Ok - I've heard it mentioned several times around the board, and I remember when Moe Green took offense to Michael's implication in GFI ("You think I'm skimming off the top, Mike?!"). What on earth is this "skimming off the top" scheme? Does the term only apply to Casino operations?

When dealing in cash, one can "skim" off the top. Let's say that a business makes $2000 in cash sales in one day. Now being that there is no written documentation in the form of credit card charges, or written checks, no one really knows exactly how much money was made that day except the person handling those cash sales. So that person can take $500 off the top of the $2000 made, put it in his pocket, and then legally record that he made $1500 in sales transactions that day, hence the term "skim."

Don Cardi

Here is a scene about skimming that didn't make it to the movie...


INT. TROPICANA HOTEL - CLOSE VIEW - DAY

The money trays are carefully unloaded from the gaming
tables, and put on a cart with others.

The cart, preceded and followed by security guards, is then
wheeled through the casino, into a private, counting room.

INT. COUNTING ROOM - MED. VIEW - DAY

The guards leave the room; the door is locked after them,
leaving only Hagen. Neri and an ACCOUNTANT, a very fat man.
The numbered boxes are opened, and cash and checks are
spread out on the counting table.

The accountant begins with amazing speed and skill, to count
and divide the money.

NERI
Fifteen percent skim?

HAGEN
Twenty-five this time.

The accountant stops, and looks up to Neri.

NERI
It might show.

HAGEN
Mike wants it.

Neri nods, and the accountant continues. Neri opens a door,
allowing a sandy-haired man, a COURIER, into the room. The
cream is placed into his pouch personally by Neri.

NERI
We've never sent this much with one
courier.

HAGEN
(to the courier)
Your plans are a little different
this time. You skip Miami, and go
straight to Geneva. It's to be
deposited to this number.
(handing him a small envelope)
And it's got to be there by Monday
morning, no slip-up.

COURIER
I think I was 'picked-up' last trip.
That hour layover I had at Kennedy.
I went over and bought a paper...

Neri has finished putting the 'creamed' money into the pouch.

NERI
Those were our people.

COURIER
Okay, just thought you should know.

He is just about to close and lock the pouch, when Hagen
gestures that he should wait, and adds more stacks of
carefully packaged bills into the pouch. Then Neri locks
it, and handcuffs it to the courier's arm, looking
inquiringly at Hagen.

HAGEN
Let them count.

The courier is shown out through a private door, and then
the first door is opened. Two accountants come in with the
guards, and the trays are opened, and the counting process
is begun all over again, this time with the State Tally
sheets.

INT. TROPICANA CORRIDOR - MOVING VIEW - DAY

The courier continues on his way; followed by Hagen and Neri.

NERI
What's up?

HAGEN
No questions.

NERI
I got to ask questions, Tom,
there's three million dollars cash
in that pouch; Mike is gone and I
have no word from him.

HAGEN
Al, as far as you're concerned, I'm
the Don.

NERI
How do I know you haven't gone into
business for yourself?

This hurts Tom; but he is a reasonable man, and he knows he
owes Neri some explanation.

HAGEN
You've been through a lot with us
so I'm going to give you the truth.
Mike knows it was someone within
the compound that set him up for
that hit. So nobody is to know
where he is, not you, not Rocco,
not even his brother Fredo. Sorry,
Al, I know how you feel about
Mike...but he still remembers Tessio.

In the movie "Casino," a scene early on showed the Mob's "skimmer" simply opening the door to the "counting room" of the Vegas casino with his own key. He simply walked over to a steel cabinet where stacks of money that had been counted were sitting, took a number of stacks, put them in his briefcase, then flew back to Kansas City. The counters ignored him.
The physical act of "skiming" in a casino has to be done before any money is recorded in the casino's books.

Ok, my question is: What's the big Freakin' DEAL? I mean, if these people generated the cash for themselves through a business, whats the big deal if they take some of the cash? The only complication I can see is that the IRS gets shorted a full taxable amount but hey, if there really is no way of recording the cash that comes in in one day, how is the IRS going to get wise to a skimming scheme? Technically, waitresses are "skimming" when they don't report the full amount of their cash tips at the end of the day. I recognize the casino biz. puts this on a tremendously aggrandized scale, but still...is it the IRS these guys are really afraid of in this scheme?

Actually they are not skimming. They are just cheating the IRS out of taxes. The owner may be the one skimming In other words if you and a friend went into a restaurant and the bill came to $100, and you gave the waitress $100, and then she went to the register and handed the owner the $100 and he rang up $80 and put $80 in the register and pocketed the other $20, that's skimming off the top. Beating the IRS by skimming off the top, but still reporting some of the income, not pocketing the whole $100, just a percentage of it.


And with the casino skims, keep in mind that while the owners themselves were skimming profits off the top, they are beating the IRS out of a percentage of taxes, and they are hurting the shareholders of the casino because the profits reported are not really as high as they should be because of the skim.

