Part 2

Kefauver Committee
Interim Report #3
May 1, 1951

U.S. Senate Special Committee
to Investigate Organized Crime
in Interstate Commerce

Louisiana presents a complete case history on how national gambling and racketeering elements align themselves with local operators in a metropolitan area, Mayor DeLesseps S. Morrison told the committee at its first open hearing in New Orleans. Information offered by Mayor Morrison, businessmen, ministers, other citizens, and local law-enforcement officials, supplemented by the reluctant testimony of a parade of gamblers, wire-service and slot-machine operators, and narcotics peddlers, traced for the committee the nature, extent, and history of this alliance.

The activities of organized crime covered by the committee in this area were mainly four: Slot-machine operation, the conduct of gambling casinos of varying degrees of luxury, the extensive wire services which supported the heel bookmaking operations throughout the area, and the narcotics traffic.

The interstate nature of all four activities was made perfectly clear: They made extensive use of equipment or supplies brought in from the outside on common carriers. They depended extensively on interstate facilities of communication. They were operated wholly or in part by men from other sections of the country. Illegal in themselves, these activities were carried on by men with criminal records who had close and frequent associations with gangsters all over the country. And, finally, their operations depended in large measure on the negligence, the active support, or the participation of some local law-enforcement officials, who in large measure could nullify the efforts of diligent officials and public-spirited citizens in their own or nearby jurisdictions.

I. The slot-machine story

Huey Long's welcome to Costello and his slot machines when they were banished from New York gave the impetus to the present alignment of interstate and local operators in slot machines, gambling houses, bookmaking, and related activities, Mayor Morrison testified. From 1936 to 1946, the companies of the transplanted New Yorker, Phil Kastel, and his New York partners, Frank Costello, Jake Lansky, in cooperation with local gentry such as the narcotics vendor, Carlos Marcello, operated slot machines illegally and openly throughout New Orleans. They created a monopolistic arrangement whereby only the machines of their syndicate were permitted. They built up a business with a profit in the millions. Costello and Kastel were tried in 1939 on charges of trying to evade payment of $500,000 in Federal income taxes on 1936-37 income from the slot machines approaching $3,000,000, but were acquitted.

Just before his election in 1946, Morrison said, the Costello-Kastel syndicate withdrew their slot-machine and other operations into the adjoining parishes. They continued to use the city as a storage and distribution point until, in 1947, the city police raided the warehouses of their company, the Louisiana Mint Co., and confiscated 1,000 machines. Three hundred and ninety were destroyed before Costello and Kastel filed suit for damages and enjoined the city from destroying the remaining 600. The courts sustained the city's contention that, although the Costello-Kastel machines dispensed mints, they were still slot machines and illegal, and therefore could be destroyed.

This action ended the activity of the Louisiana Mint Co. in New Orleans, hut not the presence of coin machines. Certain types of pin-ball machines known locally as "one-ball bandits" operate legally in the State and are licensed. The city issues about 2,000 of these licenses annually at $50 per machine. But Morrison was of the opinion that these, while they showed no automatic payoff when they were inspected for licensing, could easily be changed thereafter or could register free games for which payment would be made over the counter in the location where the machines were placed. Detection by watching every machine was obviously, difficult.

The city was seeking to determine whether it could refuse to license machines of companies operating legal pinball devices in New Orleans, but illegal slot machines elsewhere. He listed for the committee some eight companies, holding licenses for about 75 machines in the city, among whose owners were Phil Kastel; Costello's brother-in-law, Theodore Geigerman; and Carlos Marcello, or known personal or business associates of Marcello, or owners of record known to be acting as a front for him.

From the president of the trade association of coin-machine operators, John Bosch, the committee learned that the licensed pinball machines do not represent the entire number operated in the city. Bosch estimated that the members of his association number about 45 and operate about 1,200 machines - all presumably licensed. Another 60 or 70 operators, he said, were not in his association. In all, he thought, there were at least 3,000 machines in the city, 1,000 above the number Morrison knew to be licensed.

The rules of his association and Mr. Bosch's explanation hinted that all these machines were not operating legally. One rule allowed the collection of $3 per machine from every operator for various miscellaneous expenses. Another rule stated that unless a machine was tagged with the association membership card and the name of the company, it would not be represented by the association when it was picked up. Pressed for an explanation, Bosch could not avoid the inference that "picked up'' meant picked up for paying off. Bosch admitted that the association had lawyers on retainer; one of them getting over $300 a month was also the city attorney whose duty it was to prosecute pin-ball machine violations. Bosch would not estimate what the $3 per machine brought the association annually; he rejected the committee estimate of $100,000 as far out of line. Nor could he explain the uses of the fund or what was included in miscellaneous expenses.

Outside of New Orleans, slot machines operated openly in public places in flagrant violation of the law. The sheriff of Jefferson Parish would not dispute the committee counsel's estimate of 5,000 machines in his jurisdiction. Two ministers from Harrison County in Mississippi said there was one slot machine to every 25 inhabitants - operating in restaurants, barber shops, filling stations, and various other business or gambling places. The sheriff and town marshal of New Iberia, and the sheriff of St. Bernard Parish gave similar testimony concerning the wide-open operation of slot machines in their parishes.

Questioned about where he bought his machines, Kastel refused to confirm that they came from Mills Bros. in Chicago, nor would he explain transfers of vast sums of money, S75,000 in one case and $50,000 in another, from them to him, or from him to them, as slot-machine transactions. But the Jefferson Parish sheriff knew the machines operating in his area came from that company. Warren Moity, a young man who went into the slot-machine business in New Iberia to get first-hand evidence, said the rebuilt machines he bought were originally from the same company.

