EM Burlingame - 蒲 奕 言

The Mob State Problem - a 🧵(buckle up, it's a long one)

The intricate dance of governments, Wall Street, and organized crime over the past century isn't merely about collaboration or competition; it's a testament to their deep interweaving, where the lines blur, creating a tapestry of power and profit that operates beyond the reach of common law and oversight. A relationship has evolved, becoming so sophisticated that it's impossible to distinguish where one entity ends and the other begins, each playing its role in a complex game of influence, control, and economic supremacy.

During Prohibition and in the subsequent years leading up to World War II, the Mafia, or organized crime syndicates, utilized their amassed wealth in several strategic ways to purchase power and ensure the continuation of their operations:

Corruption of Law Enforcement and Politicians: Prohibition provided an immensely lucrative market for illegal alcohol, and with this newfound wealth, the Mafia bribed police, judges, politicians, and federal agents. This corruption ensured that their bootlegging operations could continue with minimal interference. For instance, in cities like Chicago, figures like Al Capone were notorious for having local law enforcement and city officials on their payroll, which allowed them to operate with impunity.

Expansion into Legitimate Businesses: With the profits from bootlegging, the Mafia invested in legitimate businesses, which served as fronts for money laundering and provided a veneer of respectability. These businesses included nightclubs, restaurants, and even real estate. This move not only diversified their income but also gave them influence in the business community and local economies.

Control Over Labor Unions: Organized crime used its wealth to infiltrate and control labor unions. This control provided them with leverage over industries like construction, shipping, and entertainment. By controlling unions, they could orchestrate strikes or ensure labor peace, thereby influencing business operations and gaining further economic and political power. The case of the Kansas City crime family's involvement with labor racketeering is an example, as they expanded their influence through control over labor unions post-Prohibition.

Political Influence and Election Rigging: The wealth was used to fund political campaigns or directly bribe politicians to influence policy, legislation, and election outcomes. This was not only to protect their illegal activities but also to expand their operations into new territories or sectors. The relationship between the Mafia and political machines in big cities during this era is well-documented, where votes were bought or coerced, ensuring that sympathetic politicians were elected.

Legal and Financial Systems: They also invested in legal counsel and financial advisors to navigate and exploit the legal system. This included setting up complex systems of money laundering through businesses, real estate, and even banks, which made tracing the origins of their wealth difficult.

Social and Community Influence: In some communities, especially within Italian American neighborhoods, the Mafia bosses would use part of their wealth for social works, like funding churches, community events, or providing for the poor, which bought them a form of social power and protection through community loyalty or omerta (code of silence).

Strategic Alliances and Conflict Resolution: Post-Prohibition, figures like Lucky Luciano established "The Commission" in 1931, which was a national syndicate composed of leaders from the most powerful crime families to govern Mafia activities across the U.S. This body used its collective wealth to settle disputes, organize crime on a national level, and ensure that the power structure remained intact through agreed-upon rules and alliances.

Academic research and historical accounts often highlight how Prohibition was a catalyst for organized crime, turning small-time gangs into sophisticated operations with vast economic resources. The wealth generated from Prohibition allowed these groups to establish a power base that influenced American society deeply, from politics to entertainment, up to World War II and beyond. This period demonstrates a classic example of how criminal enterprises can leverage economic gains from black markets to infiltrate and influence legitimate structures of power.

During World War II, the collaboration between the Mafia, Wall Street, and U.S. government agencies, particularly through the Office of Naval Intelligence (ONI), was most notably embodied in Operation Underworld. This operation enlisted the help of organized crime (control of Longshoreman Union) to secure the New York waterfront against Axis sabotage and to gather intelligence. Here are some aspects of this collaboration:

Lucky Luciano and Naval Intelligence: The U.S. government, through the ONI, approached Charles "Lucky" Luciano, who was at that time serving a prison sentence. Luciano agreed to use his influence over the docks to prevent strikes and gather intelligence. His cooperation was instrumental in what was believed to be the prevention of any significant wartime sabotage on the docks. Luciano's connections also purportedly assisted in the preparation for the Allied invasion of Sicily, Operation Husky, by providing maps and local contacts, although the effectiveness and necessity of this aid have been debated by historians.

