In 1927, the Employer’s Association of Chicago used the term racketeering to describe the influence of organized crime in a labor union called Teamsters. A basic definition of racketeering is the offering of a dishonest service to fill a need that would not usually exist. Criminals or organizations create a problem and then provide the solution. The term derives from the word racket which is any criminal activity that cheats individuals out of money.

The Mafia connection with racketeering is there for a good reason. Originally from Sicily, the Mafia is an organization of families who helped to protect the island from invaders. In 1906, Lucky Luciano emigrated from Sicily to the US. Although others came before him, Luciano is the father of the American Mafia. By taking out older mob bosses, Lucky Luciano was able to organize the younger generation of gangsters into five crime families. Between them, they established numerous rackets with bootlegging and prostitution being the most profitable.

A protection racket is probably the most well-recognized forms of racketeering. Take the Mafia as an example. They would target businesses on their ‘turf," and show there was a credible threat towards them. Maybe swindling, injury, sabotage or robbery. The Mafia would then offer them the protection that law enforcement was unable to provide. Often, the initial threat of violence was carried out by someone employed by the Mafia themselves. They would create the problem and then provide the solution. The Mafia perfected the art of the protection racket, but others carry on the practice today.

A protection racket may be the most obvious example, but racketeering can also take on many other forms. Prostitution rackets involved providing illegal sexual services. The numbers racket was an illegal lottery that was popular before national and state lotteries became legal. Another example may be a corrupt dealer using colleagues disguised as gamblers to cheat others out of their money. Kidnapping, loan sharking, blackmail, embezzlement, bribery, selling stolen merchandise (fencing), drug trafficking, sex-slavery, and murder-for-hire are also types of racketeering.

Rackets often operate as part of legitimate businesses.

Advances in technology have made racketeering even more interesting with racketeers finding new ways to extort money out of people. Cyber extortion has become big business. In some scams, hackers gain access to a computer and corrupt the data held on it. Then they refuse to release the data until they receive a large sum of money. In other instances, they use information found on the computer against the owner as a form of blackmail. Credit card fraud, identity theft, wire fraud, and money laundering are all examples of modern-day racketeering.

Prosecutors faced a huge problem when trying to bring charges against crime bosses. As the law stood, they could charge the individual who carried out a racketeering crime. But even though a mob boss may have ordered the crime, they themselves had committed no illegal act. All that changed in 1970 when President Richard Nixon signed into law the Racketeer Influenced and Corrupt Organizations (RICO) Act. This gave law enforcement the authority to charge any individual or group involved in any acts of racketeering. As head of the racket, a crime boss could now face prosecution. Anyone convicted under the RICO act can face up to 20 years in prison. If murder is part of the charges, this can increase to life imprisonment.

Evidence gathered by the FBI allowed prosecutors to indict the heads of the five families of New York. Under the RICO act, charges of labor racketeering, extortion, and murder-for-hire were bought against them. The subsequent trial became known as the Mafia Commission Trial. In 1985, the trial resulted in life sentences for the big crime bosses of New York’s once untouchable Mafia families.

One of the more famous cases of racketeering was not against the Mafia or a mob boss. Michael Milken was an American financier working for the Drexel investment bank. He became a prominent and influential player on Wall Street but didn’t always play by the rules. In 1989, Milken was indicted on 98 counts of racketeering and fraud under the RICO act. He was accused of insider trading, stock manipulation, and securities fraud. With the possibility of a life sentence, Milken took a plea bargain accepting jail time and a fine.