CHAPTER NINE

Russian Organized Crime

Abadinsky, Organized Crime 10th ed.

Criminals from the former Soviet Union (FSU) have proven capable of engaging in a virtual smorgasbord of crimes in the United States, some pedestrian, such as drug trafficking, others requiring the technical skills often possessed by FSU immigrants.

In this chapter we will look at organized crime in the FSU and Russian organized crime (ROC) in the U.S.

2

WHO ARE THE RUSSIAN ORGANIZED CRIMINALS?

“Russian” encompasses any ethnic group—such as Armenian, Chechen, Estonian, Georgian, Jewish, Latvian, Lithuanian, Tatar, Ukrainian—from the territory of the former Soviet Union, and maybe Albanians.

“Russian OC” identifies those whose origins are the territory of the former Soviet Union.

3

ROOTS OF RUSSIAN ORGANIZED CRIME RUSSIA: 1547 -1991

 Czarist Russia 1547-1917

 Russian Army losses 1905 (Japan) and Germany (WWI) angered the populace and led to rioting in the cities.

 1917: overthrow and execution of Czar Nicholas and family.

 Communists formed USSR

 1922-1953: Brutal Stalinist regime.

 Economic stagnation.

 1991: perestroika (restructuring); breakup of Soviet Union.

 Citizens distrusted all these governments.

4

PERESTROIKA / RESTRUCTURING

The Post-1987 economic liberalization:

 Awoke the entrepreneurial spirit of capitalism.

 Criminal organizations seized wealth and power.

 General populace suffered hyperinflation, unemployment, and a drop in standard of living.

The economy shrank despite great natural resource wealth, a well-educated population, and a diverse (but dilapidated) industrial base.

5

THE SHADOW ECONOMY

The state mutated into a new entity that incorporates criminal, political, and economic sources of power.

 Under communism, managers of state-owned manufacturing diverted goods for sale outside of government control—a shadow economy.

Economic reforms gave managers, in collusion with local officials, the opportunity to purchase their firms.

Criminals provided the capital for the purchases.

6

Black Market

THE EVOLUTION OF RUSSIAN ORGANIZED CRIME

7

The legal system failed to keep pace with the changes.

 lacked property rights law

 lacked contract law

 lacked business dispute resolution mechanisms

Criminal organizations filled the vacuum.

 Private protection services.

 “shadow justice:” Do-it-yourself, or hire criminals.

CRIMINALS STRUGGLE TO CLAIM STATE ENTERPRISES AND PROPERTY

 Informal agreements allotted territories and functional boundaries.

Criminals became deeply entrenched in the economy.

Criminal experience with corruption and an underground economy thrived in the nascent capitalist environment.

A new form of non-state based authoritarianism.

 Citizens live in fear of non-state criminal actors.

8

ORANIZED CRIME ACTIVITIES

 Protection, dispute resolution, debt collection.

 Criminals have access to capital; legitimate businesses do not and must go to the mobsters for it.

 Extortionate interest rates.

 Criminals have market knowledge and skills.

 Trafficking in synthetic drugs, or protecting the trafficking networks.

Nuclear trafficking, human trafficking, labor exploitation.

 Women trafficked in Europe, Asia. Abuse. Murder.

9

sex trafficking

THREE TYPES OF RUSSIAN OC 1. VETERANS AND SPORTSMEN

Minimal connection to the criminal subculture Poorly paid, badly housed, demoralized military

personnel.  Arms trafficking  Private security forces A “roof” to protect a businessman from extortion.

Sports clubs and fitness centers: racketeer gangs  Powerful gangs emerged, offering protection for a

fee.  Conspicuous jewelry, haircuts, leather jackets—

gangster chic. Credentialed.

10

THREE TYPES OF RUSSIAN OC 2. ETHNIC-BASED GROUPS

Clan legacy from FSU.

Kinship, friendship, unwritten rules, norms, practices.

Governed by elder’s council and/or senior members.

Associations with transnational OC groups.

 Control territory for trafficking routes.

 Linked to local crime groups and drug mafias.

 Ex-Soviet states don’t arrest; privately support them.

11

ETHNIC-BASED GROUP: CHECHENS

Largely Muslim, legendary warriors, hostile to Moscow.

 Falsely accused of Nazi collaboration during WWII.

 Strong family loyalty; sense of personal honor.

 adat requires vengeance to uphold family honor.

 Strict hierarchical clan structure

1991: Declared independence; violent conflict with Russian military ensued.

Credentialing: Reputation for fearlessness and violence.

12

CHECHENS (CONT.)

 Criminals conduct spectacular scams.

