Living by the Book
Illegal Gambling Operations Handle Millions of Dollars Every Month
From the Print Edition:
maduro issue, Winter 93/94
You would never guess that this tenement is a place where millions of dollars are won and lost every year.
From the outside, the decrepit building in one of New York City's worst neighborhoods looks like every other decrepit building on the block. A bum, drunk on cheap booze, lies in a heap at the foot of the stairs. Skinny teenagers with searching, desperate eyes roam the sidewalk like hungry coyotes prowling for a crippled rodent. And small-time crack peddlers, a malt liquor in one hand and a plastic bag of potent pebbles in the other, openly ply their trade on the street corner, oblivious to the police sirens that never seem to stop wailing.
It is not a glamorous spot, this block.
But inside this particular tenement, in a rented apartment nearly as slovenly as the surroundings, where you might otherwise expect a low-rent prostitute to set up shop, business is booming.
Hidden behind a facade of squalor, several Ivy League-educated entrepreneurs answer the phones, receiving frantic calls from around the country. Like stock traders in the throes of a bull market, they bark out strings of numbers: "minus one-twenty," "plus three-and-a-half," "over/under thirty-seven." Simultaneously scribbling orders on preprinted "tickets" and eavesdropping on their colleagues' transactions, each member of this crew of former scholars has the numerical talent and mental nimbleness of a commodities trader swapping Krugerrands for pesetas. They're quick-witted and sharp. In every transaction, they get "the edge," the sometimes minuscule spread that separates winners and losers. Where their clients see only a chance for the fleeting frisson of "action," they see an opportunity for financial well-being.
They're bright, these furtive laborers who work in a squalid room in a slum somewhere along New York City's margins. And they're rich. And unlike most people their age, they got that way without having to master the art of obsequiousness, toadying to a powerful boss whom they neither like nor respect. Though they probably would have made successful bankers or lawyers or arbitrageurs, these young men of refined education and good upbringing shunned the suit-and-tie-game in favor of becoming bookies.
Who has not taken the favorite (and laid the points) on a Monday Night Football game? Who has not bet on a heavyweight-title fight, the World Series, the Super Bowl? Gambling is a national mania, the most popular illegal pastime in the United States.
Most everyone bets. And nearly everybody knows a bookie, or someone who knows one, or someone who knows someone who knows one. They're a part of life, bookies are, like insurance and taxes. You hate to contribute to their cause, but let's face it, you appreciate their service.
Yet how many of us know exactly how a bookie works? We know the thrill of covering the spread on a last-minute field goal and the heartbreak of seeing a three-team parlay bite the dust. But how does the world of sports wagering look from the other side, the book-maker's perspective?
To guys like Bobby,* who, along with his college buddies, runs the dingy New York office, the view couldn't be better. "I work about four, five hours a day; I make a bundle, and there's no heavy lifting." With nearly 200 regular clients--including some of Manhattan's most respected, upstanding professionals--his office books more than $300,000 a week in bets.
Some bookmaking operations take horse bets, but most rely on frequently televised sports. In fact, popularity is directly proportional to the amount of television coverage. Hockey attracts few bettors; baseball, with its complicated odds, about twice as many, peaking during the World Series; basketball gets nearly twice as many gamblers as baseball, hitting a high during the NCAA championships and the NBA playoffs. But football, with its omnipresent seasonal broadcasts, easily generates the most action.
During the latter stages of football season, when bettor interest has peaked and betting addicts are chasing their losses, volume can pass $500,000 per weekend. Culminating with Super Bowl Sunday, easily the year's biggest wagering day, Bobby's office can process nearly $10 million in bets a year. Working on a 5 percent profit margin, minus minuscule "business" expenses (rent and eight phone lines with tape recorders attached to verify bets), this bookmaking operation could easily clear two-and-a-half times the U.S. president's annual salary.
But they don't. They make more.
The "old school" of bookmakers--the bartender at the corner saloon, the car dealer with a weekly poker game in his basement--earned their money strictly on commission. Winners were paid even money, losers paid 11-to-10, known as "the juice" or "the vig." Business was simple: collect $100 on the Bears and $100 on the Raiders and bookies were guaranteed to win $10. If their books got severely out of joint--$500 on the Cowboys, $180 on the Patriots--they simply "laid off" the imbalance to a "wholesaler," another bookie who takes larger wagers, and locked in their profits. Like any type of business where brokering is involved, the key to successful bookmaking by the old-school method was sheer volume. Bookies hoped for a betting line (the odds) that would induce equal wagering on both sides, results that made their customers winners one week and losers the next, and a never-ending stream of cash-rich players. Then they sat back and collected their 5 percent.