When they skim, they are indirectly hurting you and I.


Don Cardi

Yes. In general, income that isn't reported and taxed creates a shortfall that honest taxpayers like you and I have to make up. Money skimmed from casinos amounts to hundreds of millions each year. The taxes that aren't paid on those profits must be made up by us. Is it fair that some rich gangster gets richer while workin' stiffs like us pay more?
Don Roberto, you asked how the IRS can know if money's being skimmed:
The IRS has formed a pretty good picture of how much money casinos should be making, based on year-after-year reports and results. They know what the odds are that favor the house, and they keep track of the number of visitors to cities that have casino gambling. If you own a casino in Vegas that has X square feet of gambling space, and that has Y number of slots, tables, etc., then the IRS will have a reasonably accurate idea that you made Z dollars in profits. Of course there's variation in your profits. But if you weren't too greedy in your skim, you'd probably get away with it.
But that's a big "if." Greed by definition is an emotional, not a rational, process. Even if you knew that you could get away with, say, skimming 10 percent of your profits, you'd be sorely tempted to skim more. And that's where you'd get tripped up. Any law enforcement official who's being candid will tell you that crooks are tripped up by their own greed and stupidity, not by ace detective work.

Skimming also enabled the mafia to control casinos without any trace of ownership. The only connection was bags of cash being smuggled out.

From the Senate hearing...

QUESTADT

Is it true that you have a controlling interest in three of the major hotels in Las Vegas.


MICHAEL

No it is not true -- I own stock in some of the hotels there -- but very little.




and from Johnny Ola



JOHNNY OLA

He appreciates your concern, MICHAEL -- and your respect. The casino you're interested in -- the registered owners are Jacob Lawrence, Allen Barclay - they're both Beverly Hills Attorneys. The real owners are the old Lakeville Road group from Cleveland, and our friend in Miami. Meyer Klingman runs the store -- he runs a piece of it, too -- he does alright. But I've been instructed to tell you that if you move Klingman out, our friend in Miami will go along.

Skimming per se is a substitute for ownership and control:
Prior to 1958, regulation of gambling in Nevada fell under the Tax Commission. Oversight was lax: Nevada politicians didn't care if gangsters were building casinos--they welcomed them because all they cared about was that the gangsters were bringing money and tax revenues into the state. Most mobsters preferred to hide their ownership through front men (as in the GFII dialog you quoted) because they wanted to protect their assets from the Internal Revenue Service and the FBI.
After the televised Kefauver hearings (1950-51) and McClellan hearings (1957-58) exposed Mob ownership of casinos to a nationwide audience, the Nevada Legislature was forced to clean up gambling's image. In 1958, they took control out of the Tax Commission and put it into the new Gaming Commission. They gave the Gaming Commission two big teeth: the power to license "key employees" of hotels; and the "Black Book," a list of people who could be barred from even entering a casino, much less owning or operating one (that's the rule Nicky and Ace ran afoul of in the movie "Casino"). In effect, the "Black Book" drove Mob involvment underground. They were able to milk casinos by diffusing their ownership interests through investments (like the loan from the Teamsters Central States Pension Fund that was detailed in "Casino") or threats. The end-product wasn't ownership or even control--it was access to the "skim." While the skim was profitable, it proved to be a poor substitute for actual ownership and control, which they had prior to '58.

Ironically, the "Black Book" worked in some ways like Prohibition did for booze--it helped create violence. Casino gaming in Nevada was relatively peaceful when the Mob operated more or less out in the open because they all knew what the others were doing, reducing jealousy and suspicion that are so often the causes of murder and mayhem. They had an incentive to keep things peaceful, the better not to scare away business. Driven to secrecy, mobsters fought each other far more frequently. Vegas declined.
That set the stage for Howard Hughes and his buying spree. His imprimateur, in turn, made gaming respectable for big corporations and hotel chains. Today's mob involvement in legalized gaming is a fraction of what it once was.

I have always been unclear as to why Moe ASKS if Mike thinks he is skimming off the top.
Mike says to Moe 'your casino loses money, maybe we can do better.' to which Moe replies w/ a question 'you think i'm skimming off the top, Mike?....' Why does he ask Mike this question if skimming is such a common practice?

(Of course Mike's response of 'your unlucky' to the career gambler Moe is one of the funnier moments of the entire trilogy , although Moe did not find it too funny. )

I think the implication that Michael makes is that Moe is skimming the skim, so to speak. He's saying skim for us not from us. See CASINO or BUGSY again for a better understanding.

Ya thats a good point. The Corleones are a member of the five families who have a vested interest in Moe and the casinos. I forget to make that connection sometimes. Just like I forget that the Rosattos too are part of the 'network' and if I'm not mistaken are actually part of the Corleone 'family.'

I think that is fairly accurate. The "concern" over the skimming is that for every dollar Moe "skims", there is a dollar less for the Corleones to skim before the threshold of noticeability is reached by the IRS. Thus, the real concern is between seperate interests in the skim itself.