gangster in forced retirement due to law enforcement's scrutiny and corporate annexation of gaming and tourism. His moral blind spots and denial of the violent underpinning of his career negate some of the outrageous comparisons he makes between organized crime and big business. Nevertheless, while his specific arguments are flawed, his macroeconomic judgment about businesses that hustle the public are chilling.

"Big corporations run by men of good business intelligence are soon trained to different methods that exist in our capitalist system," Lansky warned. "You soon lose you morals if you want to stay and succeed. Years ago the robber barons carried on with private detectives. Now...these people who promote stock officials in legal methods that are crooked."

By the time Lansky learned these lessons, it was too late for him to go legit, but ironically, his longevity in a business known for its, uh, early retirements is attributed by wiseguys and law enforcement alike to his reputation for honesty. When territories and proceeds were in dispute, the boys knew they could rely on Meyer, a man who kept the ledgers in his head but never fudged the numbers. Those who broke the rules and brought heat to the outfit had their wings clipped during a time when getting clipped really meant something.

Sure that's an odd brand of integrity. But it was that code of conduct along with his understanding of the American character, which explains why Lansky died of natural causes in his eighties with the respect of his contemporaries. Lansky claims that his mob "coined the word underworld" to describe the hypocrisy of American elites who endorsed Prohibition, but secretly bought his bootleg booze. He laments that in retrospect "we should have said overworld." About the kind of people one encounters in business life Lansky wrote, "In choosing business associates some possess the character, integrity and morals...others are like the scum in any society."

An FBI agent who tailed Lansky for decades said that the mobster could have run General Motors if he had gone straight. That we'll never know, but this we will: If today's "overworld" captains can't learn a thing or two from the boss about shooting straight pronto, they'll be sleeping with the fishes.

JWR contributor Eric Dezenhall is a Washington, D.C.-based writer and damage control consultant. He is president of Nichols-Dezenhall Communications Management Group, a crisis management firm with offices in Washington, Los Angeles and London. A frequent lecturer in academic and business circles who regularly appears as a damage control expert in the international media, he is the author, most recently, of Money Wanders, a novel about media manipulation and organized crime. Comment by clicking here.

06/18/02: How Arafat Wags the Dog

© 2002, Eric Dezenhall