Until recently a member of the executive committee of the pin-ball association was Angelo Gemelli, a full-time New Orleans police officer assigned to the duty of "checking" pin ball operations and arresting operators who paid off. Obviously, Gemelli was in a most favorable position to "persuade" nonmembers to join and pay the heavy dues assessed. Gemelli received as "expenses" 10 percent of all amounts he collected for the association for "campaigns."

Nor was Costello the only out-of-State man involved. John Bertucci, another witness, testified he owned an interest in a pinball and phonograph machine company which was a Mississippi corporation and the company he operated in New Orleans was a branch of it. Moity, when he let it be known that he wished to enter the slot-machine business, was contacted by a man from Florida, who became his partner and brought his machines in from that State.

II. The gambling casinos

The parishes of Jefferson and St. Bernard, Mayor Morrison told the committee, have one of America's largest concentrations of gambling houses, wide open in violation of the law. Typical of the swank casinos was the Club Forest, whose activities early in 1951 were described to the committee. The club had a restaurant, bar, and grill. It had a casino, open to the public for day and night operation.

The daytime operation included the "big game" - the dice game - for which there were three tables, another small dice table, two roulette wheels, two blackjack games, a football pool and a race-horse book. The club paid $378 a week for its wire service.

The night operation included a keno game, six roulette wheels, small dice games, four tables of blackjack, from two to five tables for the big dice game. Customers of the gambling casino could have drinks and cigarettes on the house. If they ran out of money they could cash checks or get loans on their jewelry. The casino had approximately 48 slot machines - 5-, 10-, 25-, 50-cent and $1 machines, and also a horse-race machine.

The club reported its assets at the end of the fiscal year November 30, 1949, as $718,904, and its gross receipts for the casino and other games including the slot machines as $2,008,796. This information was elicited from underlings and the records they brought in. The club owners, the three Mills brothers, Frank, Arthur, and Henry, and their partners, Edwin Litolf, Alfred B. Scherling, Gonzales Azcona, Lawrence Luke, and Vic Gallo, remained in hiding throughout the investigation.

Equally elaborate and boasting in addition expensive night-club entertainment was the Beverly Club establishment opened in the same parish late in 1945, just in time to provide Kastel and Costello with a refuge for their New Orleans enterprises. His original partners, Kastel told the committee, were Costello, A. A. Rickefors, from whom he first rented and later bought the grounds and building, Carlos Marcello, and Lansky. When the latter sold his 20 percent interest he received $100,000 for it. Costello, admitted to a 20-percent interest in the club, also received first $1,000 a month and then $1,500 a month salary to act as a good-will agent and talent scout for its night-club shows.

The Jefferson Parish town seat of Gretna with its population of 14,000 had at least 6 large gambling, clubs with horse parlors, the town marshal told the committee. The sheriff of Iberia Parish knew of at least four, and the sheriff of St. Bernard recognized the names of half a dozen others. The committee heard the names of many others, small and large, operated in the unincorporated parts of the parishes. In Harrison County, Mississippi, the committee was told, gambling rooms were marked by signs overhead indicating "No Minors Allowed." Such signs were commonly seen in connection with public restaurants and grills.

III. The wire services

With an important race track in the area, with handbooks running openly throughout the parishes, and with horse rooms figuring substantially in the activities of the luxurious gambling casinos, New Orleans was an important focal point for the wire services of the Continental Press Service. One of its lines ended in a building just outside the Fair Grounds race track and operated only during the racing season. Obviously this was Continental's means of getting information from the track for dissemination throughout the Nation. Other Continental lines went to the Gretna and New Orleans offices of the Daily Sports News which published racing results and forms.

During the struggle of the Capone group in Chicago to take over Continental, the New Orleans wire installation became the object of a typical, successful, and mysterious attempt at muscling in. The attempt involved setting up a branch of Trans-American, the Capone news service, as a rival to the local branch of Continental by men with criminal records and connections with the Capone gang. Typically, the rival service lured employees from the local service and created an eventual merger of the two with the Chicago group or its local representatives holding the lions share of the participation. Everybody involved in the struggle - the owners of the services and their employees, or law-enforcement agents with an intimate knowledge of the wire services in other respects - refused to testify at all or gave meager information with extreme reluctance. The picture had to be pieced together from meager admissions, court documents, Western Union records, and committee investigative reports.

John J. Fogarty, owner with his son of the Daily Sports News, had been publishing racing results and forms in New Orleans for nearly 30 years. He received his information over a direct wire from Continental Press from Chicago. He insisted he was an independent owner, not an agent of Continental. But he had a characteristic agreement, made personally and orally in Chicago, with the manager, Tom Kelly, requiring him to pay $4,000 a week when he could, as much as possible in weeks when that sum was too large.

Shortly after Mayor Morrison came to office, he found that another wire service outlet, the Southern News Publishing Co., had been set up a short distance from an office of the Daily Sports News. On two successive days, the police raided both on a charge of conspiracy; while they were not violating the handbook laws of the State in their own parish, they were the instruments of violation in other parishes. The raids and the subsequent proceedings revealed that Southern News had been set up by a native son named Joseph Poretto, whose criminal record caused the chairman to brand him one of the worst characters to appear before this committee. He had connections with the Capone gang established in Cicero, and connections with their Trans-American Service, for which he had evidently tried and failed to set up a bootleg wire service in Houston. Among Poretto's associates in Southern News Publishing Co. were Ralph Emory, son of an old associate of Al Capone, several former employees of Fogarty, and two brothers of Carlos Marcello.

