The CHAIRMAN. Does that represent all of Chicago, now? Mr. KAPLAN. Just the city of Chicago, sir; not some of the areas we covered with other witnesses outside of Chicago. The CHAIRMAN. That chart does not cover all of this area that has been testified to here before the committee? Mr. KAPLAN. No, sir. As a matter of fact, it was this setup that some of the prior witnesses testified to they were trying to get for protection in their area and it fell through. The CHAIRMAN. I see. All right. Mr. KAPLAN. There are three entities to which the jukebox operators must make payments in order to stay in business in Chicago. The CHAIRMAN. They had to make payments to three separate sources? Mr. KAPLAN. Yes, sir; in order to effect the present setup that is in Chicago. The CHAIRMAN. In order to secure peace? Mr. KAPLAN. To secure peace. The CHAIRMAN. To make peace secure. Mr. KAPLAN. And this is their phrase. We have visited many operators and this is the way they talk about it. The CHAIRMAN. They talk about "so you will have peace to operate your business in peace"? Mr. KAPLAN. Yes, sir. I will state in prolog that is based upon fairly accurate figures from various sources. This is for the year 1956. But it is, I believe, an accurate representation of the years before and up until this time, at least from 1951 on. There may be some changes. Something like $15,800 in dues went to the coin machine division of local 134. That is where the business representative is Fred Thomas Smith. The CHAIRMAN. That is where you have 200 men of the 20,000 membership who are in the coin division, as they term it, of that union? Mr. KAPLAN. Yes, sir. This is set off like this because it has been described to us by the union people as an autonomous unit of 134 about which they have no information on its operations or anything else. They have records of the names of the men, but nothing more. Only "Jukebox" Smith was the man who knew about its actual running. Of that $15,800 that goes into the union, Smith has taken out in 1956 on recorded payments $10,700 for salary and expenses. On the other side we have here the Jukebox Operators Association, the Recorded Music Service Association, Inc., which was formed in 1949, early 1950, after an Illinois investigation resulted in disbanding the former one. The payment for 25 cents apiece per machine per month by the operators comes out to this-these have all been made round figures-$24,000. Then the operators also have to subscribe to the services of a company which is owned as a sole proprietorship by Michael Dale. This is the Commercial Phonograph Survey, which is down here [indicating], and this is where the bulk of this money goes. In turn, from the records we have, the money has been distributed in the following manner. The CHAIRMAN. How much went into CPS? Mr. KAPLAN. $74,000 in the year 1956, sir. The CHAIRMAN. $74,000. You have $24,000, $15,800; that is nearly $40,000, and $74,000 Mr. KAPLAN. It amounts to about $114,000. The CHAIRMAN. In other words, these figures are not accurate, but it is that much or more? Mr. KAPLAN. Yes, sir. These are the most conservative figures we could use, sir. The CHAIRMAN. All right. Mr. KAPLAN. On this side, the right side, we have indicated what appear to be legitimate expenses, assuming the legitimacy of Dale's operation. This would be for office and administrative expense of $9,500; for Mr. McCullough's salary and expenses for the year, $6,900; for an office secretary, $3,000, and for one of Mr. Dale's services, which is the publication of what he terms a news scope, which is supposed to keep operators advised of goings on in the industry, it costs him $312. The CHAIRMAN. You got those figures from his books? Mr. KAPLAN. Yes, sir, from his books and accountant's figures. The CHAIRMAN. All right. Mr. KAPLAN. On this other side we have some $25,000 going out to Mr. Dale. That is the split-up from the $74,000. This is the way it goes. The CHAIRMAN. The legitimate expense over there is part of the $74,000? Mr. KAPLAN. Yes, sir. The CHAIRMAN. All right. The balance of the $74,000 goes in this Mr. KAPLAN. $25,000 to Dale, Michael Dale. The CHAIRMAN. What is he? What is his official title? Mr. KAPLAN. He is the owner of this company, sir, a sole proprietorship. The CHAIRMAN. He is the owner of the company? Mr. KAPLAN. Yes, sir. The CHAIRMAN. All right. Mr. KAPLAN. $7,700 to Mr. Rossano. Mr. Rossano is one of the three people Mr. Kennedy