Wall Street and the OSS/CIA: The origins of the CIA in the Office of Strategic Services (OSS) during WWII laid a foundation where many of the initial operatives and strategists were from Wall Street — bankers, lawyers, and businessmen. This relationship continued into the Cold War, where the financial and legal acumen of Wall Street was utilized for funding operations, money laundering for covert operations, and providing cover for agents through business positions.

Post-War and Cold War Collaborations | During the Cold War, the connections deepened:

- Anti-Communist  Efforts: The Mafia's anti-communist stance made them natural, though covert, allies in certain CIA operations, especially in Italy where the  CIA sought to influence elections against Communist parties, sometimes with the aid of the Mafia.

- Cuba and Operation Mongoose: The CIA's attempts to overthrow Fidel Castro involved several plots that enlisted figures from the American Mafia, who had lost significant investments in Cuba due to Castro's revolution. This included infamous plans to assassinate Castro, where figures like Sam Giancana and Santo Trafficante Jr. were allegedly involved.

- Drug Trade and Black Operations: There have been allegations and some evidence suggesting that elements within the U.S. government allowed or ignored Mafia drug trafficking in return for their assistance in various global hotspots. For instance, during the Vietnam War era, there were collaborations       in Southeast Asia that some claim involved the drug trade, funding black operations, though such claims are often surrounded by controversy and secrecy.

Academic and Historical Views: Scholars like Alfred W. McCoy in "The Politics of Heroin" explore how intelligence operations intertwined with the drug trade, suggesting a symbiotic relationship where both the CIA and criminal organizations could benefit from the control and flow of narcotics. However, direct, documented evidence of these collaborations often remains classified or obscured due to the nature of covert operations.

Modern academic research continues to unearth the depth of these relationships, often through declassified documents or investigative journalism, slowly elucidating a complex web where legality, morality, and strategic interests intersect.

The collaboration during these periods reflects a pragmatic approach where the U.S. government and intelligence agencies utilized the Mafia's control over labor unions, their international connections, and their anti-communist stance for strategic advantages, while Wall Street provided the financial mechanisms and cover necessary for global operations. However, much of this history remains shrouded in secrecy, with full details often not disclosed in official capacities.

During the War on Drugs, the relationships between the Mafia, the CIA, and drug cartels from Colombia and Mexico evolved in complex ways that significantly expanded their power and global influence:

Collaboration for Intelligence and Operations: 

- CIA and Cartels: There have been allegations and some documented instances where elements within the CIA collaborated with drug cartels for strategic reasons. For instance, during the 1980s, the CIA's involvement in Central America often intersected with drug trafficking, particularly with the Contras in Nicaragua. While not directly managing drug operations, there was a tacit allowance or ignorance of drug trafficking by some groups if it helped fund anti-communist efforts, operations like those in Laos during the Vietnam era or in Central America.

- Mafia's Role: The Mafia, leveraging its historical connections from Prohibition, expanded its operations globally by facilitating drug distribution networks. Their experience in money laundering and operating in the shadows made them invaluable partners or competitors to Latin American cartels.

Money Laundering and Financial Networks:

- Global Financial System: The War on Drugs inadvertently pushed cartels to innovate in money laundering. They started using more sophisticated methods, integrating into the global financial system through front companies, real estate, and even using seemingly legitimate businesses like telecommunications, such as Carlos Slim laundering money through telecom services.

- Banks and Financial Institutions: Major banks have been implicated in laundering drug money. Operations became so sophisticated that they involved high-level banking, where illicit funds were cleaned through multiple layers of transactions across different countries, making the origin of the money nearly untraceable.

Protection and Corruption:

- Political and Law Enforcement Corruption: Just as during Prohibition, the cartels and Mafia used their wealth to corrupt officials. This corruption reached high levels of government, law enforcement, and even military in countries like Mexico and Colombia, ensuring protection for their operations.

- Strategic Alliances: The cartels formed alliances with each other and with the Mafia for mutual benefit, sharing routes, protection strategies, and sometimes even engaging in conflict to control these resources. The Sinaloa Cartel's reported collaboration with the DEA, exemplifies how these groups operate with certain protections or at least a blind eye turned for intelligence or other strategic benefits.

Expansion into Legitimate Businesses:

- As with the Prohibition era, where the Mafia invested in legitimate businesses, during the War on Drugs, cartels have been investing in everything from agriculture to entertainment, effectively laundering money while also gaining social and economic influence.

