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, 4 <br /> The Attorney General's Working Group believes that regulatory strategies designed <br /> to reduce the concentration of sexually oriented businesses, insulate residential areas 0. <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 /> j communities. <br /> SEXUALLY ORIENTED BUSINESSES AND ORGANIZED CRIME <br /> I • 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 /> 1 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 /> 1 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.The <br /> 1Working-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 /> _1 <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 /> Jopportunity 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 /> 1111 <br /> -14- <br /> 1 <br />