The Hells Angels' devilish business (Fortune, 1992)December 2, 2012: 9:00 AM ET
Editor's note: Every week, Fortune publishes a story from our magazine archives. On Tuesday, December 4, the fifth season finale of the FX drama Sons of Anarchy airs. The show follows a biker gang in Northern California. Back in 1992, Fortune's Andy Serwer looked at the business dealings of the Hells Angels, and the descriptions below read as if they're ripped from a Sons of Anarchy script.
While many Angels and other outlaw bikers are just rowdies, a disturbing number are involved in crime. Police say they make big money in the drug trade.
By Andrew E. Serwer
FORTUNE -- First you hear the pulsating thunder of three dozen unmuffled Harley-Davidsons snaking around the bend. Then you see them. An outlaw motorcycle gang, maybe Pagan's or even Hells Angels, overlords of the highway, pushing toward you in a double line. Expressionless, they are ornamented with shaggy hair and beards, mosaics of tattoos, and ripped denim covered with patches of skulls, swastikas, and cryptic arrays of letters and numbers. Perhaps you're scared, if only briefly.
If the bikers are Angels or one of the other major outlaw clubs -- the ones who live for biking and consider themselves apart from society -- you have reason to be nervous. Federal law enforcement agencies, including the FBI and the Bureau of Alcohol, Tobacco, and Firearms (ATF), say that outlaw bikers, with over 300 clubs, 5,000 members, and at least 10,000 regular hangers-on, are one of the nation's largest organized criminal networks, after the Mafia and Asian gangs. They are also a business.
The feds believe the Hells Angels and the other large outlaw gangs earn up to $1 billion a year worldwide from drug dealing, prostitution, gunrunning, theft, extortion, and murder. That's far less than La Cosa Nostra, which takes in an estimated $50 billion annually in the U.S., but the outlaw bike gangs are more vibrant and growing faster. The Angels, the biggest and most sophisticated, with about 1,000 members in more than 70 chapters worldwide, have a tight management structure, sophisticated communications systems, and / -- when they need it -- paramilitary discipline. Most other bikers treat them with deference and fear.
Says Anthony Tait, who worked undercover for the FBI as a member of the Hells Angels in the mid-1980s: ''I saw countless instances of narcotics use and sales, rape, felony battery, petty theft, grand theft, weapons violations of all kinds, and extortion. I also heard murders being planned and descriptions of murders already committed.'' Tait's testimony has helped convict more than 30 Hells Angels over the past several years, including patriarch Ralph ''Sonny'' Barger Jr., jailed for plotting to bomb a rival gang's clubhouse.
After being battered by a series of investigations that included Racketeer Influenced and Corrupt Organizations (RICO) prosecutions during the mid- and late 1980s, the Angels and three other major bike gangs -- the Outlaws, Bandidos, and Pagan's -- are building back up again. Barger, 54, the organizing genius behind the Angels' growth, is scheduled to be released from prison this month. Police say he has been advising the club from his cell in Phoenix and is likely to reinvigorate the leadership.
The Angels scoff at the picture law enforcement paints. They insist they are simply being persecuted because they live an outrageous lifestyle that defies society's petty rules -- and because police and federal agents are pumping them up as a threat to win bigger budgets. ''It's not a criminal organization,'' says Robert Maganza, president of the New York City chapter and one of the new team of officers elected since the 1980s' prosecutions. ''Basically it is a motorcycle club. A lot of people were in trouble at one time or another, but outside of the club. The government is trying to make a name for themselves by taking us down.'' Any member caught dealing drugs, he adds, will be thrown out of the chapter.
Outlaw biking is principally a lifestyle for members of such clubs -- as it is for many other riders with no interest in crime who love powerful bikes and emulate the defiant outlaw style and customs. When the gangs get rough, it's most often against other gangs. But for some Angels, the old lifestyle has yielded to the pursuit of wealth. Some live in expensive homes, drive luxury cars, and keep lawyers on retainer.
Police say that the chief moneymaker for many Angels is manufacturing and distributing drugs, particularly methamphetamine, or ''meth,'' a type of speed that comes in a white powder and is usually snorted. The drug, primarily used by lower-income whites, is made from domestically available chemicals. Bikers dominate the meth business, which government sources estimate is worth several hundred million dollars a year.