Global Influence Through Drug Trade:

- Market Expansion: The demand for drugs in the U.S. and Europe allowed cartels to expand their operations worldwide. They not only supplied drugs but also started to control parts of the production, like coca cultivation in Colombia, moving to methamphetamine and fentanyl production later, which further globalized their operations.

- Cultural Influence: The wealth from drugs also flowed into cultural sectors, like sports (notably soccer in Colombia), influencing social structures and becoming part of the cultural fabric, which both legitimized their power and laundered money.

The intertwining of these entities during the War on Drugs showcases a pattern where criminal enterprises leverage legal systems, corrupt governance, and global finance to expand their power, similar to but on a much larger scale than during Prohibition. This era saw these groups not only protecting themselves through traditional means but also evolving these methods into sophisticated global operations, deeply embedding into the economic and political systems worldwide.

The assertion that the U.S. economy has been sustained solely or predominantly by illicit wealth since the early 1970s, when the U.S. moved off the gold standard, involves considerable speculation and touches on various conspiracy theories about economic systems. However, without endorsing the entirety of this view, here are some examples and contexts where illicit financial flows have intersected significantly with the legitimate economy:

The Drug Trade: Since the 1970s, the war on drugs has inadvertently highlighted how much money illicit drug trade generates. Estimates have varied, but the United Nations Office on Drugs and Crime (UNODC) has suggested that the global drug trade could be worth hundreds of billions of dollars annually. This money often needs to be laundered, integrating into the legitimate economy through various means like real estate, businesses, or financial institutions.

- Example: The case of HSBC, which was involved in a scandal for laundering money for Mexican drug cartels, shows how even major banks can become conduits for illicit funds, indirectly supporting parts of the financial system with what is essentially 'dirty money'.

Shadow Banking and Derivatives: The growth of the shadow banking system, which includes various forms of credit intermediation outside the regular banking system, has sometimes been linked with the movement of illicit funds. The complex financial products like derivatives, which reached into the trillions of dollars, have occasionally been criticized for their opacity and potential for misuse in laundering money.

- Example: The 2008 financial crisis brought attention to how derivatives and mortgage-backed securities could be used in ways that obscure the origin and risk associated with funds, although not all or even most of this activity is illicit, the lack of transparency can facilitate laundering.

Offshore Financial Centers: Post the gold standard era, there has been a significant rise in the use of offshore financial centers for tax evasion, avoidance, and money laundering. These centers hold trillions in assets, some of which are from illicit activities.

- Example:  The Panama Papers and subsequent leaks like the Paradise Papers have revealed how global elites, including those involved in criminal activities, use offshore entities to launder and hide wealth, which indirectly supports financial systems by keeping vast sums within financial circuits.

Cryptocurrencies and Digital Laundering: With the advent of cryptocurrencies, there's a new avenue for laundering money. While cryptocurrencies themselves are not inherently illicit, their anonymity features have been exploited for money laundering.

- Example: Services like mixers or tumblers (e.g., the mentioned Tornado Cash) are designed to obscure the trail of cryptocurrency transactions, making them a modern tool for integrating illicit wealth back into the economy.

Real Estate and Luxury Goods: High-value sectors like real estate and luxury goods often see investments from unclear origins. This not only launders money but also sustains economic activity in those sectors.

- Example: In major cities around the world, luxury real estate has been a known avenue for money laundering, where properties are bought with illicit funds, thus injecting that money into the economy.

The claim that illicit wealth alone sustains the global banking system or the U.S. economy is an oversimplification and lacks comprehensive empirical support. However, the intersection of illicit finance with the legitimate economy is undeniable, influencing various sectors while providing liquidity and investment that might not otherwise exist. This does not mean the economy depends on this money but indicates that illicit financial flows have significant, often unrecognized, impacts on economic systems.

This is only a 3rd of the Thread. Will split the remaining two thirds and post related threads Friday and Saturday.

You Won't be Alone, When the Time Comes | by: E.M. Burlingame

Quiet now. Listen.

Five generations. Forged in the crucible of endless, grinding conflict. Ghosts born of OSS blood and Cold War ice. Shadows who learned the alchemy of mud and malice in jungle hells. Rebuilders who

EM Burlingame - 蒲奕言