Within a short time, a new service, ostensibly the Daily Sports News, opened in Gretna. Neither Fogarty nor Poretto would discuss what happened in the interval, nor would they admit any association. But the idea of a merger was supported by the Western Union records. The wire service Western Union rented to Southern News in New Orleans was transferred to the Daily Sports News address in Gretna, and shortly thereafter discontinued while the service to the Daily Sports News went on uninterrupted. The committee also had information that, before the raids, Fogarty and his son owned the Daily Sports News outright, and that when business was resumed afterward, the Marcellos figured largely in the ownership.

The key position the Daily Sports News held in the bookmaking business in the area was also revealed by the records of the Western Union. From the same address at which it received the news from Continental, the Daily News paid monthly rentals on 66 so-called unequipped wires, with terminal points in as many different locations in Louisiana, Mississippi, and Alabama. These were electrified, dormant wires, without transmission or receiving equipment, installed for service at some time, then when service was discontinued, presumably not removed to save the cost of a possible reinstallation.

Admittedly equipment could be attached without the knowledge of the Western Union. An agent of the company verified the fact that the rental on one such wire, to Pass Christian, Miss., was $186 a month. Some 20 other wires with terminal points in New Orleans were paid for at prices varying from $10 to $33 a month. Mayor Morrison testified that it was over some of these wires that his police department found the only direct service to bookmakers in New Orleans after the two raids.

For the rest, bookmakers in New Orleans as in the outlying parishes relied on getting their information and placing their bets through telephones which connected with the horse rooms and bookie parlors serviced by these wires. 'Every telephone in New Orleans, Mayor Morrison stated in emphasizing the need for over-all metropolitan enforcement of bookmaking laws, is a possible source of handbook violations so long as wide-open gambling goes on in the outskirts of the city.

IV. The narcotics traffic

From Thomas McGuire, agent in charge of the Bureau of Narcotics in New Orleans, the committee learned that the drug traffic here ranked in importance with that of other metropolitan port areas. The bulk of heroin, major item in the traffic, he said came from New York by common carrier, plane, ship, or train. Its price at the time was up to $300 an ounce, higher than it had been up to the previous month. Marijuana, which came into the area in greater than normal quantities, came from the Mexican border via Galveston and Laredo, Tex. His unit, he said, was investigating the participation of Mafia members in the narcotics traffic. Their tightly knit organization made them difficult to deal with. Any place which operates wide open, McGuire said, tolerating prostitution, gambling, and so forth, is the perfect field for narcotic peddlers who are frequently involved in other types of rackets. Of his own knowledge, McGuire knew that peddlers came in for supplies from other States; he had recently arrested a former resident in from California in search of supplies in the area in which he had previously worked and with which consequently he felt familiar. Other peddlers, friends of a recent deportee named Sam Carollo, move in and out from Kansas City. The sheriff of Jefferson Parish minimized the dope traffic in his own jurisdiction. He knew and took pride in the part one of his own men had played in a recent haul of narcotics supplies worth $21,000. But he was sure that Carlos Marcello, who had served time for narcotics peddling and was a resident of Jefferson Parish, was never caught in his jurisdiction. The committee had information that Carlos and his brother Anthony owned a boat used in running narcotics into the port of New Orleans. Both, when questioned, refused to answer questions as to their narcotics activities, as well as practically every other question except their local address, on the grounds of self-incrimination.

V. The importance of Carlos Marcello in New Orleans rackets

In every line of inquiry, the committee found the trail of Carlos Marcello. Kastel stated that Marcello was an original partner in the Beverly Club; from another witness, it was learned that he was its registered agent. Several witnesses testified that he had an interest in another luxurious club, the Old Southport, in which his associates were two of his seven brothers and a brother-in-law. He was rumored to have bought this club outright for $160,000. Marcello's brothers were found in the raid on the Southern News Service, and figured in the partnership of the Daily Sports News. Marcello owned interests in horse parlors and bookie joints such as the Bank Club and the Billionaire Club. He had an interest in Kastel and Costello's Louisiana Mint Co., in the L. & B. Amusement Co. with his brother-in-law, and in half a dozen other slot-machine companies operating in and around New Orleans. In addition, according to the sheriff of Jefferson Parish; Marcello advanced money to people who were building business establishments of one kind or another, and put his slot machines in these locations. Whether or not he and his brother Anthony had boats running narcotics into New Orleans, it is a fact that Marcello had served time for dope peddling among other things and had asked and been refused a. Presidential pardon. Toll calls connected Marcello with Harry Brooks, close associate of Mickey Cohen, Joe Civello, narcotics violator, and Sam Yarras, brother of Chicago hoodlum Dave Yarras, a prominent figure in the fight between the "mob" wire service and Continental Press. Also in touch with Marcello was Charles Gordon, a main cog in a national football betting syndicate. Carlos talked over the phone to one Vincent Vallone just before the latter was murdered in Houston, Tex., in a Mafia-type killing. Among the many bars, restaurants, and inns in which Carlos Marcello had a financial interest was the Willswood Tavern, declared to be a hang-out for Mafia members. His legitimate business interests include all kinds of food concerns, particularly sea foods and frozen foods.

Marcello was born in Tunis, Africa, of Sicilian parents and came here in October 1910. He has never become a citizen. In view of this fact and in view of his record which the chairman stated made him one of the leading criminals in the United States today, the question was raised as to why he had not been deported.

