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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 specifie 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 />• • <br />The Working Group heard testimony from a witness who had been prosecutirij <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 />___ * • • ♦ <br />The Working Group heard testimony that an organized crime entity may operate <br />somewhat like a franchisor. In order to stay in bus; less, 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 />% <br />• <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 errtities 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-