The One-Armed Bandit: Frank Costello and Slot Machines in the New York Cosa Nostra

In Part I of this short series, The One-Armed Bandit: Slot Machines and Organized Crime in New York City, we looked at the origins of the slot machine in Brooklyn and the technological manipulations developed later to hide the illegality of slot machine activity throughout the country.

The rise of Frank Costello (born Francesco Castiglia) in the ranks of the Luciano crime family to eventual Mafia boss is that of popular culture lore, most notoriously perhaps as the possible inspiration for Vito Corleone in The Godfather  or as portrayed by Jack Nicholson in The Departed. Born in Calabria, Italy, Costello immigrated with his family to East Harlem in 1900 before he was ten. Costello had an early start in criminal gang activities and by Prohibition was heavily involved with bootlegging in partnership with such characters as Charlie “Lucky” Luciano, Meyer Lansky, Benjamin “Bugsy” Siegel and Arnold Rothstein. As Prohibition came to an end, he strategically moved into the gambling rackets.

Costello’s plan for slot machine domination in New York City was comprehensive. According to Allan May, a crime historian and columnist for the  Cleveland Plain Dealer,  Costello had a four part plan that encompassed the economic, political and administrative challenges to running an illegal business:

Costello meticulously set about establishing his new slot machine business by 1) obtaining New York City as his exclusive territory from the Mills Novelty Company”¦2) he promised the right people a piece of the action; 3) he set up a system to payoff the police and politicians; and 4) he recruited his own army of collectors, salesman, servicemen, and even his own police force to track down any machines that were stolen.

In New York City, Costello would work with Phil “Dandy Phil” Kastel who would become his long-time partner in slot machine and gambling racketeering. The slots were shipped inter-state from Chicago from the Mills Novelty Company and placed in mundane, highly trafficked locations such as restaurants, bars, drugstores, bus stops and gas stations. Costello and Kastel were able to evade the law by rigging the machines to dispense mints, and the duo even founded the Triangle Mint Company to control the production of the mints.

With such a lucrative business, other gangs would also get involved with the business of slot machine, but none would ever rival the distribution and effectiveness of Costello’s operations with a reported 25,000 slots throughout New York City,  not to mention operations in Saratoga, New York and New Jersey. The Shapiro Brothers gang in Brownsville, Brooklyn for example, focused on slot machines, loansharking, dice games and the extortion of shopkeepers but all three brothers were murdered by other gangs.  The infamous Enoch “Nucky” Johnson of Atlantic City, now inducted into the organized crime hall of fame thanks to the HBO show Boardwalk Empire  (where he is fictionalized as Nucky Thompson), said “We have whiskey, wine, women, song and slot machines. I won’t deny it and I won’t apologize for it. If the majority of people didn’t want them, they wouldn’t be profitable, and they wouldn’t exist. The fact that they do exist proves to me that people want them.”  Johnson is linked directly to Costello as one of the “Big Seven Group” that hosted the 1929 crime convention in Atlantic City pushing an agenda for a national crime syndicate.

Photo via Wikimedia Commons from Library of Congress

Costello would maintain close links with the political powers that be throughout his career, with the Kefauver Committee Report  by a U.S. Senate Special Committee tasked to investigate inter-state organized crime noting, “The record is complete with evidence of persons in high political positions going to Costello’s home at Costello’s call.”  He was the primary link between the mafia and Tammany Hall but in standard mafia practice, Costello distanced himself from any prosecutable activities, relying on a veritable army of underlings and associates to carry out the incriminating activities. He  would also maintain a few business fronts to loosely account for his apparent financial successes. The Kefauver Report found his testimony at the 1951 public hearings in New York dubious:

On detailed examination of Costello, it became perfectly apparent that his legitimate business consisted of very few investments about which, on examination, he had practically no knowledge of himself and which required practically no time or attention from him. The characterization which he gave himself as being a legitimate businessman simply cannot be sustained.

But the hubris and brashness of the crime bosses during this time is evidenced by the fact that Costello and his counsel were, as reported by the Kefauver Report, “thankful for the opportunity to testify so that they could dispose of the fantastically untrue stories about Costello.”  This brazenness would trickle down to local law enforcement as well.

