Vol. 4, No. 3, March 2008
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Vegas and the Mob
An honest look at the early undesirables of local lore
Before legalized gambling became accepted in most of the country (let’s use 1950 for a rough cut-off date), anyone who ran a gambling business (or racket, as they would have said back then) was, ipso facto, a criminal. And because gambling is organized, rather than disorganized crime (it’s the difference between running the lottery and holding up a convenience store), virtually everyone involved with gambling was involved with organized crime.
Back in the 1850s, illegal gambling operators in the big cities banded together in syndicates for two reasons: to spread the risk of running businesses of chance and to combine their “protection,” or payoffs to police and elected officials. Those who joined the syndicate contributed to the “war chest” and found that the police never raided them; those who didn’t found themselves on the wrong end of “reform” efforts.
These operators weren’t above strong-arming the competition or customers who were peevish about losing their money, and they helped to corrupt police, courts and city halls across the country. But in the 1920s, a new breed of racketeers took over: bootleggers. A group of young, ambitious and ruthless men seized on Prohibition as their ticket to wealth—or the cemetery.
After Prohibition ended in 1933, some of these men stayed in the liquor business and “went legit,” while others drifted into other forms of organized crime—prostitution, loansharking, narcotics and union racketeering. Many, though, moved into gambling, which was illegal, but, like rum-running, viewed as a victimless crime. They ran illegal “numbers” lotteries, operated clandestine casinos, and took horseracing and sports bets—or provided financing and protection to those who did.
In the late 1940s and 1950s, these men were middle-aged and looking for respectability. Nevada, at the same time, was looking for economic growth. Since wide-scale commercial and economic development was not in the cards, tourism—particularly gambling tourism—became the state’s economic driver by default.
Nevada regulators, with increasing power after 1955, screened out “undesirables,” but early on state officials made an uneasy truce with casino men who had checkered pasts. Being accused—or even convicted—of a gambling-related offense wouldn’t disqualify an applicant, though being publicly linked to more serious crimes might.
Follow the Money
But in the early years regulators didn’t look too closely at the money trail. Casinos cost anywhere between $2 million and $10 million to build by the mid-1950s, and mainstream lenders demurred on making loans to casino builders. So prospective owners went around the country selling “points” (shares) in their projects to just about anyone who was willing to invest. This included an inordinate number of brothers-in-law mixed in with former “associates,” many of whom were still involved in the rackets.Some of these investors (the brothers-in-law) were official, those with questionable rap sheets were off the books. The only way that these silent partners could recoup their investment was through skimming, or systematic, management-sanctioned embezzlement. If there were five craps tables open on Friday night, the take for four of them might be brought to the back and counted; the casino declared this as income and paid taxes on it. But the contents of the fifth drop box would be handed off to a bag man, who set out for New York, Chicago or Miami with a full briefcase and returned with an empty one.
This is how the most infamous organized crime figures, like Frank Costello and Meyer Lansky, were linked with Las Vegas, even though they never officially owned a brick on the Strip. In 1955 a newspaper investigation uncovered Lanksy’s sub rosa investment in the Thunderbird. More fantastically, after a botched assassination attempt in 1957 Costello was rushed to the hospital, where a detective rifling through his discarded clothes found a slip of paper with the newly-opened Tropicana’s exact gaming revenue noted on it, along with an itemized list of where the skim was headed.
Regulators forced a management change at the Tropicana.
Even earlier, links between casino owners and unsavory type had made headlines. Up in Reno,
William Graham and James McKay parlayed their bootlegging and illegal gambling interests into a legitimate casino empire after 1931. The pair were chummy with known gangsters like Baby Face Nelson, and when they went to federal prison in 1938 for mail fraud, few of their competitors shed any tears.
Down south, Antonio “Tony Cornero” Stralla tried his hand at several projects in Las Vegas, opening the Meadows Club on Boulder Highway (today, it’s the site of a Lowe’s) in 1931 and running a casino called the S.S. Rex on the first floor of the Apache Hotel (today, it’s Binion’s casino). While this seems a curious name for a Nevada gambling hall, it actually made sense. Cornero had made a mint running illegal gambling boats off the coast of Los Angeles, and the best-known was called the S.S. Rex.
Cornero later had a crazy idea: build a massive 800-room casino hotel on the Strip. Most people said he was crazy, and the Securities and Exchange Commission didn’t think much of his printing stock certificates in his basement. After he died shooting craps at the Desert Inn, the managers of that casino took over the project. The Stardust opened in 1958, and had as interesting a career as any Strip resort.
The most infamous—and misunderstood—connected guy to set up shop on the Strip is Benjamin “Bugsy” Siegel. Siegel, a former member of New York’s notorious Murder, Inc. hit squad, moved to Los Angeles in the late 1930s to oversee the local branch of the race wire, a national illegal gambling information network. Siegel came up to Las Vegas on race wire business and bought shares in a few gambling halls, including the El Cortez.