mentioned who did have a criminal record. We have not been able to find Mr. Rossano in spite of very strenuous efforts to get him. Mr. Messino, $7,000. He has a crimínal record. The CHAIRMAN. Is that the Messino who appeared today? There was $675 paid to a Mr. Tano in that The CHAIRMAN. All right. Mr. KAPLAN. And we cannot account for another $7,000 of this $74,000. We have no way of knowing where it went. Mr. KENNEDY. At least some of that has gone to Mr. Salvatore? Mr. KAPLAN. That could well be, sir. The CHAIRMAN. Do you have any record of it going to him? Mr. KAPLAN. No, sir, because he came on the following year. We have no record of it from what we could pick up. The CHAIRMAN. I mean, their records actually don't identify it as going to him? Mr. KAPLAN. No, sir. Senator MUNDT. What service are the operators supposed to get for this $74,000? Mr. KAPLAN. Well, Mr. Dale states that he performs a public relations service for the operators. He keeps the location owners happy when they are upset with the kind of service they are getting. He tells the operators whether the contracts they are supposed to have with locations are authentic. There are piles and piles of slips going to the association from Mr. Dale's company in which he says, "We have verified your contract with location and we find it authentic in every respect." Nobody can quite explain to us what they mean by this, except that the man who signed the contract is apparently the man that signed the contract. They go around and ask him if he signed the contract and he says, "Yes, I signed it." We could never get an operator to tell us what additional value this was to the operator. He also put out this news scope which is a canned information leaflet which he sends once a month that he buys from some news service, and on the back of which he might add some little comments which are then printed and sent out to the subscribers of his service. I think I might point out that all of the operators subscribed to Mr. Dale's service en masse when he set up this service in about 1949 or 1950, when this organization, RMSA, was set up. After investigation in 1953 or 1954, he converted that contract with the association over into individual contracts with the operators. We had some testimony on that yesterday. Senator CURTIS. Who pays in that $100,000? Mr. KAPLAN. That money is paid by the individual jukebox operators, sir. Senator CURTIS. By a jukebox operator, do you mean the place of business where it is located, or the man who owns the machine that sets it there? Mr. KAPLAN. The man that owns the machine that sets it there. Senator CURTIS. Is that a voluntary payment? Mr. KAPLAN. We have had testimony that it is not a voluntary payment, but it is necessary in order to get affiliated with the union. Senator CURTIS. It is necessary in order to be affiliated with the union? Mr. KAPLAN. Yes, sir. Senator CURTIS. Then, according to that chart up there, what arm of this apparatus is the enforcing arm? Mr. KAPLAN. The enforcing arm is Mr. Smith, sir. Senator CURTIS. Using the union? Mr. KAPLAN. Yes, sir; using his power in the union as a union representative. Senator CURTIS. In other words, he uses prerogatives and power vested in unions generally to set this whole apparatus in motion and going? Mr. KAPLAN. Well, he uses his known stature as a business representative of the local; yes, sir. He is the person that goes around when they get a new operator, the one we have had testimony about here, and he is the one who tells them, "You take care of the bills from Dale." Senator CURTIS. Did you know that that $10,700 was all that he got out of that? Mr. KAPLAN. No, sir; we do not. Senator CURTIS. These items that you have enumerated, are they equal to $100,000? Mr. KAPLAN. They come to more than $100,000, sir. The CHAIRMAN. Senator Capehart. Senator CAPEHART. What do you understand these operators pay this $100,000 for? Mr. KAPLAN. They pay this money to effect a collusive trade restraint in Chicago, and now they are paying it to Dale and, of course, to the union, in order to enforce it. They have been unhappy to pay it, from what we can gather, but they have to pay it. Senator CAPEHART. For what purpose? What returns do they get for it? Mr. KAPLAN. Well, for the operators that are pleased with it, and have been there a long time and who are the largest operators, they get almost control of the industry. They don't get any competition