The importance of slot machines to the growth of organized crime can hardly be exaggerated. With the end of Prohibition, it was the gem in the crime crown of the great bootleg gangs.
While the slot machine or one-armed bandit goes back to the 1880s, when the first such device turned up in the saloons of San Francisco, the real pioneer of slots in Mafia circles was Frank Costello. Costello, with by far the best political connections of any mobster in New York, saturated the city with slots in the early 1930s. In all, he placed about 5,000 around town—in lunchrooms, drug stores, speakeasies, candy stores and other locations.
In establishments that catered to schoolchildren, Costello had his machines equipped with wooden chairs so that the little kiddies could play such a delightful grown-up game. Even in depression days, a low figure of $10 a day per machine produced a daily gross of $50,000, or about $18 million a year. Actually, experts believe Costello and his mob took in at least twice that much.
Of course, not all the income was profit. Expenses were heavy. The police and politicians had to be paid off. (According to one expert this meant "half the police force and all of Tammany Hall.") Costello equipped his machines with a special sticker which informed an inquisitive policeman if he was dealing with a legit mob slot.
If it did not have the sticker, the officer was expected to sabotage the apparatus. The color of the sticker might change without notice so that any cheating independents using counterfeit stickers could be weeded out. Occasionally a misguided policeman would think it his duty to bust a protected machine, a shocking misdeed that inevitably resulted in his transfer to the wilds of Brooklyn or Queens.
During the regime of Mayor Jimmy Walker, the Costello-organized racket worked to perfection. Mafiosi in the Luciano family (Costello a chief lieutenant) were given no pay for their various racket chores but were accorded a given number of slots.
Actually all they got were the stickers, giving them the right to set up the slots, which they had to buy and locate without infringing on the territories of others. Informer Joe Valachi testified that during this period permission to run 20 slots produced a weekly take for himself and a partner of $2,500.
Things took a decided turn for the worse for the New York mob when reform mayor Fiorello H. La Guardia came into office, and appointed Lewis J. Valentine, an honest cop, police commissioner.
Valentine set about filling the upper ranks of the department with more honest officers than ever before in the city's history. Honesty in both city hall and police headquarters was more than even Costello could endure, and the gang leader was on the defensive when the mayor launched a war against slot machines.
Costello pulled wires in the courts to get an injunction restraining La Guardia from interfering with the operation of the machines, but the feisty mayor simply ignored the order and dispatched special squads of flying police around town to smash the machines. Costello was appalled at such rank disobedience of the law, but eventually conceded that the slots would have to be moved to safer territory.
Happily for Costello, he found a helping hand in the form of Governor Huey Long of Louisiana, who issued a "Y'all come on down" invitation at, of course, an appropriate commission rate $20,000 a month (to be left in a tin box in New Orleans' Roosevelt Hotel). Even with Long's untimely assassination in 1935, Costello did not have too much trouble maintaining his machines in Louisiana or even in anti-Long New Orleans.
The appropriate officials were approached by Costello's number one agent, Dandy Phil Kastel, and a suitable business arrangement was achieved. The income from slots to Costello, Kastel and Meyer Lansky, who got a slice of almost all gambling enterprises in the country, came to at least $800,000 a year.
This was after business expenses were deducted, including payoffs to political figures and police officials and a gift of 250 machines to the local Mafia chief, Carlos Marcello, to install in the Algiers section of the city, located on the west bank of the Mississippi.
Marcello got twothirds of the take and turned back one-third. In return, Marcello made sure no other racketeers gave the slot syndicate any trouble. Costello always understood that one does not look to the police to control members of the underworld.
For a while, the slots racket operated without additional trouble until reform reared its ugly head. Despite the payoffs, the slots were endangered. To solve the problem, the Louisiana Mint Company was formed, and the slots were converted to dispense mint candy.
A test case was hurried to the Louisiana Supreme Court for a decision as to whether the candy vending by the machines took away the gambling stain to them. It was long rumored that Costello-Kastel-Lansky ensured a favorable decision by buying four judges. In any event, the slots were found to be legal.
Finally though, in another reform wave in the mid-1940s, the Louisiana Supreme Court ruling was overturned, and the candy-dispensing machines were held to be gambling devices. The slots were tossed out of New Orleans.
The ever-vigilant Costello had, by this time, made arrangements to move the machines just beyond the city line in gambling casinos in Jefferson Parish. Then, with the growth of legitimate casinos in Nevada, the slots were shipped into those establishments, almost all of which were controlled by the mob through various fronts.
Today, slot machines are legal in Nevada and Atlantic City, New Jersey, and smaller legal establishments elsewhere. The profits are enormous, far greater percentagewise than the dice, blackjack or roulette tables.
The sales pitch is generally made, and is said to have originated with Costello, that since the machines have operated without payment of graft, they now pay off at 95 percent. Actually, it is believed that the true payment rate is about 75 percent. The slots remain as they were under Costello— genuine bandits.