 The capital, Grozny, became a hub for unsanctioned flights hauling contraband and outlaws.

 Middle East, Turkey, central Asia.

 Narcotics, “duty free” goods, bandits in hiding.

Mafiosi rob cargo trains traveling through Chechen.

 Crimes: arms trafficking, currency and financial document counterfeiting, restraint of trade.

 Contract crimes in U.S.: murder, extortion, fraud.

 The only group that does not respect vory territories.

13

THREE TYPES OF RUSSIAN OC 3. VORY

Professional underworld dates from end of 17th century.

 Gangs of itinerant petty criminals formed criminal hierarchy: vory v zakone, “thieves with a code of honor.”

 Thrived among prison inmates.

20th century: political dissidents sent to prison camps.

 Transformed vory code:

 Forbade adherence to conventional lifestyle.

 Forbade involvement in politics or collaboration with state (except prison authorities).

14

VORY V. ZAKONE

Stalin’s Gulags filled up with political dissidents.

WWII: developed regional corporate-type structure.

 vory split into 2 factions, later reunited:

patriots supported efforts to defeat Nazis;

 traditionalists were aloof.

Code: abandon family; have no wife or children; loyalty to world of crime; never insult or attack a vory; have no job; learn vory code and language.

15

VORY TATTOOS

Tattoos express a coded vory language decipherable only by vory.

 Serve as an identity card. Credentialing.

 Tattoo shows status in organization hierarchy.

 Tattoo shows criminal specialty.

16

VORY DURING AND AFTER COMMUNISM

Managers of state-owned enterprises became unofficial entrepreneurs.

 To meet quotas, they established informal networks for supplies from other state-owned enterprises.

 Gap between government-controlled rice and market price created opportunity for crime.

 Managers sold best goods to vory at premium prices; vory extorted money from managers.

 When Russia privatize, the corrupt managers and their vory partners purchased the state enterprises.

17

VYACHESLAV IVANKOV (YAPONCHIK—”LITTLE JAP”)

High-ranking vor v zakonye with Solntsevskaya Bratva (Solntevo Brotherhood) of Moscow.

 1991: Released early from from prison. Went on campaign of extortion, torturing victims; ordered killings, including journalists and police officers.

Vor leadership banished him to U.S., with $1.5 million in a suitcase. Violent leading Russian crime boss in U.S.

 1995: arrested for Hobbs Act extortion of immigrant businessmen. 9-year sentence. Released 2007,deported.

 2009: Assassinated in Moscow.

18

CRIMINAL OR BUSINESSMAN?

 Leaders of criminal organizations invested their capital in the businesses they were protecting.  They became capitalists and their role changed.  They contract with licensed security agencies and hire

lawyers, accountants, and PR professionals.  Liberalization and privatization made OC groups legal and

transformed entrepreneurs with illegally gained capital into legitimate businesspersons.

 In the 19th century, the U.S. Robber Barons laundered their infamy, separating their names from the methods they used to achieve incredible wealth.

19

FROM GANG TO FINANCIAL-INDUSTRIAL ENTERPRISE

Uralmashevskaya:  Sports club toughs  illegal alcohol and extortion.  Invested assets in cash-needy businesses.  1992-3: defeated vory in Ekaterinberg.

 Solntsevskaya Bratva:  Boss Semion Mogilevich  Soviet era: part of Moscow crime group.

 Defrauded fellow Jews who were fleeing to U.S. Hungary: owns nightclubs and big part of arms industry. U.S.: operatives launder money and do contract

murders.

20

RUSSIAN ORGANIZED CRIME IN THE UNITED STATES

 Russian émigrés are urban in origin, well-educated, and industrially and technologically skilled; many are military- skilled, many Ph.D.s in math, physics, engineering.

 Not closed off from ladders of upward mobility.

 Excel in organized crime.

 Jewish émigrés settled in Brighton Beach part of Brooklyn.

 Russian Jewish criminals exploit Jewish émigrés.

 Enterprise organizational style. Fluid. Not hierarchical.

21

THE BUSINESS OF RUSSIAN ORGANIZED CRIME

ROC engages in sophisticated crimes: insurance fraud, Medicare scams, securities-related fraud, identity theft, counterfeiting, and tax fraud.  “Daisy chain with a vanishing point:” A classic scam.  Taxes due when fuel is delivered to retailer.  Pass fuel (on paper) through multiple companies.  Final company does not exist. No tax paid.

 Blue alcohol (2000):  Russian criminals in U.S. got American distilleries to disguise their

product by adding dye, shipping it in huge vats labeled windshield wiper fluid, cologne, mouthwash, or solvent.