VI. Typical bookkeeping of gambling enterprises

Proof of long suspected juggling of figures and keeping of books which did not accurately reflect the facts was found in the New Orleans testimony of Vernile Cavalier, a former dice man and cashier at the elaborate Club Forest. The books and records of the Club Forest, as produced by the public accountants who maintained them, were a model of bookkeeping practice, but Cavalier's story raised serious doubts as to the true situation. Cavalier said that on occasions when Deputy Sheriff Cassagne came into the club, one of the managers would instruct him to withdraw sums of over $1,000 for "ice," or protection. It was Cavalier's impression that the sum so drained off was merely taken off one of the dice tables as a loss, just as if one of the players had won the sum with a lucky streak. Committee investigators were unable to find any account or record of expense in the Club Forest's books which might relate to the "ice."

Then too, there was found the extremely questionable practice of charging off, as an expense or loss against the club's gross, the astronomical sum of $372,000 in 1 year with the explanation that this represented moneys lent to players and customers which was not repaid, or for bad debts resulting from "rubber" checks tendered by customers. Even granting the incredulous theory that many would be so bold as to hand these case hardened operators bad checks, the fact that much of the money so advanced was immediately lost by the customers at the tables without leaving the casino would render this theory of loss to the club somewhat paradoxical. Notwithstanding, equally amazing sums have been charged off through the years without apparent action by the tax authorities to question or disallow.

Having found such evidence of withdrawals of funds for the purchase of official tolerance going unrecorded, the question is immediately raised and the issue apparent - how much more money is drained off the top by those in control of the various gambling operations which never gets into the books?

VII. The frustrated attempts of citizens' groups to get court and official action

Outside of the city of New Orleans, citizens' attempts to bring about local official action met with frustration. Rev. Dana Dawson, a pastor of a Metairie church, organized a citizens' league in Jefferson Parish to close up the gambling casinos. They brought a. padlock suit against the Club Beverly and the Club Forest. Dawson testified he was approached first by Pete Perez, the dice foreman at the Club Forest, and was promised funds for the new Sunday-school building if the suit were dropped. Then it was suggested that Dawson might be satisfied if gambling was closed up in the Metairie district of the parish.

Sheriff Clancy took part in some of these conversations with Perez and Dawson. He told the pastor what a nuisance it was for him as sheriff to have to get jobs in these clubs for his friends. He boasted that he had placed about 2,000 people there, and stressed the economic value of the clubs to the district because of the jobs they provided. Perez and Clancy continued to make contributions to the church from the owners of several gambling casinos.

But the padlock suits were pressed. Both the Reverend Dawson and the attorney for the group, Mr. James McCain, recounted that they were in the courts for 4 years. The suits were fought on the ground that the act under which they were brought was unconstitutional, because it permitted legal action to be taken in any part of the State. The suits were in fact brought in the district in which the clubs were located. Despite two unanimous decisions of the State supreme court directing the lower court to try the case on its merits, the case was never tried and the act under which the suit was brought was finally declared unconstitutional by a 4-to-3 decision.

In Harrison County, Mississippi, ministers and public-spirited citizens had similar experiences. Rev. Douglas Carroll and Rev. Thomas Carruth recounted their concern about the concentration of 21,000 boys at Keesler Field, the biggest radar school in the world, some of whom came to their spiritual advisers in great distress because they had been unable to resist the temptation of the slot machines or had been unable to resist the temptation of the slot machines or blackjack games and had dropped their entire pay on the day they received it. The ministers went around, took pictures of the slot machines in restaurants, filling stations, grocery stores, and other places. They told about the mass meetings they held in protest against official inactivity. Through a Presidential order, the machines were finally removed from Keesler Field. But the Reverend Carroll and the Reverend Carruth testified they could never get convictions in the courts of the city for the craps, blackjack, and other games which were run wide open in Biloxi and other parts of the coast. When their attorney laid the matter before the Governor, the ministers said, he refused to do anything, presumably because it was a county matter.

In Iberia Parish, a young defeated candidate for mayor, Warren Moity, was shocked to have friends tell him they were in the slot-machine business but that they could operate only if the marshal and the sheriff were paid off. Sufficient interest was stirred up to start a grand-jury investigation; but, under a foreman who himself played the slot machines, no true bill was returned. Moity then tried a newspaper campaign. The papers would not even take his paid advertisements. At that point, Moity decided he would go into the business himself. He told his own partner, who was a brother of the conniving marshal, Howard LaBauve. Within a few days, Moity testified, he was contacted through a slot-machine distributing company, by a former Florida slot-machine operator named William Webster. Just to "front" for the machines, Moity was to get 25 per-cent of the business; his partner another 25 percent, and Webster 50 percent. When Moity went to obtain locations, he found there were no good ones left; those were held by the son-in-law of Sheriff Ozenne and by the brother-in-law of Marshal LaBauve.

Moity was promptly approached, he said, by LaBauve and was told that his machines would be destroyed unless LaBauve and Ozenne were paid off. After 3 months Webster and Moity broke up. They weren't making any money above the Federal and State licenses and the payments to the marshal, the sheriff, and the trade association. Webster took his machines back to Florida.

Moity then bought machines of his own. When he refused to pay protection, he and the owners of the locations were threatened. At least once he was shot at. He was threatened when it became known that he was going to Washington to ask the assistance of this Senate committee. Having done so, Moity tried to sell his slot-machine business. By putting an advertisement in a magazine, he got a prospect and a $$750 deposit from a prospective purchaser. But the latter couldn't come to terms with LaBauve and Ozenne and withdrew. Consequently, at the time he testified in New Orleans, Moity said he was still in the business, with 25 machines on location in public places, paying off in cash strictly against the law. Urging the committee to do something to compel local officials to enforce the laws or resign, Moity said he realized how difficult it was for people with families and businesses to stand up, as he had done, against threats rid against the knowledge that the legally constituted bodies would not help.

