Subversion By Organized Crime And Other Unscrupulous Elements of the Check Cashing Industry
State of New Jersey Commission of Investigation 1988 Report
PUBLIC HEARING-FIRST DAY (April 26, 1988) – Unlicensed Check Casher Gallagher Confirms Mob Ties
Anthony Gallagher of Bayonne, a known associate of the Genovese organized crime family, testified at length about his maverick career as a free-wheeling, unlicensed check casher since the late 1960s. During the course of his rambling testimony, he cited dealings with other Genovese mob figures, including underboss Venero (Benny Eggs) Mangano and loanshark Frank Vonell
A. He has long been identified as an ally of John DiGilio, the long time Hudson County enforcer for the Genovese gang, who was found murdered in May, 1988. Gallagher’s appearance at the SCI hearing occurred within two weeks of his conviction in Newark of federal racketeering and conspiracy charges. Ironically, DiGilio, a co-defendant in that trial, was acquitted.
Gallagher’s name had surfaced in the testimony of previous witnesses as having served as a check casher or as a referral agent for other check cashers or in connection with questionable transactions that these witnesses described in detail. In addition, Gallagher’s long association with organized crime was outlined at the hearing by the Commission’s expert, Dintino.
Cashed Checks For “Gratuities”
Apparently, because the Department of Banking has no criminal statutes to back up its regulatory control over check cashers, Gallagher was able to operate for many years without being effectively sanctioned. Because the department’s inherently weak civil authority was restricted to the check cashers it licensed, who had to obey a rigid regulatory system, Gallagher indicated in his testimony that he was able to operate openly by, as he claimed, accepting “gratuities” rather than charging fees. He explained how he operated as a check casher to Counsel Gaal:
Q. Do you charge a fee for cashing checks?
Q. Do you receive any type of remuneration, compensation, gratuity?
A. We normally receive an amount for every check we cash.
Q. Have you called that in the past a gratuity?
A. I call it today a gratuity.
Q. Is there any particular rule of thumb that you have in terms of the amount of the gratuity you might receive or you do receive on a check?
A. About 1 percent.
Q. Have you yourself applied for licenses?
Q. And what happened?
A. Nothing happens. When you apply to the Department of Banking it gets lost. It drops through the cracks for about a year, two years. I think you got to get seven Senators and 16 Assemblymen and the Governor’s deputy to push it and they push it up and you save a year or two.
Q. Have you operated more than one check cashing business at a time?
A. Yes. I have two now.
Q. Now, Mr. Gallagher, you operate and you have operated check cashing businesses in this State without a license. How do you do it?
A. I open a check casher.
Q. And you open the door, and what do you do with the checks and how do you get cash?
A. Well, if you have a bank you deposit them into a bank but as you know banks don’t like welfare recipients, banks don’t like that type of check, so you have to be very, very circumspect in disposing of your check. I’m talking about the regular governmental checks and the welfare checks. So you go and you open up bank accounts or we have enough people write up, whoever, that open up possibly 12 [accounts]-we could open up a big check casher tomorrow morning right here in Trenton.
Q. Do you have check cashing businesses in Florida?
Q. And do you send those checks up to New Jersey?
A. Yes. 42
Q. And what do you do? Process them through
A. Well, now I don’t send them up because I have ways of disposing of the checks in Florid
Q. At the time you testified in executive session you indicated that you would send them up to New Jersey
A. Yes, some of them I still have to send up.
Q. And they handle them through your New Jersey businesses?
A. Yes; just float them around.
Q. Now, Mr. Gallagher, the State of New Jersey, in particular the Department of Banking, requires that check cashers obtain corporate resolutions before they cash checks payable to corporations. Do you require corporate resolutions?
A. Of course not.
Q. What do you think of that requirement?
A. It’s a joke.
A. Because it has no force and effect. I mean, it’s something that a lawyer would like to have when he goes six months from now or a year from now and sues to collect on a check, but it gives you absolutely nothing. It’s a regulation that’s worthless.
Q. Another banking rule is that, in essence, where a check casher is allowing the customer to repeatedly bounce checks or maybe I should say a check casher cashes checks for a customer that repeatedly bounces checks, they should, in essence, get rid of that customer and stop?
A. Well, that’s what the Bank Commissioner says.
Q. Why do you take issue with that?
A. Because the people who come to cash checks, 50 percent of the time they’re going to bounce the checks … Gallagher said he makes it a practice to cash checks at licensed check cashers. He insisted, however, on paying a fee that would be half as much as the one point “gratuity” that he received:
Q. Now, in addition to moving checks to individuals or business accounts, have you on occasion taken checks to licensed check cashers?
