Thanks to Mental Floss for this:
In the early 1940s, Joseph “Socks” Lanza—nicknamed for the knockout power of his fists—cut a formidable figure at downtown Manhattan’s Fulton Fish Market, which he oversaw for crime boss Charles “Lucky” Luciano. But Luciano was several years into a 30-to-50-year prison sentence for running a prostitution ring, and Lanza himself had recently been indicted on charges of conspiracy and extortion.
So assistant district attorney Murray Gurfein and Lanza’s lawyer, Joseph Guerin, thought the bulldoggish gangster might be open to a more lawful project for a change.
Around midnight on March 26, 1942, the three men huddled on a bench uptown in Riverside Park to discuss a secret plan.
The Office of Naval Intelligence (ONI) needed a well-connected informant to feed them leads about any pro-Nazi or fascist sabotage along the waterfront—anything that could threaten the Navy’s ships or submarines off the East Coast. Though it was made clear to Lanza that the government wasn’t offering him immunity or any other compensation, he agreed to help.
About one week later, Lanza met with ONI Commander Charles Haffenden, who was heading the mission, in Haffenden’s off-the-record office suite at the Hotel Astor to put the plan in motion. “You let me know where you want the contacts made, or what you want, and I’ll carry on,” Lanza told him [PDF].
With that, Operation Underworld had officially begun.
Just months after entering World War II, the U.S. Navy was already feeling vulnerable. Enemy submarines were picking off vessels along the East Coast with alarming ease, and many believed that German saboteurs had set the massive fire that sank a French ocean liner, the SS Normandie, that was being converted into a warship in the Hudson River on February 9, 1942.
The ONI suspected that longshoremen must be ferrying supplies to Axis watercraft stationed in the Atlantic, and they were desperate to root them out.
Not only did the Mafia pretty much run the docks, but they were also Italian—and therefore more likely to know which Italians might sympathize with Benito Mussolini’s Fascist regime.
Lanza’s cooperation initially seemed promising. With the help of trusted truck owners and dock workers, Lanza kept the ONI informed about questionable detritus that fishing vessels brought to shore, from flares and airplane scraps to human body parts. He also set up some ONI operatives with their own trucking gigs.
But Lanza’s indictment hung like a black cloud over his credibility; some people withheld full cooperation, wary that he was conspiring with the district attorney’s office rather than supporting the war effort. So Lanza suggested the ONI bring in an even bigger gun.
“The word of Charlie [Luciano] may give me the right of way,” he said.
Gurfein phoned Moses Polakoff, Luciano’s lawyer from the case that landed him in prison, and asked to discuss his infamous former client. Polakoff wasn’t keen on having anything else to do with Luciano; they hadn’t been in contact since Luciano’s appeals had wrapped up in 1939, and it’s possible Polakoff was hoping to distance himself from the underworld. (In the 1950s, he actually won a libel suit against the New York World-Telegram Corporation for printing a newspaper article claiming he was connected to other “notorious hoodlums.”) Nevertheless, once Gurfein stressed the importance of the matter, Polakoff relented and went to hear the details in person. But he was still hesitant to speak for Luciano.
“I told him that I did not know Luciano well enough to broach this subject to him on my own, but I knew the person whom I had confidence in and whose patriotism, or affection for our country, irrespective of his reputation, was of the highest; and I would like to discuss the matter with this person first before I committed myself,” Polakoff later said.
That patriot was Meyer Lansky, fondly known as “the Mob’s Accountant.”
Lansky, Polakoff, and Gurfein met for breakfast at Longchamps in Midtown Manhattan, where Gurfein explained the deal and reiterated that Luciano would in no way be compensated for his involvement. Lansky said he thought Luciano would be interested in participating; Polakoff suggested that they transfer him to a closer prison to make it easier to communicate.
Government officials agreed. On May 12, 1942, Lucky Luciano was moved from Clinton Correctional Facility in Dannemora, New York, to Great Meadow Correctional Facility in Comstock, New York, about 225 miles north of Manhattan. Nobody seemed to have told Luciano why he was being relocated—when Lansky, Lanza, and Polakoff showed up in early June, Luciano greeted them with a friendly “What the hell are you fellows doing here?”
Lanza’s hunch soon proved spot-on: Practically the entire New York underworld bowed to the name of Charles Luciano. For roughly two years, the boss sat holed up in prison giving directives to his goon squad.
Johnny “Cockeye” Dunn and Jerry Sullivan manned the West Side waterfront, Joe Adonis and Frank Costello monitored the Brooklyn side, and Mike Lascari oversaw the New Jersey piers.
Union cards were procured for undercover ONI operatives, who were then hired by hotels, restaurants, bars, piers, truckers, factories, cabarets, and other key businesses. The mobsters even brought Sicilian expats to Haffenden so he could mine their memories for useful information about Sicily in order to plan an invasion.
Lansky helped connect Haffenden with contacts in every sphere, and Polakoff acted as a somewhat reluctant chaperone during prison visits to Luciano. (His request to stop attending the meetings was denied, so he usually passed the time reading a newspaper in the corner of the room.)
It didn’t take long for Luciano to feel like he had done enough for the war effort to justify a sentence reduction, and he petitioned for one in February 1943. The judge didn’t approve it, but he essentially told Luciano to keep up the good work and try again later. On May 8, 1945—V-E Day—Luciano filed another petition. This time, after an investigation, the parole board recommended that New York governor Thomas E. Dewey commute Luciano’s sentence on the condition that the gangster immediately be deported back to Italy. Dewey did, and Luciano sailed to his homeland on February 9, 1946.
Dewey’s decision to set such a notorious criminal free was harshly criticized, largely because it wasn’t clear if Luciano’s contributions to the war effort even made a difference. It was also suggested that Dewey had accepted a payoff in exchange for releasing him.
In 1954, Dewey commissioned state investigator William Herlands to launch an investigation into Operation Underworld. Herlands interviewed dozens of people involved in the program, many of whom claimed that Luciano’s help had been useful—especially all the intel provided by Sicilian immigrants, which officers used after they landed on the island in the summer of 1943.
“We gained an insight into the customs and [morals] of these people—particularly Sicilians—the political ideology and its mechanics on lower echelons, the manner in which the ports were operated, the chains of command together with their material culture, which enabled us to carry out the findings and purposes of our mission,” one Naval officer testified.
In his final report [PDF], Herlands concluded that “there can be no question about the value of this project” and that Luciano’s liberty had been well-earned. But that sentiment didn’t earn the Mafia any brownie points among the general population. The ONI asked that the report be kept under wraps, lest it “jeopardize operations of a similar nature in the future” or cause “embarrassment to the Navy, public relations-wise.”
For more than two decades, Operation Underworld remained a secret. Herlands’s report was finally released in the mid-1970s at the request of Rodney Campbell, who was writing a book on the subject. As for whether the ONI has launched any “operations of a similar nature” since then, your guess is as good as ours.
Another good article
The Luciano Project book
https://www.amazon.com/Luciano-Project-Secret-Wartime-Collaboration/dp/0070096740
Wiki
https://en.wikipedia.org/wiki/Operation_Underworld
One more good article
