Lucian K. Truscott IV, the writer who covered the gay riots at the Stonewall Inn for the Village Voice in 1969, provides the backstory of the historic event for the New York Times:
In fact, the Stonewall operation was the work of a Police Department deputy inspector, Seymour Pine, and officers from the morals unit, and they carried it out without the knowledge of the officers of the local police precinct, whom they suspected of taking payoffs from the Stonewall and other Mafia-run gay bars in the Village. Deputy Inspector Pine had two stated reasons for the raid: the Stonewall was selling liquor without a license, which it was, and it was being used by a Mafia blackmail ring that was setting up gay patrons who worked on Wall Street, which also seems likely. The owner of the Stonewall, Tony Lauria, was reputed to be a front man for Matty Ianniello (known as “Matty the Horse”), a capo in the Genovese crime family who oversaw a string of clubs in the city. New York’s gay-bar scene at the time was a corrupt system apparently designed to benefit mobster owners, who served watered-down drinks at inflated prices, often made with ill-gotten liquor from truck hijackings. It worked like this: citing disorderly behavior laws, the State Liquor Authority ruled that bars catering to openly homosexual patrons were not entitled to liquor licenses. Gay bars were thus made effectively illegal, which left them to the mob, which happily ran clubs without liquor licenses and paid the police to look the other way. Several more years would pass before the first clubs with openly gay owners would be licensed — places like the Ballroom on West Broadway and Reno Sweeney on West 13th Street — and the mob lost its stranglehold, an early legacy of Stonewall.
Indeed, the Mafia continued to dominate the gay bar and sex club venues for decades -- at least well into the 1980s -- after the Stonewall Riots, and this blog queries whether to this day the mobsters ever fully got out of the racket.
At the time of the raids the Stonewall Inn frontmen themselves were affronted by the police action on their watering hole as reported then by Howard Smith for the Village Voice:
As for the rough-talking owners and/or managers of the Stonewall, their riff ran something like this: we are just honest businessmen who are being harassed by the police because we cater to homosexuals, and because our names are Italian so they think we are part of something bigger. We haven't done anything wrong and have never been convicted in no court. We have rights, and the courts should decide and not let the police do things like what happened here. When we got back in the place, all the mirrors, jukeboxes, phones, toilets, and cigarette machines were smashed. Even the sinks were stuffed and running over. And we say the police did it. The courts will say that we are innocent.