"We used to live in Harlem," one well-known professional poker player reveals. "Then my dad started making book. We moved to Long Island six months later."
The new breed of bookie, of which Bobby and his cohorts are prime examples, eschews the predictable, collect-your-commission-and-play-it-safe methodology. If the bookies of the past were strictly brokers, content to leave the gambling to their customers, then today's bookmaker is a trader who lives by the golden rule of making money: buy low and sell high.
"When I first started, I thought you always tried to keep your books perfectly balanced," Bobby explains. "No risk. Of course, there's much less reward. In our office, and I would say the majority of offices around the country, we don't try to balance our totals. Our feeling is, in the long run, the vig will take care of us."
In other words, most bookmakers are willing to gamble--with an edge. It's the same concept that keeps the lights shining on Las Vegas Boulevard. Some days the bookmaker will lose. In fact, about half the time. (Bobby's office lost nearly $100,000 during the first week of the NFL season.) But when he wins--again, roughly 50 percent of the time--he'll earn 11-to-10 on his wager. At this rate, the player must win his bet about 53.5 percent of the time just to break even. Thus there are more losers than winners, especially because most amateur sports bettors who win occasionally will continue to play until they lose. And because there is only a handful of bettors in the United States capable of consistently beating the odds over the long run, the bookie--thanks to the immutable laws of mathematics--must inevitably prosper.
The fact remains, though, that some players are long-term winners. Whether with the help of analytic computer programs or superior information networks or extrasensory intuition, they somehow beat the odds over the course of a season. This elite minority of bettors, who number maybe a dozen in the country, is known throughout the gambling world as the Smart Money. Unlike the $25-a-call charlatans who predict winners roughly 50 percent of the time, you won't find the Smart Money advertising 900-line tout services on cable television. Still, the bookmakers know who they are. And when one of their bets comes in, the bookies take heed.
"When we get a bet from, say, Clyde* in Las Vegas, our office goes nuts," Bobby explains. "Within 10 minutes we'll get dozens of players all going the same way as Clyde. People hear which way he's going, and they want to jump on the bandwagon. In that short period of time between Clyde's bet and all the other calls is when we make our money."
What his office does, Bobby says, is a common practice called "scalping." For example, as soon as Clyde calls in his bet on the Packers, giving six points, Bobby gets on the phone to other bookmaking operations around New York (and sometimes the entire United States), placing substantial bets on the Packers minus six points. In the meantime, he adjusts the betting line at his office, making the Packers a seven-point or seven-and-a-half-point favorite. When the anticipated onslaught of calls following
Clyde's lead comes in, the callers pay a premium price. By kickoff time, the Packers might be giving up eight points.
"Buy cheap. Sell expensive," Bobby says, grinning.
The money that supports the bookmaker's "gambling with an edge" comes, of course, from his faithful customers. Their constant infusions of capital are what keeps a bookmaker liquid, even when he has a bad week. Therefore, Bobby says, it is crucial to continually recruit new players and keep the ones you have content, even when they're bleeding off their money. "That's one reason we have a $5,000 limit on any one bet. We don't want our customers going broke. We want to do a volume business."
A bookmaking office is organized like a pyramid: the clerks who answer the phones start out earning an hourly wage. For each new player they personally bring to the operation, they get a small percentage of the winnings. Managerial employees earn a larger percentage of each client's losses. And the boss of the office, the unofficial "bookmaker," keeps the bulk of the profit. In turn, the entire office may be part of a larger syndicate, in which case the earnings go to an unseen higher-up, who probably has never met the low-level clerks who answer the phones and supply him with fresh gamblers.
At the top of that pyramid may well be organized crime. According to the Associated Press, Justice Department studies conclude that illegal gambling is the mob's largest source of revenue, greater than prostitution or drugs. Some bookies disagree. "That may be [true] in some organizations," says Jim*, a California-based bookie. "But as far as I know, everyone we deal with, all the way to the top, is legit. The money doesn't end up in the Godfather's hands. It goes to Vegas! We're all part of a larger syndicate. And the biggest players in the group live in the Nevada desert."