VII. Official inactivity

The committee heard the testimony of the sheriffs of four parishes and the town marshals of two incorporated towns. Every one of them stated that he knew slot machines, handbooks. gambling, and in some instances prostitution went on openly in his jurisdiction, although most of them added that they had seen none of these activities themselves.

Rowley, the sheriff of St. Bernard Parish since 1939, observed that back in the 1870's the constable and justice of peace were paid out of gambling funds. He pointed to the present-day anomaly of the State and the United States collecting taxes on slot machines, which are illegal, and then subjecting the owner to the danger of the seizure of machines whose existence is revealed by the tax payment. Sheriff Ozenne of New Iberia Parish made the same point through his attorney - the existence of the tax on these machines creates a hiatus; they are illegal, but they have them all over the State.

In New Orleans, the sheriff of Jefferson County, "King" Clancy, a graduate lawyer, arrogantly declined to answer, on the grounds that it would incriminate him, the question whether gambling was against the law in his parish and whether he had ever made any effort to enforce the antigambling laws. But when he later came to Washington to purge himself of contempt, he admitted that he had done nothing. He justified his failure to keep his oath of office on the ground that upward of 1,000 people, most of them old or underprivileged, were employed in the five or six big casinos in his parish and for their sake gambling had been condoned.

Beauregard Miller, the town marshal of Gretna, which is the Jefferson Parish seat, also used the economic argument. He said flatly: "Without gambling, the town would be dead. It has a population of 14,000 and its main business is gambling." He added that anybody who closed the town up would be defeated at elections. Marshal LaBauve of New Iberia said that slot machines ran openly, and prostitution had gone on in restricted districts of the city all his life. Nobody objected. The health department examined the girls to see that they were not infected with venereal disease.

There was much evidence that these and other Law-enforcement officials were not only neutral toward but obstructive to law enforcement. Sheriff Clancy admitted in Washington that he had accompanied the Club Forest dice dealer on his visit to the Reverend Dawson and had made every effort to persuade Dawson to drop the suits against the casinos.

Some of the officials had relatives engaged in the gambling and slot-machine activities. Sheriff Ozenne's son-in-law, in addition to his slot-machine interests, owned a night club and gambling casino. LaBauve's brother-in-law had slot machines. Sheriff Rowley denied knowing that his 40-year-old nephew was a gambler, and insisted he did not know what business he was in. There were other evidences of participation in gambling enterprises by police officers.

A former superintendent of police in New Orleans, George Reyer, who had once been president of the International Association of Police Chiefs, admitted that shortly after he left the force in 1946 he teak his present job with the Daily Sports News, checking for wire taps. He also admitted that he was not a wire expert and that in 4 years he had never found a tap. But he had a salary of $100 a week. Reyer also had an interest in several gambling casinos which linked him with the owners of the Club Forest, but the committee could not definitely establish that these interests extended back into the time of his police service.

There was also definite evidence of direct bribery before the committee. Moity testified that Marshal LaBauve called him personally to demand a payoff for himself and Sheriff Ozenne if he intended to stay in the slot-machine business. Moity said that on LaBauve's instructions he did in fact pay one Amer Rodrigue $50 a month for 3 months. Both Ozenne and LaBauve denied anything more than casual conversations with Moity, and denied getting money from Rodrigue. They knew Rodrigue as a gambler and a slot-machine mechanic.

Clancy, too, was reported to have a collector of protection money, one Cassagne, a deputy, who, Clancy admitted in Washington, was the man who made the arrangements for finding jobs for people in the casinos. Cassagne was admittedly seen around the clubs by Kastel at the Beverly, and by the night dice supervisor at the Forest. The latter testified that, after one of his night bosses had followed his customary procedure of taking a sum of money from the bank for "ice," he had seen Cassagne enter a private room with him. In New Orleans, Clancy refused to state on the grounds that it might incriminate him whether he had ever received any money from Cassagne. In Washington he denied it flatly but admitted that Cassagne made collections, and might possibly have taken a cut himself. Cassagne's collections were for charity, Clancy said, and the people who wanted them accompanied him when the collections were made.

Kastel admitted that Cy Ernst, one of Clancy's deputies, drove him home from the Beverly casino. At times he was carrying large sums of money with him.

While a committee investigator was serving a subpena at the Beverly club on January 18, 1951, a uniformed officer of the Louisiana State police entered the gambling club and delivered a set of license plates to Kastel's private office, passing through the gaming room to do so.

Outright payments for protection were most clearly established in the case of Sheriff Grosch of Orleans County. His divorced wife testified that in the last 6 years of their life together, ending in 1940, while he was chief of New Orleans detectives he had accumulated $150,000 in a safety box which she had bought on his instructions under an assumed name, using a false address. She had seen him receive money every week from a man named Julius Pace, identified elsewhere as a slot-machine and music-box dealer. She had herself received $39 every week in an envelope handed her by one Larry Copeland, also a slot-machine operator. A man whom she understood to be running a house of prostitution came every Saturday night and brought them their food for the week.

Grosch handed her other sums of money in small bills for her to change at one bank or another into large ones, to put in the safety box in the attic.

