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App. B / Adult Businesses
<br />also likely to be involved with organized crime.
<br />The Working Group conducted additional research to as-
<br />sess the relationship between sexually oriented businesses
<br />and organized crime. The Working Group was informed by
<br />prosecutors of obscenity that there were many ways in which
<br />organized crime entities could derive a benefit from sexually
<br />oriented businesses. There is a large profit margin in por-
<br />nography. The presence of coin-operated peep booths
<br />provides an opportunity to launder money. Cash obtained
<br />from illegal activities, such as prostitution or narcotics, can
<br />be explained as the income of peep booths. Cash income can
<br />also escape taxation, in violation of law.
<br />Although it is clear that organized crime is involved to
<br />some degree in the pornography industry, various sources
<br />reach different conclusions as to the depth and extent of this
<br />involvement. Part of the difference in assessment is based
<br />on differences in the way the term "organized crime" is
<br />defined. Authorities who restrict their definition of organized
<br />crime to the highly organized ethnic hierarchy kno in as La
<br />Cosa Nostra (LCN) tend to find fewer links than those who
<br />define the term to include other organized criminal enter-
<br />prises. Where there has been intensive law enforcement and
<br />prosecution, it is more likely that linkage between sexually
<br />oriented businesses and organized crime figures will be
<br />evident.
<br />The Working Group has adopted the definition of organ-
<br />ized crime contained in Minnesota's Report of the Legislative
<br />Commission on Organized Crime (1976). The Working Group
<br />is concerned about the relation between sexually oriented
<br />businesses and any "organized criminal conspiracy of two or
<br />more persons that is continuous in nature, involves activity
<br />generally crossing jurisdictional lines and results in third -
<br />party profit." The threat from organized crime includes, but
<br />is not limited to involvement of national crime enterprises
<br />such as LCN.
<br />Recent federal indictments of James G. Hafiz in Indiana
<br />392
<br />Minnesota Attorney General's Report / App. B
<br />for perjury' and of Harry V. Mohney in Michigan for tax
<br />evasion suggest a possible connection between organized
<br />crime and "a Minnesota pornography business. Hafiz, a Min-
<br />nesota resident who is an agent of Beverly Theater, Inc., the
<br />company which operated the Faust Theater in St. Paul,2 has
<br />been linked to Mohney, a major pornographer based in Michi-
<br />gan. The indictments allege that Mohney caused the incor-
<br />poration of the company which operated the Faust, that a
<br />corporation owned by Mohney paid for improvements to the
<br />Faust and that Mohney is, in fact, the owner of numerous
<br />sexually oriented businesses, including the Faust. (See
<br />United States v. Hafiz, Indictment, No, IP 88 -102 -CR (S.D.
<br />Ind., Sept. 16, 1988); United States u. Mohney, Indictment,
<br />No. 88-60062 (E.D. Mich. Sept. 9,1988).)
<br />Mohney, in tum, has been linked with national organized
<br />crime enterprises. A 1977 report of the United States Justice
<br />Department stated:
<br />It is believed that Harry V. Mohney of Durand, Michi-
<br />gan, is one of the largest dealers in pornography in the
<br />United States ... He is alleged to have a close associa-
<br />tion with the LCN Columbo and the LCN DeCavalcante,
<br />both of which are very influential in pornography in the
<br />eastern United States. In Michigan, Mohney is known
<br />to hire individuals with organized crime associations to
<br />manage his businesses. His businesses and corporations
<br />consist of 60 known adult bookstores, massage parlors,
<br />art theaters, adult drive-in movies, go-go type lounges
<br />and pornographic warehouses in Michigan, Indiana,
<br />Illinois, Kentuckm Tennessee, Wisconsin, Iowa, Ohio
<br />and California. He is involved in the financing and
<br />production of pornographic movies, magazines, books
<br />and newspapers. He also directs the Importation and
<br />distribution of his own and other pornographic publics -
<br />1 Hafia war acquitted of the perjury chargee. St. Paul Pioneer Press,
<br />Jan. 11, 1989, at 10A.
<br />1 The City of St. Paul bought out the Faust for $1.8 million, closing
<br />the entertainment complex on March 7, 1989.
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