Outlaw bikers have also been arrested and convicted for trafficking millions of dollars of cocaine. The ATF estimates they control 50% of the illegal drug market in Oregon and 35% in North Carolina. They do business with Colombian cocaine dealers and have been linked to criminal activity with the Mafia. Major gangs avoid heroin and crack, however -- they don't like the idea of members getting hooked.
They love firepower, and the weapons and technologies they use would be a significant addition to almost any country's armory. Police have seized vast quantities of handguns, silencers, shotguns, M-16s, AK-47s, MAC-10s, and Uzis, as well as LAW rocket launchers, grenades, dynamite, bombs of all types, and C4 and other plastic explosives.
In their illegal business activities, the bikers use walkie-talkies, mobile phones, pagers, cash counters, scramblers, police scanners, fax machines, PCs, electronic eavesdropping devices, and video surveillance. Government agents recently recovered an ultrasophisticated, custom-made radio-wave detector the CIA would be proud to own.
Biker expert and author Yves Lavigne provides endless detail about this phantasmagorical world of violence and crime in Hells Angels: Three Can Keep a Secret If Two Are Dead. The book (Lyle Stuart, $9.95) is lurid, but law enforcement says it's accurate -- and the legally wise Angels have not sued Lavigne for libel, though they are pressing suit against him for trademark infringement over a drawing of their winged-death's-head logo on the book's dust jacket.
The Angels started out as legitimate antiheroes, organized in San Bernardino, California, in 1948 by World War II veterans. For years their greatest vice was local hell-raising. Marlon Brando brought them national attention when he played an angst-ridden gang leader in the 1953 film The Wild One. Four years later Sonny Barger formed the Oakland chapter, became the leader of the pack, and added a little more ''there'' to ''there'' by making it the mother chapter, or headquarters.
As the Angels grew, they started to cultivate their rebel image and to become more businesslike. By the mid-1960s, they were holding press conferences to put an upbeat spin on their activities. They incorporated and trademarked their logo and the name Hells Angels. But, police say, because of mounting legal bills from arrests for mayhem during their wilder excursions, the Angels turned increasingly to the drug dealing that eventually became their major business. They still try to maintain a positive image by organizing Toys for Tots benefit rides.
It didn't hurt that the club had an exceptional chief executive officer. Says Lavigne: ''Barger converted a sloppy, rudderless gang into a lean, mean organization.'' He kicked out dissenting members and, like any ambitious manager with a powerful ego, began to build his empire. Police say Barger absorbed other groups calling themselves Angels and expanded the drug network.
The club soon began to attract earnest police attention. Law enforcement prosecuted Barger and the Angels throughout the 1970s and into the early Eighties with little success. Though 16 Angels were convicted of firearms violations, a RICO attempt against 32 of them, including Barger, failed, and murder charges against him were dismissed. In the late 1980s, however, the feds nailed the club in two successful major investigations. A West Coast operation resulted in dozens of convictions and crippled the mother chapter, while the effort in the East brought even more sentences and shut down several chapters. The government also began a still pending forfeiture case against the powerful New York chapter's clubhouse, claiming it was used in drug trafficking.
What makes the Angels and the lesser outlaws so distinctive among criminal enterprises -- and adds to the frustration of law enforcement officials -- is that many Americans celebrate them and identify with them. Back in the 1950s, the American Motorcyclist Association, the voice of legitimate riders, pronounced that ''only 1%'' of all riders were troublemakers. The outlaws gleefully accepted the label, and many still call themselves one-percenters. (The actual percentage is much smaller -- counting the hangers-on police call associates, only about 0.2% of the estimated nine million motorcyclists in the U.S.) And plenty of people -- including many who have never even sat on a motorcycle -- like their style and applaud them for defying convention and authority.