Siegel, who has been described as a “handsome hoodlum,” wanted desperately to make a name for himself as more than a low-life shoulder hitter. In 1945, Siegel happened upon Billy Wilkerson, the urbane publisher of the Hollywood Reporter who’d started work on a casino he called the Club Flamingo but had run out of money. Polished and well-traveled, the cultured, suave Wilkerson was everything that Siegel was not. Siegel led a group of investors who agreed to bail Wilkerson out.
Originally, Wilkerson remained in charge of the project, and Siegel became his pupil, learning everything he could from the Hollywood magnate. But over time, Siegel came to resent Wilkerson’s almost innate superiority. In addition, he got himself into trouble by over-selling shares in what was now called the Hotel Flamingo to some very dangerous people. In no uncertain terms, he demanded that Wilkerson give up his interest in the Flamingo or face the consequences. Fully aware that he was dealing with an admitted serial murderer, Wilkerson did the sensible thing—he left town, flying to Paris and checking into a hotel there under a pseudonym.
Thus, when the Flamingo opened on December 26, 1947, Ben Siegel (no one ever called him “Bugsy” to his face) was in charge. But it was a disaster—he’d pushed to get the casino open before the hotel was finished, and the gamblers left with their winnings rather than staying and playing. The casino closed, and re-opened in March with its hotel. By May the place was showing a profit.
On June 20, 1947, Siegel was gunned down in the Beverly Hills home of his mistress Virginia Hill.
To this day, the murder remains unsolved, and some believe that the goings-on at the Flamingo led to his demise. Suffice it to say that the Flamingo was only one of several dubious operations Siegel was involved with, and the short-tempered racketeer had made many, many enemies.
Despite his brief presence in Las Vegas (he hated the town, and preferred to call the shots from Los Angeles when possible), Siegel has been acclaimed as “the father of Las Vegas.” Why? Mostly good posthumous PR (having Warren Beatty play you in the biopic helps) and perverse wishful thinking: if someone as dangerous as Siegel was involved with Nevada casinos, they must be exciting and glamorous. In fact Siegel had no vision for the future of Las Vegas, and rather whimsical ideas of how to run a casino.
Just the Facts
The real story of “Vegas and the mob” is more about white collar crime than dramatic mob hits. For years, casino managers oversaw the siphoning of casino revenues—anywhere from 5 percent to 15 percent of the total, according to estimates—into the hands of organized crime associates. Plain and simple, it was a case of tax evasion and fraud. Of course, questions could be asked about what that money did when it was in the hands of the recipients: did it fund loansharking, prostitution and narcotics rackets? But the organized crime on the Strip was, at its zenith, more about the organization than the crime.In the 1960s, the landscape started to shift. That cohort of ambitious former bootleggers was now nearing retirement age. They had sent their children to college rather than schooling them in the rackets, so the next generation was more likely to have a business degree than a certificate from the school of hard knocks. And casinos were getting more expensive to own and operate: the days of what historian Hal Rothman called “shoebox capital” building Strip hotels were ending. It cost $50 million to build the International (now the Hilton) in 1969, and only institutional lenders could get their hands on that kind of money. So corporate owners moved in, while the aging original wise guys stepped aside.
The mob scene in the 1970s and early 1980s—dramatically brought to life in Nicholas Pileggi’s book (and Martin Scorcese’s movie) Casino—was so much more violent than the earlier years, precisely because time was passing the days of the skim by. Priced out of the newer resorts, organized crime associates had to cope with stricter enforcement by Nevada gaming authorities, local police, and federal law enforcement. The skimming scandals at the Stardust and the Aladdin were the last gasps of a dying way of doing business.
That’s not to say that organized crime left Las Vegas. Since professional police forces were first established in the mid-19th century, organized crime has been a fact of life in most large cities throughout the world. But, as the 1999 National Gaming Impact Study Commission found, it did abandon direct involvement in the casino industry.
The career of the notorious Anthony Spilotro is instructive. The increasingly violent Spilotro moved from overseeing things in Las Vegas for his Chicago associates (at one point from the vantage point of the Circus Circus gift shop) to running a lucrative burglary ring. Las Vegas organized crime no longer meant skimming casino profits; it now included the usual suspects—prostitution, loan-sharking and protection rackets—that could be found in any city.
So what is the legacy of the mob in Las Vegas? That is a difficult question to answer, because there never was a single “mob” whose director made an executive decision to invest in the gaming industry. Rather, it was a loosely-defined group of men with varying degrees of involvement in illegal enterprises who, for the most part, came to Las Vegas looking for a better life. There was no master plan, no national conspiracy. They were just trying to make a buck the easiest way they could.
Most important, today’s audiences should never fall into the mistake of glamorizing organized criminals, viewing them as romantic figures. These were, after all, lawbreakers who used extortion and violence to line their pockets at the expense of working men and women, murdering rivals and even bystanders with impunity. It was a brutal, ugly business, and not all of its victims are at the bottom of Lake Mead.
So while it may be appropriate to remember the “boys,” we should take a long, hard look at their actual lives—not the Hollywood version—before pledging to commemorate them.