Today a woman of responsibility, the supervisor of nurse's aides in the hospital operated by Tulane University, Mrs. Grosch's testimony was corroborated by documents and witnesses. An employee of the Rolland Lock Co., from which Mrs. Grosch said she bought, the box, produced records which jibed in every particular with her story. And finally Mrs. Grosch produced two written agreements made at the time of her divorce, one for the record which gave her $5,000, and another, a secret agreement, which made a settlement of $35,000. It indicated that Sheriff Grosch's wealth 10 years ago was far larger than could be explained by his salary of $186-a month.

The sheriffs and town marshals denied ever receiving any campaign contributions from gamblers, slot -machine operators, and bookmakers. But Bosch, head of the Association of Coin-Machine Operators in New Orleans, confronted with a check for $100 to one L. Scanlon, admitted it was for his campaign as civil sheriff. The members made contributions through the association. They decided what they would give in some fashion about which Bosch was vague. It depended on the office and what they collected. Usually they gave to both sides. They contributed some $8,000 to Morrison's campaign, Bosch said; about $5,000 to one of his opponents, and a small sum to still a third candidate.

Evidences of unexplained wealth were not confined to Sheriff Grosch. Rowley, sheriff of St. Bernard Parish, who knew of no trial for a gambling offense in his district since 1940 and could recall no conviction at all, admitted to a supplementary income of from $6,000 to $8,000 within the past 3 years. He owned a 1949 Ford, financed partly by a trade-in, and a 1949 Cadillac which he had bought for cash extracted from his own strongbox in his bedroom at home. At the time of the committee's hearing in New Orleans, the box contained between $15,000 and $20,000. Asked the source of his funds, the sheriff refused to answer on the grounds of self-incrimination.

Questioned about his income, Sheriff Clancy estimated before the Washington hearing that it was about $20,000 annually over the past 4 years. Yet, it must have been considerably more than that by his own figures. While his salary was never more than $5,700, he admitted to an annual income of nearly $5,000 in an oil interest with Judge McCune and others, which he had not reported to the Committee in the papers requested under subpena. In addition, Clancy said he had made $78,000 through betting at the races or through bookmakers. The only records he had, he said, were his bank deposits. He attributed his extraordinary success to his restraint in playing only the last two races on any day, and to the advice he received from jockeys and owners who felt indebted to him because they knew they could always come to him for a loan if they were broke.

Just as the connection of the local mobsters with the out-of-town gamblers and racketeers can be summarized in the activities of Carlos Marcello, the involvement of a local law-enforcement officer was epitomized in "King" Clancy. That all these gambling and racketeering operations were illegal, and that in law and in fact he had the power to close them up tight, Clancy admitted to the committee in Washington, in contrast to his New Orleans refusals to answer. Clancy told the committee that since his New Orleans appearance he had actually closed down the slot machines. Asked about the lush gambling clubs in the towns, Clancy first insisted that policing them was the job of the city police department but admitted, he had jurisdiction to close them up, and promised he would do so.

Clancy admitted that Kastel had consulted him about opening up the Beverly Club. At the time there was a casino there, but the operators were not making any money. Kastel asked him, Clancy said, whether he would have any objection to his taking over. Clancy told Kastel he would have no objection, so long as other people didn't complain, and Kastel gave people jobs. When the committee ventured that the other clubs couldn’t have been happy about it, Clancy averred they said nothing to him. At that point, Clancy conceded to the committee that he was the high power who gives clearances; they opened when he said they could, and when he said they should close, they closed.

In Washington, Clancy displayed a considerable knowledge of all these illegal operations which high lighted his equally considerable professions of ignorance. He knew that Marcello was partner of Kastel and Costello in the Beverly Club. He wouldn't admit that any deputies were employed by the casinos, but admitted he couldn't tell whom he had made honorary deputies without the records before him, and such persons might be employed at the casinos and be misusing their badges.

He had not only gone to the Reverend Dawson about the padlock suits; he knew that four separate gangster groups continued to give money to the Dawson church, and said they gave money to other churches also. He conceded that the committee would be justified in saying that his office was actually running an employment agency for the gambling casinos.

Just as he knew and could testify to many of Marcello's activities and interests in the gambling casinos, Clancy knew of his activities in connection with slot machines. He said that the Dixie Finance Corp., in which he had an interest, might be loaning money to slot-machine distributors.

Clancy knew that the large casinos had horse rooms, wire service, and facilities for laying off bets throughout the country. He knew that the headquarters of the Daily Sports News was the fan-out point for all the handbooks in the area. He knew there had been a merger of two rival wire services, but didn't know anything about the muscling-in procedure. Clancy denied in New Orleans that there were two telephones listed in his name at the Daily Sports News address, just a block away from his office as sheriff. In Washington he confirmed it and said it must have been a mistake which the telephone company would have to straighten out.

Clancy knew Kastel, but no more about his criminal record than he had read in the papers. He did not know Kastel's friend Costello. Clancy knew of no alleged Mafia meetings, operations, or hang-outs. He was sure the recent narcotics haul in his parish had not been intended for sale there but for the preparation of cigarettes to be sold in New Orleans. Marcello, a Jefferson Parish resident, though not a desirable character, had never been apprehended in his and Clancy's home territory on narcotics charges, the sheriff admitted.

Clancy knew that slot machines were bought from Mills Bros. in Chicago, but not that negotiations were in progress for a. proposed slot-machine factory in his parish to defeat the purpose of the recent law against interstate shipment. He knew there was a State law ordering officers to seize and destroy slot machines on penalty of removal from office, and admitted that his failure to do so was a flagrant violation of his oath of office.