 In Russia, the dye was removed, vodka flavoring added, and product sold evading alcohol import duties and taxes.

22

ROC MEDICARE FRAUD

Mirzoyan-Terdjanian Organization (Armenian American)

 2010: 73 members and associates indicted.

 Headquarters in NY and LA, operates worldwide.

 Stole identities of Medicare beneficiaries and doctors; got space, PO Box, bank account.

 Billed Medicare for services not provided.

 Medicare shut down clinics, new ones established.

 Investigation uncovered 118+ phony clinics in 25 states.

23

CHAPTER EIGHT

Asian Organized Crime

Abadinsky, Organized Crime 10th ed.

Japan’s most popular television comic and host, Shinsuke Shimada, retired from the entertainment industry after admitting to extensive ties to the yakuza. His ties to organized crime were disclosed when a series of emails he sent to a yakuza boss were leaked to the media by another senior yakuza figure who had been the subject of derogatory comments made by the TV host. The scandal disclosed yakuza domination of the entertainment industry (Adelstein 2011).

This chapter examines the most prominent Asian organized crime groups–Chinese and Japanese.

2

CHINESE ORGANIZED CRIME

Asian is an imprecise term that can include many diverse groups. In the U.S., 34 distinct ethnic groups make up Asian communities.

Secret societies have a long tradition in China, some dating back to the beginning of the Common Era.

Criminal organizations in China are referred to as "secret societies," "black gangs," or "black societies."

3

UNIQUE CULTURAL DYNAMICS OF CHINESE SOCIETY

Born into a hierarchically organized society, Chinese see selves bound in a web of mutual obligate bonds.

Part of a latent organization formed by guanxi.

 Gianxi embraces many concepts such as connections, networks, and patron-client relations.

 Built on a series of dyadic relationships, some natural; others must be acquired, cultivated, and maintained.

 Parallel of partito, discussed in chapter 5.

4

UNIQUE CULTURAL DYNAMICS OF CHINESE SOCIETY (CONT.)

Loyalty to family and friends is a moral imperative.

Qingqing parallels southern Italian famiglia.

 Parental and filial obligations of reciprocity.

Resources are pooled. Each member must contribute. Family must provide each member with resources for living.

Pooling familial resources advances the business interests of overseas Chinese.

5

Pronounced “shingshing”

UNIQUE CULTURAL DYNAMICS OF CHINESE SOCIETY (CONT.)

 In this setting, law is marginalized to a position well below mediative mechanisms in the social order.

Like famiglia and partito, guanxi and qingqing facilitate criminal organization.

Guanxi is global, providing a dynamic for international business, both legal and illegal.

Triads are a natural extension of these cultural attributes.

6

TRIADS

7

Triad symbol: Equilateral triangle representing heaven, earth, and man.

Members are assigned numbers based on their position: Members are 49. Enforcers, "Red Poles," are 426. A leader, "Hill Chief," is 489. Numbers always start with 4.

Ritualized dress and behavior. Secret hand signs and passwords; elaborate initiation includes recitation of 36 blood oaths, each ends with death penalty for violation; fee payment to sponsor.

TRIADS (CONT.)

Loose cartels of independent groups with similar structures and rituals.

Members choose their own criminal activities. Do not pay leaders unless leaders participate.

 As in American Mafia and outlaw biker clubs, Triads have an associational hierarchy that does not exert vertical control over members' criminal enterprises.

Leaders advance the influence of the organization for their own and the members' benefit.

8

TRIADS (CONT.)

1911: Qing (Ch'ing) dynasty ended; Dr. Sun Yat-sen, leader of new Republic of China. His successor, General Chiang Kai-shek, imposed a military regime with help from the secret societies, in particular, the Green Gang (Qing Bang).

1949: Mao Zedong defeated Chiang's Nationalists. Mao sought to obliterate Triads.

 Triad members fled to Taiwan where they were tightly controlled by the Nationalist Party (Kuomintang).

9

TYPICAL TRIAD STRUCTURE

 Leader is called Shan Chu; deputy leader is Fu Shan Chu; Below is Incense Master, Heung Chu; and Vanguard, Fin Fung.

 Incense Master and Vanguard administer lodge rituals and vest, initiate, and order retribution. Only mature lodges have these positions. Members pay fee for services.

 Ranks of officials: Red Pole (fighter), White Paper Fan (counselor), Messenger (liaison).

 1990s: HK Triads invested in Western countries, as a hedge against uncertainty when HK would revert to PRC in 1997.

10

HONG KONG TRIADS: UNITED BAMBOO

United Bamboo: strong ties to the Kuomintang Party.