Costello’s vast slot machine business in New York City was abruptly cut short by the election of Mayor Fiorello La Guardia in 1933 who ran on an anti-corruption platform. Costello’s relationships with Tammany Hall would be of no use in the new reformist government, whose arrival was coupled with a simultaneous clean up of the police department. Ending racketeering was high on La Guardia’s list and slot machines were an obvious and publically visible target to unleash his masterfully strategic public relations campaign against the mafia. Beginning with a public radio address to the city in which he vowed, “Let’s drive the bums out of town,” La Guardia went on a “search on destroy mission”  on Costello’s slot machines. Costello attempted to intervene, successfully obtaining an injunction against La Guardia, but the mayor “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.”  An opportunity would soon present itself in New Orleans.

The destruction of Costello’s slot machines remains one of the most powerful visual legacies of the slot machine era in New York City. It is difficult to find images of slot machines in the city from that era that do  not  involve La Guardia, the most famous in photos and videos of La Guardia wielding a sledgehammer onto slot machines piled high before he personally dumped them into the river. In a Getty Images video footage, La Guardia smashes a slot machine and then faces the camera to say: “Let the gamblers, tinhorns, racketeers and gangsters take notice that they have to keep away from New York from now on.”

Fortunately for Costello, Louisiana governor Huey Long saw La Guardia’s actions as an opportunity for his state. While the Kefauver Report doesn’t state the exact terms of the deal, it did contain Costello’s own testimony that he moved his operations to Louisiana by the invitation of Long, “intending, as Costello stated, to legalize them and tax them for various State enterprises.”  Carl Sifakis, author of The Mafia Encyclopedia, writes that Long exacted a commission of $20,000 per month in the deal.

Long was assassinated shortly thereafter by the son of a long-time political opponent and in the public hearings, Costello claimed that he passed on the management of the slot-machine business in Louisiana to Kastel, a contention the committee found patently false based on legal wire-tapping which “show Costello giving specific orders as to the purchase price and make of machines.”  In addition, the report cited Costello’s extended visits to New Orleans as further evidence. The report recommended further examination to determine whether Costello’s statement under oath could be classified as perjurious. New Orleans is arguably the location where Costello perfected his stratagems including primarily:

• Disguising the illegality of slot machines behind innocuous activities and creating various legal companies across the entire supply chain of the slot machine business
• Managing the interstate transportation of equipment and supplies
• Partnering with local mafia figures to solidify monopolies
• Paying off local officials to ensure that laws could be willfully broken without repercussion, with the often flagrant and open participation of local officials in the business of illegal activities (even as far as being listed in public records).

Slot machines represented only a portion of the businesses that followed these basic strategies, but were the catalysts and foundation of other related activities. The Kefauver report highlighted four major activities: slot-machine operation, gambling casinos, wire services that supported bookmaking operations, and narcotics traffic. It is clear, however, that many other racketeering operations run by organized crime groups also involved some combination of such entrenched practices.

While the memory of an urban realm dotted with slot machines has been predominantly erased from the public consciousness through concerted legislation to contain gambling over the course of the last century, it is clear that that many states have re-embraced the legalization of gambling. Advertisements for Resorts World Casino at the Aqueduct Race Track in Queens, New York plaster subway cars. Meanwhile, the 1990s saw a return of slot machines in mundane urban locations, like bodegas and fast-food chains, but this time in electronic form. Inspector Frank Biehler told The New York Times in 1990 that the suppliers of the machines were “linked to organized crime,”  and the article contended that electronic slot machines were one of the “fastest-growing organized-crime operations in New York City.”

Using similar strategies to those wielded by Frank Costello, the machines are rigged to return at a rate significantly lower than legal slot machines and are disguised using interchangeable faceplates to look like video games. While the machines themselves have evolved, the methods of destruction have not””in 1990 the police still used the trusty sledgehammer. While attitudes towards gambling and the legalization/illegalization of gambling will always follow a cyclical pattern, the analysis of the slot machine industry during the era of Frank Costello and more contemporary practices demonstrates the endurance of both organized crime strategies and their exploitation of natural human vices. The current flurry of conflicting legislation that has arisen as a result of ongoing legalization of gambling activities makes a historical inquiry timely, the time is ripe once again for organized crime opportunism.

Get in touch with the author  @untappedmich.