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1 <br />1 <br />1 <br />1 <br />1 <br />1 <br />1 <br />1 <br />1 <br />1 <br />1 <br />1 <br />1 <br />1 <br />1 <br />1 <br />`1 <br />1 <br />L!C <br />The Attorney General's Working Group believes that regulatory strategies designed <br />to reduce the concentration of sexually oriented businesses, insulate residential areas <br />from them, and reduce the likelihood of associated criminal activity would constitute a <br />rational response to evidence of the impacts which these businesses have upon local <br />communities. <br />SEXUALLY ORIENTED BUSINESSES AND ORGANIZED CRIME <br />infiltration of organized crime into sexually oriented businesses reinforces the need <br />for prosecution of obscenity and requires specific regulatory or law enforcement tools. <br />The Working Group attempted to assess both the present and potential relationship <br />between organized crime and sexually oriented businesses. <br />The Working Group heard testimony from a witness who had been prosecuting <br />obscenity cases for the past thirteen years that many sexually oriented businesses have <br />out -of -town absentee owners. If the manager of a local business is prosecuted on an <br />obscenity charge, his testimony may make it possible to pierce the corporate veil and <br />identify the true owners. <br />The Working Group heard testimony that an organized crime entity may operate <br />somewhat like a franchisor. In order to stay in business, the local manager of a <br />sexually oriented business may have to pay fees to organized crime. The makers and <br />wholesalers of pornographic materials are also likely to be involved with organized <br />crime. <br />The Working Group conducted additional research to assess the relationship <br />between sexually oriented businesses and organized crime. The Working Group was <br />informed by prosecutors of obscenity that there were many ways in which organized <br />crime entities could derive a benefit from sexually oriented businesses. There is a large <br />profit margin in pornography. The presence of coin - operated peep booths provides an <br />opportunity to launder money. Cash obtained from illegal activities, such as <br />prostitution or narcotics, can be explained as the income of peep booths. Cash <br />income can also escape taxation, in violation of law. <br />-14- <br />Page 84 <br />TOTHL P 06 <br />