coming in, they don't get any more operators knocking away at their location. They don't get any competition. They are able to keep the old machines on location. They are able to keep location owners from owning their own machines. Senator CAPEHART. In other words, what they do, if an operator has 100 machines in 100 locations, by virtue of paying 90 cents a month per machine to this organization, he is guaranteed to keep those 100 machines forever; is that your understanding? Mr. KAPLAN. This is pretty well guaranteed. In the last month or two we have had a new situation coming up in which the guarantees are not being kept. That is, even the operators who are paying into this association are continuing to lose some of their better locations to hoodlum-controlled outfits. Senator CAPEHART. In other words, it is a setup for an organization to control the business in Chicago. Mr. KAPLAN. Yes sir. It is a payoff to the hoodlums to leave these guys alone, in effect, because if they had paid the money directly into the union, then, of course, they would lose control of it, since it would go into the regular office bookkeeping setup and then be recorded. But if they pay it to Dale and it is a sole proprietorship it has been their belief, apparently, nobody could get these books or figures about them on the ground that they would be privileged and, consequently, nobody would know who was getting that money. Senator CURTIS. Did anybody pay any taxes on that $100,000? Mr. KAPLAN. I am quite certain the legitimate operators would be paying the money Senator CURTIS. No; after it left their possession. Mr. KAPLAN. Mr. Smith, Mr. Dale, these several gentlemen, make tax returns. Some of them do not, apparently. But these people The CHAIRMAN. What about on the original $100,000-plus? Of course, that comes through many operators. I wonder if they can charge off that 90 cents a machine to legitimate expenses and, therefore, pay no tax on it? Mr. KAPLAN. Yes, sir. Many of the operators are actually paying union dues on their employees at roughly about $7-something per quarter. The CHAIRMAN. Is that charged off as a legitimate operating business expense, and no income tax is paid on it? Mr. KAPLAN. Yes, sir. We have some operators who are charging that money off as a business expense. The CHAIRMAN. So there is no income on the original $100,000; no income tax paid on it? Mr. KAPLAN. Exactly, sir. The CHAIRMAN. But as it gets down to the hands of Dale, Rossano, and those others, presumably they would have the duty of paying tax on it. Whether they do not, of course, is something else. Mr. KAPLAN. The money for Commercial Phonography Survey is deducted by every operator we have examined as a business expense, and the money to their association is deducted by every operator as a payment to a nonprofit trade association. The CHAIRMAN. Is there anything further? The chart will be made exhibit No. 56. (Chart referred to was marked "Exhibit No. 56" for reference and will be found in the appendix on p. 17213.) Mr. KENNEDY. This, Mr. Kaplan, is just one area in which they have been able to channel money? Mr. KAPLAN. Yes. Mr. KENNEDY. We discussed this morning, and we will be discussing later, the operations of the labor distributing company, where they have to purchase a certain percentage of their records. That is one way that the gangsters of the underworld get some money out of this industry. This is a second way that they get money out of the industry? Mr. KAPLAN. Yes, sir. Mr. KENNEDY. This is enforced, as the other one is, by the efforts of this union official who goes around? Mr. KAPLAN. Yes, sir. Mr. KENNEDY. In addition, the people of that area, Chicago, and the Chicago area, must suffer because the equipment in the various places where these boxes are located is not going to be as good equipment as it might be; is that correct? Mr. KAPLAN. That is true. Mr. KENNEDY. The competition is prevented by this operation. Mr. KENNEDY. There is no competition at all, except the hoodlum companies that come in from the outside and start to take over. Nobody else can do it, however. Mr. KAPLAN. Actually, when the hoodlum companies are competing, the public does not benefit, because they are not competing on the ground of offering better service, better equipment, or better prices. They are just competing with somebody who cannot stand up to them and cannot pay the protection. In addition, the Chicago asso |