The $230 million Internet fraud scheme - believed to be the largest ever prosecuted - produced a series of recent arrests of alleged members and associates of the Gambino organized crime family in New York and Florida.
Authorities say the case shows a new generation of mobsters has rewritten the way they do business since losing much of its grip on the gambling industry, construction unions and other traditional sources of income.
"I have never been involved ... with any business regarding the sex industry - EVER!" John "Junior" Gotti, the former acting boss of the Gambinos, wrote in a published letter after reading about the case in prison. Gotti is serving a 5-to-7 year federal term for racketeering, bribery, extortion conspiracy and illegal gambling.
Gotti's reaction aside, prosecutors allege Martino, as customary for a Gambino soldier, "kicked up" an $8 million cut to Salvatore LoCascio, a reputed Gambino captain.
LoCascio, 42, was arrested at his gated home in Naples, Fla. He and Martino, 42, of Harrison, in Westchester County, and two co-defendants, porn publisher Bruce Chew and advertising executive Norman Chanes, have denied any wrongdoing, saying the Web sites were legitimate.
The defendants could face up to 20 years in prison if convicted of money laundering, credit card fraud and other charges.
According to documents filed in federal court in New York, the Gambinos' foray into the lucrative world of Internet porn began in 1996 when the defendants opened an adult entertainment business based in Manhattan. Along with magazines and 900 numbers, they launched several Web sites using content from Chew's porn magazines, including High Society and Young Girl.
The sites offered "free tours" for anyone who presented credit card information as proof of age, promising in a message, "Your card will not be billed." But thousands of consumers in the United States, Europe and Asia were still charged recurring monthly rates of $90 before they realized they had been cheated, prosecutors said.
From there, Martino "used a plethora of corporations to funnel money to himself and his captain to avoid detection by law enforcement authorities," prosecutor Linda Lacewell said in court papers.
"The fraud was relatively simple, but the money laundering was complex and worthy of the most sophisticated white-collar criminal," the prosecutor added.
With his gift for consumer fraud, Martino became one of the Gambino's major assets, authorities said. His schemes allegedly earned LoCascio more than $40 million, including $8 million for the Internet porn scam.
The defendants' allegedly used the flow of cash on multimillion-dollar homes in the Hamptons, among other luxuries. LoCascio once ran up a $12,000 bill during a four-day stay at a Ritz-Carlton resort in Florida, authorities said.
In response to a flood of complaints by consumers and credit card companies, the Federal Trade Commission began an inquiry of the Web sites. A follow-up criminal investigation uncovered the money trail leading to the Gambino family, authorities said.
Prosecutors say the evidence includes a 1990 surveillance tape of "Junior's" father, the late Gambino boss John Gotti discussing Martino's future with the family. On it, the late "Dapper Don" tells his cohorts that he likes prospects like Martino who can "do more than killing."
Said Gotti: "Ten years from now, these young guys we straightened out, we're going to be really proud of them."
By Tom Hays