The Angels' colorful ferocity and independence have won them the sometime friendship of many celebrities. Music stars Willie Nelson, Bo Diddley, and Jerry Garcia of the Grateful Dead have all hung out with them. Journalist Hunter S. Thompson rode with the Angels in the mid-1960s until he got on their nerves and they beat him up. Tough guy actor Mickey Rourke used to pal around with them until he unwisely gave them two Harley-Davidson Sportsters -- lightweight models considered ''girl bikes'' in the club. After that the relationship soured. For years the Angels reportedly had a contract out on the life of Mick Jagger, the result of a falling-out over a 1969 Rolling Stones concert where a Hells Angel hired as a bodyguard was accused (and later acquitted) of having murdered a spectator. Some evidence suggests the contract was terminated after the Stones paid the Angels $50,000.
The Angels have parlayed their notoriety into real clout by building a model decentralized organization. Its motto could be, Think globally, trash locally. Individual units have plenty of autonomy, but communications are excellent. Local chapters, governed by elected officers, take care of their own business. The U.S. is divided into East and West Coast sectors, with regional officers who coordinate activities and settle disputes. The international chapters, including those in Canada, Europe, South America, Australia, and New Zealand, are separate entities. Though Barger is the godfather, there is no official international president, and no chapter claims to speak on behalf of the regional, national, or international organization.
Recruiting is selective and rigorous. A would-be member must ride a Harley- Davidson -- no ''Jap-scrap'' is tolerated. He must be nominated by a member and serve as a ''prospect,'' or probationary member, for about a year and a half, guarding clubhouses and bikes, cleaning up, and cruising in the rear during ''runs,'' when clubs ride in groups to party (see diagram). The prospects don't necessarily join the Angels to become criminals -- they join to be known as the baddest bikers in the world. But almost invariably, say law officials, they have to commit some kind of crime to become full members. Some chapters have reportedly required or suggested murder of a rival gang member or drug dealer.
Angels and prospects must pay dues of about $100 per month, according to government operative Tait. With 1,000 members and 200 prospects, that comes to over $1.4 million per year for the organization, or about $20,000 per chapter. The money stays at the chapters except for what regional officers need to travel on club business -- plane fare, hotels, and car rentals. Some chapters have imposed drug-dealing taxes of 10% on members. The parent organization collects money mainly when the legal defense fund needs boosting -- in 1985 the bill for a special assessment came to $500 for each Angel worldwide.
Who belongs to the Hells Angels? Most members are from working-class backgrounds. Many are veterans. Some work in marginal blue-collar jobs; others run small businesses such as bike shops and tattoo parlors. Many are rootless, with no links to the community they happen to live in. They tend to think they are okay; it's the rest of society -- the ''citizens'' -- who are off track. They're aging; many are in their 40s and 50s. No African Americans are to be found -- ''none has ever tried to get in,'' says one Angel, sounding like a member of a lily-white golf club.
For many Angels the club is their family, their world. These are intensely bonded men with a strong code of mutual support. If one is attacked, the others must jump in. The club has written rules with strict penalties -- from suspension for those who don't pay dues to expulsion for members caught dealing substandard drugs, injecting narcotics, or using crack.
On occasion the penalties have been extreme. Quebec has had some of the world's most violent bike gangs; Canadian officials hold warring bikers responsible for more than 30 killings in the province from 1988 to 1991. One Angel alone, Yves ''Apache'' Trudeau, admitted to killing 43 people between 1970 and 1985. When the North chapter in Quebec got out of hand in 1985, the Angels decided to liquidate it by wiping out its members. Canadian Angels murdered six of them, dumped their bodies in the St. Lawrence River, and closed the chapter. Three Angels were convicted of the murders, and many others pleaded guilty to lesser charges.
The typical Hells Angel is obsessed with strength and toughness, with taking risks and flaunting his sexual virility. Women are not allowed to be members; as ''old ladies,'' they are highly subservient. But they flock to the club because of the glamour and to be part of a strong extended family. Some have ended up as prostitutes, abused, beaten, or even murdered. Still, they are usually remarkably loyal. The ATF and FBI say some have worked at telephone companies, major utilities, and even police departments, where they are suspected of providing intelligence for the club.