Thus "King" Clancy, in his history and attitudes, his personal and business associations with flagrant lawbreakers, posed flatly and succinctly for the committee the problem of the admittedly negligent local official who eases the path for organized crime and its use of interstate facilities, but who can be dealt with personally only by local action.

He typified in effect the foundation on which the whole structure of organized gambling and racketeering rests. Without conniving and participating officials like him, neither the wire services and bookmaking interests emanating from Chicago nor the gambling and racketeering elements allied with Costello of New York nor the local criminals like Carlos Marcello and Joseph Poretto could have used the interstate facilities of communication and transportation to further their illegal enterprises alone or in concert with other racketeers from all over the country.It is apparent from the foregoing that the following patterns of organized crime and gambling are present in New Orleans;

1. The association of native gamblers and gangsters with outside racketeers, particularly those from the Costello-Lansky-Adonis syndicate.

2. A deep-seated aversion on the part of the lawfully elected law-enforcement officials to enforce the laws which they have sworn to uphold.

3. The personal enrichment of sheriffs, marshals, and other law-enforcement officials because of their failure to enforce the gambling laws and other statutes relating to vice.

4. The interference with attempts of civic and religious groups to improve law enforcement in particular communities.

5. The attempt to justify "wide open" conditions by the so-called benefits they confer through employment opportunities and by the fact that the "people" (who are never asked) want it that way.

6. The failure to see that the apology for wide-open conditions is colored by the self-interest of the officials who have a vested stake in the maintenance of the status quo.

7. The brazenness of law-enforcement officials, who in gangster style refuse to answer questions, concerning their law-enforcement activities on the ground of self-incrimination.

8. The failure of the central State government to take effective steps to compel local law-enforcement officials to enforce gambling and vice laws.

In the course of its investigations throughout the country, the committee was repeatedly struck by the magnitude of the gambling business and by the pattern of domination of this business by an interlocking group of gangsters, racketeers, and hoodlums. In all of the localities previously discussed in this report, gambling, except for pari-mutuel betting at race tracks, is prohibited by State and/or local law. Although some of the participants in this tremendous illegal business of gambling were relatively frank about their operations, the majority of the witnesses on this subject before the committee exhibited an extreme unwillingness to reveal information about their gambling activities.

With the exception of those States which permit on-track betting and a few which permit certain special and relatively insignificant forms of gambling, Nevada is the only State which presently legalizes gambling within the framework of a State and local licensing system.

In an effort to obtain reliable information about the size and methods of operation of top-flight professional gamblers and to investigate further the interstate ramifications of the gambling underworld, while still conforming to the letter and spirit of its original authorizing resolution, the committee heard testimony on gambling operations in the State of Nevada.

The basic law legalizing gambling in Nevada was enacted in 1931. This law permitted gambling operations by persons who paid a license fee and received a license from the county authorities. Since that date, a number of changes have been made in the licensing system and the law, which was last amended in 1949, now requires that all persons who engage in gambling operations, including the operation of handbooks, must be licensed by the State as well as by the county or city in which they operate. State licenses are issued by the Nevada State Tax Commission which is empowered to hold hearings and to grant and revoke licenses on the basis of the qualifications of the applicants or licensees.

The committee was told by Clifford Jones, lieutenant governor of Nevada, and William J. Moore, member of the State tax commission, that prior to 1949 little or no effort was made to screen the applicants for State licenses. Lieutenant Governor Jones and Mr. Moore both testified that since 1949 an effort has been made to keep out persons known to have criminal records or strong affiliations with out-of-State gambling syndicates. No attempt had been made, however, to eliminate the undesirable persons who had been operating in the State before that time. Both the lieutenant governor and Mr. Moore themselves participated in the operation of hotels which included more or less large-scale gambling casinos. Gambling is a legalized business in Nevada and there is no question as to the character of these gentlemen, who were most cooperative in their testimony before the committee. However, the committee's inquiries revealed that the caliber of the men who dominate the business of gambling in the State of Nevada is on a par with that of professional gamblers operating illegal gambling establishments throughout the country.

Before he was shot to death in 1947, Benjamin "Bugsy" Siegel was undoubtedly the gambling boss of Las Vegas, Nev. Siegel, who had carried on gaming operations in California and elsewhere before coming to Nevada, had been associated with "Lucky" Luciano, Frank Costello, Joe Adonis, Meyer Lansky, and other influential members of the eastern underworld. From about 1942 until the time of his death Siegel controlled the race-wire service in Las Vegas through Moe Sedway, an ex-convict, gambler, and long-time associate of many New York mobsters whom Siegel brought to Las Vegas. Through a control of the wire service, Siegel controlled the operation of all hand-books operating in Las Vegas. He refused wire service to any book unless he or his agents actually operated and managed it. During the period of the Trans-American-Continental fight over control of the race-wire service, Siegel, who was closely connected with members of the Capone mob, dispensed the Trans-American service and in some cases, serviced bookies who were also receiving the Continental service. Siegel was shot to death in California a few days after Trans-American went out of business.

Until his death by violence, Siegel had a controlling interest in the Flamingo Hotel at Las Vegas, one of the country's most elaborate gambling establishments. Associated with Siegel in the hotel and its gambling enterprises were Moe Sedway, Allan Smiley, a gambler with a long criminal record who came to Las Vegas with Siegel, Meyer Lansky, and Morris Rosen also old-time associates of the New York mob.