Indeed, the national line starts there--it originates from a "sports-consultation" service run by a well-known oddsmaker, who is paid by the casinos to post a number that anticipates which way the public will bet. The legal sports book at the Stardust claims to release the earliest odds, but within minutes every other place does, too. Las Vegas dictates the flow of the nation's bets--and much of the money flows back to there. Bookies from around the country have associates who work the pay phones around the sports books of all the major casinos, ready to lay off money at the last minute. They also deal with "outlaw bookmakers," who will take bets of more than $10,000 without issuing paperwork for the IRS. The network is enormous.
"Being a part of a large organization, a syndicate, helps you absorb the big losses," Bobby says. "But the only way to make big money is to have your own clients." To that end, Bobby and his colleagues frequent New York City sports bars and card rooms. They take day trips to Atlantic City, New Jersey, and Ledyard, Connecticut--home to a Native-American-owned casino, where all forms of gambling are legal--except sports. "That's one of the drawbacks of this business. You can't advertise. So you go where gamblers congregate," Bobby says. "And you find customers."
The majority of a bookie's business, however, finds him--simple word-of-mouth. "Ninety percent of our customers are referrals," Bobby reports. "If one of our regular players will vouch for a new player, we'll take his action. Maybe he has to put the cash up front at first [most longtime players bet on credit], or the guy who brought him to us is responsible for anything his pal might lose. But if he comes with a recommendation, we'll take him." If the fledgling bettor proves reliable, making good on several weeks of losses, his credit limit is raised. "We're like American Express," Bobby quips.
Occasionally the bookmaker will get stiffed by a deadbeat. According to nearly a dozen bookies I spoke with, the official party line is: "We don't use hired goons." Kneecap-breaking gorillas in shiny suits are, apparently, bad for business. "If someone holds out on me," says Raymond,* one of the largest operators in Texas, "I write it off as a business loss. And I'm more mad at myself than anyone else for trusting the bastard." In lieu of smashed patellas, many bookies find the best way to collect is by threatening to call the wife. "Most guys are more scared of the missus than a couple of cracked ribs," he reports. Like a bank, the bookmaker would rather do prior, rigorous credit checks than engage in messy collection procedures.
Says Bobby, "The last thing we want is to draw undue attention to our office over a few thousand dollars. A couple of times out of 100 you're going to get screwed. That's probably the biggest drawback to making book."
Well, almost. The largest liability, of course, is that it's illegal. Several weeks before the commencement of the 1993 NFL season, the U.S. attorney in San Francisco, after a five-year investigation, cracked what the office believes to be the largest sports-betting ring in the country. The feds used telephone wiretaps, informants and IRS records. A federal grand jury returned a 59-count indictment against 26 members of a bookmaking syndicate that was thought to take in more than $1 billion a year from more than 10,000 bettors. These bookies, some of them Americans who worked out of a villa in the Dominican Republic, face felony charges of racketeering, money laundering and conspiracy, among other things.
Bobby's office in New York frequently used the Dominican connection as one of their "outs." If their books became too imbalanced or they simply wanted to bet with the Smart Money, the Manhattan bookies could call their wholesaler in Hispaniola. Seized telephone records surely contain Bobby's number. Yet he and his colleagues profess to be unfazed. "I know the figures sound huge. But really, we're small potatoes compared to a lot of other guys. Sure, the cops could bust us if they wanted to, probably. But they've got bigger fish to fry. I've heard some guys say that the over/under is four. If there's less than four people working in the room, it's a misdemeanor. More, a felony. I don't know, that's probably bullshit. But in some ways it makes sense: the bigger the office, the bigger the bust."
None of the bookies I spoke with has ever been charged with a felony. In fact, only one of them has ever been arrested. Ricky,* a 20-year veteran of the business who works in a rural area of the Midwest, has been collared four times. On each occasion he was charged with promoting gambling (a misdemeanor), fined $500 and given a suspended sentence.
