But he is not a man of unlimited resources. He must balance his books so that he will lose no more on the winner than has been bet on the other horses in a race, after his percentage has been deducted. He cannot control the choices of his customers, and very often he will find that one horse is the favorite choice of his clientele. His "action," as he calls it, may not reflect the action of the track. Therefore, he must reinsure himself on the race in much the same way that a casualty insurance company reinsures a risk that is too great for it to assume alone. To do this, the bookmaker uses the "layoff" man, who, for a commission, accepts the excess wager.
The local layoff bettor also will have limited funds, and his layoff bets may be out of balance. When this occurs, he calls the large layoff bettors, who, because of their funds, can spread the larger risk. These persons are gamblers who comprise a nationwide syndicate or combine. They are in close touch with each other all the time, and they distribute the bets among themselves so that an overall balance is reached on any horse race.
With a balanced book at any level—handbook, layoff, or syndicate—the edge is divided, and no one loses except the men and women who placed the bets. As an indication of the volume of business I am talking about, one of the largest operators in the, combine does a layoff business of $18 million a year. His net profit is $720,000 a year. This is a 4 percent return on volume, with relatively no risk, as a result-of the balancing of his books on each event.
The term "gamblers" is a misnomer for these persons. They accept money that the small gamblers wager, but they do not gamble at all. This is further illustrated, graphically, by what we know as the numbers racket.
A man purchases a ticket with three numbers on it, paying a dollar for the ticket. Since there are 999 such numbers, he should reasonably expect the odds to be 998 to 1. The numbers bank usually pays 600 to 1 on such a wager—or less—so you can see that the only gambler in this situation is the man who makes the bet. The operator pockets forty cents of every dollar bet -that is, if the game is run honestly. That, however, is too much to expect from this group. If the play is too high on any one number, they manage through devious means to ensure that a number on which he play has been small will be the winner.
While we do have great problems in estimating the total amount gambled illegally, we can get some idea from significant records made available by the Internal Revenue Service through raids.
For example, the records of an Indiana bookmaker indicate that for a three-day period he received a total of $1,156,000 in wagers. A check of the gross receipts of a large department store in the same- city indicated its gross for the same three days as $31,863. A Chicago bookie's records showed he took in $6,400,000 in total wagers for one year, while a chain grocery store in Chicago showed total gross receipts of only $293,000. While, actually, these comparisons may be unfair, in that the bookmakers probably are doing considerable layoff betting from smaller bookies in other cities and other states, these two instances are not unusual, as the following Internal Revenue figures indicate: A Los Angeles bookmaker, Jack Rosen, took in $4,511,000 in one year. A Miami bookie received $1,594,000; a Virginia bookie, $1,221,000 for an eight-month period; and a Tennessee bookmaker, $1,689,000 for five months. A Pennsylvania policy operator collected $587,000 in seven months.
But, invariably, when federal agents try to raid bookmakers and policy operators, the first efforts of the law violators are aimed at destroying all of their books and records. Only a short while ago raiders in Detroit used a ladder to go through a second-story window in a raid in which they found people in the house burning information sheets in a potbellied stove which had a padlock on it. IRS agents in Atlanta recently raided a policy operator who also operates a supermarket. They found records of baseball bets in his cash register. While agents were examining these slips, the operator of the establishment suddenly touched his cigarette to the betting slips, and they exploded in a ball of fire. This bolt-flash paper is now widely used by racketeers so that they can do away with their records in a matter of seconds. A New Orleans bookie who was recently raided raced into his bathroom and dumped his papers into a toilet. Agents were right on his heels and salvaged the soaking documents, which indicated $6500 in bets had been placed with this operator during part of the day.
In January, Internal Revenue agents raided a large-scale bookmaking operation in Florida. The raid was unique because some of the Revenue agents brought fire extinguishers and were able to douse a fire set to flash paper by operators in an attempt to destroy records. However, I was more interested in the agents' report that the bookmaking operation appeared to handle about $250,000 in bets daily.