 Leader is wanted in Taiwan. Served prison terms in U.S. for drug trafficking. Lives in People's Republic of China (PRC). Attractive ally to PRC and to dealmakers and smugglers.

 Extortion, debt collection, gambling, prostitution, trafficking in persons, pirated movies, construction, bid rigging.

 Coordinated efforts in various countries enable international drug trafficking, arms trafficking, alien smuggling, and financial fraud crimes.

11

HONG KONG CRIMINAL ORGANIZATION: BIG CIRCLE

 Big Circle: origins in Communist China's Red Guards. Mao's personal militia in Great Cultural Revolution. Revolution canceled, fled to HK.

 Big Circle is not itself a Triad, but major bosses belong to Society of Tranquil Happiness Triad.  Very active criminal organization. Cells in Canada, U.S.,

Europe that are highly sophisticated in use of technology to thwart law enforcement.

 Manufacture and distribution of counterfeit credit cards and other documents, drug trafficking, extortion, prostitution, gaming offenses.

12

PRC AND HK TRIADS AFTER 1997

When HK reverted to the PRC, HK Triads were designated patriotic societies by the PRC in an effort to keep Taiwan-based counterparts out, fearing they would join forces with anti-Beijing liberals.

This definitional change allowed HK Triads to establish guanxi with officials and state enterprises, and gain access to business status and wealth.

 It also helped them locate licit and illicit business opportunities on the mainland.

13

TRIAD BUSINESS

Drug trafficking Triads expanded their operations during the Vietnam War.

Triads control prostitution in Singapore, HK, and Macau.

Macau-based Triads are part of the gaming industry.

 Triads run VIP rooms inside casinos.

 Recruit rich businessmen and government officials from Southeast Asia, Taiwan, and China to gamble.

 Provide one-stop service to their clients, such as transport, escorts, accommodation, protection, sex service, and loans.

14

TONGS

1848: Chinese laborers recruited to come to U.S. to work in gold fields in California, also railroads.

1860s: Chinatowns in Pacific Coast cities. 1882 Chinese Exclusionary Act.

 Refuge in Tongs: business, fraternal, political groups; also licensed illegal businesses; nation-wide alliance.

1890-1930: Tong wars on East and West coasts.

Gambling (in particular Pai Gow), prostitution.

Mostly exploited their own communities.

15

ASIAN GANGS

Many contemporary tongs are national, particularly the Hip Sing, On Leong, and Tsung Tin.

 Some tongs are connected to Chinatown gangs such as Ghost Shadows and Flying Dragons in NY, Chicago, Boston, and San Francisco.

 1960s: American-born (ABC) and new immigrants "Fresh Off the boat" (FOB) formed gangs.  Changed from self-help to predatory.  Victimized tongs and local merchants. Extorted massage

parlors, prostitution.  Last leg of heroin distribution.

16

YAKUZA

Yakuza roots are in the Tokugawa Period, 300 years ago.

 Japan united under a central system of government, Feudalism ended, and the samurai lost their role in life.

 yakuza — masterless samurai, unscrupulous itinerant peddlers, professional gamblers, common criminals.

Yamagumi-guchi gumi dominates the industrialized, densely populated area from Kyoto through Osaka to Kobe, Tokyo, and most major centers in Japan.

17

YAKUZA

 By adhering to rules that preclude violence against police and innocent citizens, yakuza syndicates have been able to operate openly. Listed in phone book.

 ya-ku-za: 8+9+3=20; a useless number in an old card game, "good for nothing."

 Elaborate tattoos and atonement finger joint amputation signify membership. Modern yakuza are innovative entrepreneurs, rather than “tattooed nine-fingered thugs."

 Born poor, went from juvenile delinquency to crime.

 Long-standing links with ruling political parties.

18

YAKUZA STRUCTURE

Pyramidal structure; 4 or 5 ranks.

Decisions that affect the whole organization are made by the boss and his senior executives. Routine day-to- day decision-making is decentralized.

 Initiation is elaborate ceremony.

 "Talent scouts" recruit young delinquents. Nowadays, computer and finance skills are prized.

19

YAKUZA BUSINESS

Control most organized criminal activities in Japan, including drug trafficking.  Japan has a drug problem, especially amphetamines,

which yakuza produce in clandestine laboratories in Japan.

 At the center of the international sex trade (female, including children) bought and sold throughout Third World countries.

 Control illegal gambling, practice extortion and loansharking.

20

YAKUZA AND LEGITIMATE BUSINESS

Bankers sometimes dispatch yakuza to bankrupted businesses to confiscate property ahead of unsecured creditors.

White collar crime through infiltration of legitimate businesses.

 Intimately involved in Japan politics.

Robin Hood image.

21