Q. Okay. And are you doing that currently?
Q. When you take checks to a licensed check casher is there any rule of thumb as to the fee that you have to pay?
A. I won’t pay them more than a half a point.
A. Because that’s 50 percent of the profit. I only charge a point.
Q. You charge a point and get half a point?
A. When I say I charge a half a point-I don’t want to read four years later that I said we charge a point. When I charge a point, I’m saying that our average amount that we receive as a gratuity for a check is a point. It always has been for 12 years.
Gallagher Is Check “Floater”
Gallagher described himself as a check “floater,” as distinguished from a check kiter. However, his process was similar in that he also utilized the time or float period for a bank check to clear to make free use of the proceeds of the check. In organized crime circles, a series of kites, or floats, enables a perpetrator to pyramid an ever increasing amount of cash as loanshark loans, bets or for other illicit purposes, so long as the float can be maintained. Counsel Gaal reviewed the practice with Gallagher:
Q. Can you tell us what your definition is of a check kite? 43
A. I don’t use the term “kite”. I use the term “float.” a What’s a check float?
A. . . . Let’s say Friday is welfare day so welfare day maybe $100,000 [is needed] to cover welfare and you only have $20 so … you’re able to go to a check casher-and you give him a check for $30,000, the check is flat out no good at the moment when you give it to him.
Q. You give him a no-good check for $30,000
A. Right. We’re using the term again-we’re using the worst term. We’re saying the check is no good at present.
Q. Which means there are insufficient funds in the bank
A. There’s zero in the bank. There’s one dollar in the bank. We have a $30,000 check. You bring the $30,000 check to a check casher. He then gives you $30,000 in cash. You now can use that $30,000 all during the day. In other words, you can start with zero and do it all during the day.
Q. Is it also fair to say that the next day you would continue by cashing a new check?
A. The cycle may-and, you know, because-banks don’t like to cash checks because the worst thing that can happen in banks is to take money out of the banks.
Q. Now, did you recently devise a way to assist a check casher who needed cash for the weekend?
Q. And was that Grand Street?
Q. And was the methodology that you devised
A. It’s exactly the same as this, but it failed.
Q. And why did it fail?
A. Because an idiot in the bank for Grand Street who had been there for like-since they opened-thought they were trying to rob the bank of the money.
Gallagher Had a $400,000 “Float”
Counsel Gaal reminded Gallagher that he had previously told the Commission he once maintained a $400,000 check float. Indeed, he had told the SCI the only reason he operated as a check casher was to enable himself to contrive floats and utilize the cash for loans and other activities. He explained this type of operation:
A. Yeah, I had done that. I’m not sure about the number again. You know it might have been eight or ten accounts.
Q. Can you do it
A. At the time we were doing 400, 500 [thousand dollars] a day.
Q. How long can you run one of these floats if you don’t make a mistake?
A. It isn’t that. It’s if the people on the other side don’t realize-if the people on the other side see malevolence in you, they can-then they can destroy you. If they don’t see malevolence, you can do it forever. It doesn’t cost anybody anything.
Q. Are there also other factors such as a snowstorm which prevent you from getting to the bank to make your deposit
A. A snowstorm is the worst thing that can happen to a float.
Q. Mr. Gallagher, is it fair to say that the floater gets the benefit of cash for whatever purpose he might have?
A. That’s correct. It’s also a method to steal, too, and that’s why I’m being-I don’t know why I haven’t taken the Fifth yet, but I’m getting very, very careful in what I’m answering. I’m trying to hold together a statement I have together with what you’re asking me but if you stay on target, I’ll stay that way. That’s what happens. When somebody thinks you’re attempting to steal from them you have a problem when you’re really not.
Q. Could it also be said that the floater is getting … interest-free loans:
A. Yes, and I love them. 44 Gallagher testified that check cashers not only can “launder” money but they also make loans:
Q. Would you also agree that check cashers can lend money and do lend money?
A. Sure they do.
Q. On a regular basis?
A. I would think … I don’t know about-I’m not saying that licensed guys would do that because that could jeopardize your license.
Q. But the unlicensed ones do?
A. We do.
Q. When you testified in executive session you gave an example of the businessman who needs money on a Friday, who comes to you and as a check casher, to use the term “kite” or “float” a check, lends him 15,000, he pays a point and he brings the check in on Monday. In essence, that’s an advance of money. Am I right?