Almost all the chapters own clubhouses; some, such as those in New York City - and Oakland, are large buildings or complexes. Many have surveillance equipment and guards. But the drug money goes mainly to the members, not the institution. As a result, a fair number of them, particularly on the West Coast, are wealthy. ''Some of these guys own mini-estates on acres of land, Corvettes and Cadillacs with car phones, Porsches and fancy boats,'' says Tony Tait.
Few do as well as Angel Kenneth Jay Owen, meth cooker extraordinaire. In 1987 federal agents who arrested him found a cash-counting machine eating through a stack of $100 bills in his Oakland house. All told, Owen had almost $1 million in cash. Agents discovered a recipe for cooking meth at his lab labeled ''RICO Legal Defense Fund.'' Booted up on his PC was Andrew Tobias's Managing Your Money. The FBI says Owen had recently bought base chemicals for making $30 million of meth. He was sentenced to 41 years, ordered to forfeit $2.4 million of property, and slapped with a $2.1 million fine.
Several other major clubs have sprung up to challenge the Angels. As the mob has done, they've carved the U.S. into monopolistic territories, sometimes in truce and sometimes at war. The Angels control California, Alaska, pieces of the Northeast, Midwest, and Southeast. The Outlaws, the Avis of the biker world, own Florida and most of the Midwest. The Bandidos hold sway in Texas and parts of the Deep South, with scattered chapters in the Pacific Northwest. The Pagan's are primarily in the Middle Atlantic region. The Sons of Silence rule the Rockies and the Plains. The feds have identified other, smaller 1% gangs on the rise like the 100-member Dirty Dozen in Arizona. Police there believe this gang may soon become the subject of a friendly Angel takeover.
Like so many businesses, the Angels are getting some of their best growth from abroad. They have chapters in 14 other countries, from Canada to Brazil to New Zealand. Europe, a particularly hot market, has been developing its own biker subculture. Over the past two decades, scores of small, Harley-riding gangs have formed across the Continent. Eurobikers try to give their clubs intimidating-sounding American names, though some have trouble with the vernacular. The Power Dead howl across the Alps. In Norway, Shabby Ones and Rabies scream down the cold, lonely roads. Denmark is graced with Mental Midgets and Bullshit.
Interpol now counts 26 Hells Angels chapters in Europe, including 13 in Britain, and 362 members. That doesn't include four prospect chapters with over 40 members. Right now the Angels are building in Scandinavia. In Denmark, where they have two chapters and a prospect chapter, police report they run drugs from Holland, extort money from bars, intimidate witnesses, and monitor the police right back. Police say these European brothers stay in close contact with U.S. Angels.
Other European police reports show a pattern of criminal activity. In Zurich the law is searching for Angel Reinhard Lutz, wanted for trafficking 100 kilos of cocaine, worth $5 million. Police believe Lutz fled to Brazil and has holed up in an apartment owned by Angels in Rio. Swiss authorities say Angels are also involved in prostitution and extortion. Zurich Angels have been convicted of murder, rape, and procuring explosives. In Holland, police are convinced the gang smuggles drugs, and last year linked a murder to it. Says Tait, who visited most of the European chapters: ''The European Angels are just like the American ones, only ten years behind.''
Though authorities still worry about the bikers, they have lately turned their attention to other problems such as crack. Result: The bikers have been able to lick their wounds and build membership. The prosecutions of the Eighties also toughened the gangs and left them more secretive. ''Today you could never just walk into the Hells Angels,'' says Tait. ''You have to be known. The Angels will check you out thoroughly. They will get hold of your rap sheet and do a credit check'' to see if you're who you claim to be -- easy enough for an organization with their know-how. The gangs are also more mobile. ''If you had a business and wanted to build a factory but there were too many regulations, you would move,'' says Maryland state police sergeant Terry Katz. For the Pagan's, that means finding counties or states where police are not yet versed in their ways.
''No question about it,'' says biker expert Lou Barbaria of the New York state police, ''the gangs are growing again and becoming more sophisticated.'' Members of the New York Angels chapter admit the clubhouse forfeiture case has left them financially pressed but remain adamant that they are just a bike club. Many important members are now being released from jail. Even if they lose their case, president Maganza says, ''we're not going to disappear off the face of the earth. We'll be here. We're growing.'' Says another member: ''We're stronger than ever.''