Still, Bobby has contingency plans. "We've never had any problem," he says. "But we're prepared." His crew rents an alternate apartment, vacant except for preinstalled phone lines. "If we get busted, we move." The biggest risk Bobby takes isn't going to prison but gambling tens of thousands of dollars on the "hot side" or executing the weekly exchange of cash. "My exposure is minimal. I meet with my clients once a week with a paper bag of money tucked under my shirt. To me, that's the scariest part of this business. Walking around New York City with $20,000 bucks in $100 bills tucked into your shorts. Besides that, I don't worry. In fact," he says, "since I started making book, I never had it so good."
But not as good as Kelly.*
Except for the cellular phone that seems perpetually pinned to his ear, he appears to be an average citizen, a civic-minded pillar of his exclusive Southwestern community. And in many ways he is: the school playground boasts a shiny, red fire truck; the kiddie soccer league plays in stylish new uniforms and the library contains enough Macintoshes to start a small design firm--all thanks to Kelly's beneficence.
But the guy has his dark side. Whenever he goes to Vegas he regularly wins and loses six figures at the poker table. He bets $50,000 on one roll of the dice. And when he makes a sports bet, it's usually at the casino's highest limit. Granted, if he wins or loses $250,000 over a weekend, it's not going to have much effect on his lifestyle. Because Kelly, pillar of his community, is probably America's biggest bookie.
Working in a syndicate with four other well-financed partners, Kelly takes the bets nobody else will handle: when bookmakers around the country need to get a bet down, they call him. The minimum wager is $10,000--"anything else is too messy," he says, dead-pan--and the maximum is whatever Kelly feels comfortable with. "I generally don't like to take more than $200,000 on any one game, unless it's the Super Bowl, where all the information is totally out in the open. During the regular season, too many things can happen that I don't hear about in time. Maybe 10 minutes before the kickoff of a nothing game, the quarterback's wife has a miscarriage. Maybe the coach of a big favorite decides he's going to give his second-stringers a lot of playing time."
Though Kelly won't reveal how much action he typically handles over an NFL weekend, other bookies who bet with him estimate his volume at $6 million to $7 million. Multiply that by 16 regular season games, add in the playoffs, and you've got a bookie who can afford a few soccer uniforms. And that's not counting the baseball, basketball and hockey seasons. Because the numbers he deals with are so large, and, in practice, so unwieldy--carrying around $10,000 bucks in a suitcase is not easy--Kelly settles only two or three times a year, flying to Miami or Chicago or Seattle to rendezvous with clients. Or he'll sometimes use a "clearing man," a broker who arranges money transfers between two cities for a 5 percent commission. And other times he'll simply say, "give it to me when you see me." Which is a gentlemanly thing to do when sums equivalent to a congressional salary are involved.
"Honor," Kelly says, "is a big part of this business. So is trust. There are a lot of very fine people who make book, and a lot of decent people who bet with us. Very fine individuals. It's just too bad it's illegal."
Michael Konik is a writer based in Hollywood, California.
* All names and some identifying details have been changed.
Super Bowl Mania
There's no debate in the world of bookies about which day is the busiest of the year: Super Bowl Sunday. A prominent Texas bookie describes the 1993 event, the Super Bowl between the Dallas Cowboys and the Buffalo Bills, which the Cowboys won 52-17.
"The phones start ringing early, even before the pregame show starts. On Super Bowl Sunday, everybody's a bettor. By this time of the football season, almost all of my customers are down for the year. The Super Bowl is the last chance they have to 'come back.' So volume is tremendous. We have a television going in the office, and everytime a so-called expert makes a prediction--boom!--in come the calls. People want to have somebody else to blame if they lose their bet, I guess. In a way, television's the best friend my office ever had.
"About an hour before kickoff, a lot of money starts to come in on Dallas. Now you got to understand, we already have our line adjusted up. We're in Texas, and people want to bet on the home team and all. So we make them pay a premium. We're probably a point over the Vegas number already. But now we start getting some serious action on the 'Boys: $3,000, $5,000, $10,000 bets. Now we got almost $600,000 on the 'Boys and only about $200,000 on the Bills. So we got to make a decision. Do we even up? Or do we gamble with the Bills?
"I personally think Dallas is going to win, but my associates decide that, hey, we're way up for the season already. We're gambling with the customers' money. We're going to let it go and root for Buffalo.
"Well, some money came in on the Bills right before the national anthem. But we ended up losing about $250,000, anyway. I guess that shows you should never gamble, right?"
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