A. Of course. It’s done all the time …
Borrowed From Mobster’s Wife
One of the most revealing disclosures by Gallagher was an admission that he had borrowed money from the wife of the Genovese underboss, Venero (Benny Eggs) Mangano, in 1981. SCI Intelligence Chief Dintino said such a transaction indicated that Gallagher was deeply aligned with the Genovese organized crime family. Here are Gallagher’s recollections of the loan, which he utilized to end or reduce one of his check float operations:<
Q. Mr. Gallagher, have you had occasion when you borrowed money to bring down a float?
A. Do I borrow money to bring down a float? Sure.
Q. And is one of the individuals that you borrowed money from Mrs. Mangano, the wife of Mr. Mangano?
A. The last loan was in 1981.
Q. Have you borrowed money from Mrs. Mangano?
A. Yes, in 1981, yes.
Q. But you have borrowed money
A. Because I’ve described him in testimony in Federal Court. He’s a very, very close friend of mine. I worked on cases that he was involved in, civil contempt cases, and I think one or two are loans that I don’t have to pay him back that he forgot about them but he’s just a red herring thrown in here for no reason at all…
Gallagher’s Mob Background
When Gallagher was able to borrow money from Mrs. Mangano, it had to be with her husband’s approval. And, according to Chief Dintino, Benny Eggs Mangano as the Genovese family’s underboss was a leader of “one of the most powerful organized crime organizations in the country.” Counsel Gaal asked Dintino to characterize Gallagher’s connection with the Genovese gangsters:
Q. In your opinion is it significant that an individual such as Gallagher would visit [such] a man on a daily basis and be capable of borrowing a significant sum of money interest-free from him?
A. It is very significant in that Gallagher is trusted by the Genovese hierarchy and plays an important role in their illegal operations. There is also no doubt in my mind that DiGilio, Mangano and Vincent Gigante, the present boss of the Genovese organization, all receive a piece of Gallagher’s legitimate enterprises and illegal criminal activities, including the check cashing facilities he mentioned he owns. Also when called upon for a favor such as utilizing his check cashing facilities for illegal activities, he would have to comply.
“Significant” Criminal Associate
Chief Dintino was asked to outline Gallagher’s mob background and connections:
Q. Do you know of him prior to these hearings and, if so, what can you tell us about him and his activities? 45
A. Yes, I have known Gallagher prior to these hearings and Anthony Gallagher is a significant criminal associate of the Genovese crime family. Gallagher primarily serves as a front for Genovese family members [such as] Venero Mangano. His illicit activities include collusive theft, extortion, labor racketeering, tax violations and corruption relative to the waterfront ports of Hudson County. His criminal record reflects an arrest for forgery and a recent conviction for extortion whereby money was being extorted from a stevedoring company in exchange for labor peace at the Military Ocean Terminal in Bayonne, New Jersey. You might say that Gallagher is a mini-Meyer Lansky for the DiGilio segment [of] the crime family.
SCI Agents Check Out Gallagher
SCI Agents Raymond Schellhammer and William P. Rooney testified about their surveillance of Gallagher’s unlicensed check cashing establishments at 790 and 809 Broadway, Bayonne. In fact, Schellhammer said he paid a fee rather than a gratuity-despite Gallagher’s testimony to the contrary-when he cashed a check at the 790 Broadway establishment:
Q. What was the amount of the check?
A. The check was in the amount of $275.
Q. And was a fee paid for cashing this check?
A. I received back $272, and although [the fee] was more than 1 percent of the face value, I didn’t make any comment about it.
SCI Accountant Explains Float*
The Commission’s chief accountant, Julius M. Cayson Jr., concluded the public hearing’s opening day with an explanation of Gallagher’s check float manipulation. He was questioned by SCI Counsel William DiBuono:
Q. Does Mr. Gallagher characterize what he does as a float? *See chart, p. 47.
A. Yes, he does.
Q. Is this a form of check kiting?
A. Yes, it is because the result is the same; that is, the kiter or the floater is using the bank’s funds without its knowledge and, of course, without paying interest on the money.
Q. Does Mr. Gallagher’s floating activity rely upon the use of a check casher?
A. In the instance that we’re going to examine today, yes, it does.
Q. At this point I’ll pass out the chart.
A. The staff has prepared this particular exhibit, and in the scenario that we present here Check Number 1 is cashed at a check casher and that particular cash is used for any purpose. It’s used for any purpose that the floater wants to use [it for]. Check Number 2 then is cashed also at a check casher and that cash is deposited to cover Check 1. Check 3 covers Check 2, et cetera, until the cash deposits of the check and succeeding checks [extend] for as long as the unauthorized loans are extended. Each succeeding check is used to cover the previous check until such time as the float either collapses or the thing is paid off. The wrinkle here is that instead of using checks which is kiting, currency is used and that, of course, Mr. Gallagher says is the float. I-we can’t get any more simple than that.
Q. Does the floater benefit by this activity?
A. Yes. The floater benefits because, in effect, he’s getting an interest-free loan.
Q. Is there any way to stop this scheme?
A. The only way to stop a float is to refuse to accept a cash deposit. That is quite extreme, but we have an instance in this investigation that was alluded to earlier in which to destroy the float, a cash deposit was refused.
Q. How difficult is it to identify this type of activity?
A. It is very, very difficult if the perpetrator uses fictitious payees, multiple banks, many bank accounts and cashes his checks under $10,000 which, of course, thwarts the CTR regulations.