After Siegel's death the operation of the Flamingo was taken over by Sanford Adler, a gambler with a long record of arrests, and a number of his associates. Adler entered into an agreement with Sedway, Rosen, and Gus Greenbaum who controlled the wire service in Phoenix. Under the agreement, Adler was to have control over the operation of the hotel, although Rosen, Sedway, and Greenbaum held the controlling number of shares in the hotel. After a violent disagreement with Greenbaum, Adler suddenly sold out his interest and retired to his gambling clubs in Reno and Tahoe, leaving Greenbaum, Rosen, and Sedway in undisputed possession of the lucrative Flamingo operation.

With Siegel removed from the scene, Sedway and Rosen attempted to carry on Siegel's monopoly over the race wire. Trouble over the wire service came to a head when service to the Santa Anita Turf Club was cut off. The Santa Anita Club, owned and operated by the Stearns brothers, adjoined the Frontier Turf Club, a former Sedway-Siegel operation, in which Rosen had succeeded to Siegel's interest. Sedway attempted to negotiate a merger with the Stearns, but instead they tapped the Frontier Club wire service and continued to operate independently.

At this point, Robert Jones, county district attorney of Clark County, and a partner of the lieutenant governor, became alarmed about the situation in connection with the distribution of the wire service in the State. He addressed a letter to the Nevada Tax Commission expressing grave concern over the situation prevailing in Las Vegas as a result of the monopoly of the race-wire service, and stated that the "situation was fraught with danger to the public peace." In accordance with Mr. Jones' suggestion, a hearing on the wire service was held in Las Vegas late in 1948. The testimony given in these hearings revealed that although Connie Hurley nominally held the race-wire contract for Las Vegas, arrangements for the distribution of the service to Las Vegas bookmakers were actually made by Rosen and Sedway. As a result of the hearings, Rosen was forbidden to carry on gambling operations in Nevada. He has continued to hold a controlling interest in the Flamingo Hotel, however.

Another million-dollar gambling operation in Las Vegas is the famous Desert Inn run by Wilbur Clark, an old-time gambler, who at one time worked on the gambling boats off the coast of California. Clark's associates in the construction and operation of the Desert Inn include Sam Tucker and Thomas J. McGinty, Cleveland gamblers; Moe Dalitz, an old-time bootlegger and gambler, and Morris Kleinman, a gambler and bootlegger who for many years has been associated with the biggest gambling operations in Ohio.

The Bank Club in Reno is owned and operated by William Graham and James McKay, who were convicted of mail fraud in New York, but who returned to Nevada after the expiration of their prison terms. At one time, Graham and McKay sold a one-third interest in the Bank Club to Joseph Stacher, a well-known eastern gambler. Stacher was reputed to be willing to spend as much as $250,000 to elect city officials who would license him to operate as a partner in the club. His application for a license was, as a matter of fact, denied by the Nevada Tax Commission before any action was taken on his application for a city license.

Also operating in Reno are Mert Wertheimer, a big-time Michigan gambler who has been in partnership in Florida with such notorious gangsters as Joe Adonis, the Lanskys, and Frank Erickson, and with Lincoln Fitzgerald and Daniel Sullivan, members of the Michigan gambling syndicate.

Benny Binion, one-time king of the rackets in Dallas, Tex., has also been involved in gambling operations in Reno.

It is also clear to the committee that the gambling operations in Nevada are inextricably tied to interstate commerce. The bookmakers receive bets from many out-of-State sources and lay off bets with bookmakers outside the State of Nevada as a daily practice, they use telephone wires and other facilities of interstate commerce. Part of these transactions are cleared by use of the mails. Several of the gambling syndicates are financed to a very substantial extent and exist largely on money from outside States. Most of the gambling public comes to Las Vegas from places beyond the borders of Nevada.

It seems clear to the committee that too many of the men running gambling operations in Nevada are either members of existing out-of-State gambling syndicates or have had histories of close association with the underworld characters who operate those syndicates. The licensing system which is in effect in the State has not resulted in excluding the undesirables from the State but has merely served to give their activities a seeming cloak of respectability.

The reform of the race-wire service which was hoped for as a result of the legislation enacted after the 1948 Las Vegas hearings seems to have been equally unimpressive. The 1948 act requires the impartial distribution of the wire service to all licensed bookmakers, and gives the tax commission power to fix rates and inquire into the operation of the wire service.

William Moore, a member of the tax commission, told the committee that although the commission must pass on any increases over the rates charged in 1948, the commission has made no attempt to fix rates, or to eliminate the practice of fixing rates on the basis of a percentage of the bookmaker's take. It is this practice of charging for the wire service on the basis of a percentage of take which effectually makes the distributor of the wire service a partner in every bookie operation, and which inevitably leads to violent competition for control of the wire service.

Mr. Moore also told the committee that the commission had confined itself to passing on complaints from bookmakers - which, strangely enough, had been limited to one complaint in 3 years - and had undertaken no independent scrutiny of the wire service operation.

The profits which have been taken from gambling operations are far greater than those which can be earned quickly in any other business. The availability of huge sums of cash and the incentive to control political action result in gamblers and racketeers too often taking part in government.

In States where gambling is illegal, this alliance of gamblers, gangsters, and government will yield to the spotlight of publicity and the pressure of public opinion, but where gambling receives a cloak of respectability through legalization, there is no weapon which can be used to keep the gamblers and their money out of politics.

Taking Lt. Gov. Clifford Jones as a particular instance: 2 1/2 percent of the Pioneer Club had been sold to him for $5,000 in the year 1941. Thereafter, his annual income from this operation was 44,000. Jones is also a member of a law firm, and one of his partners is Robert Jones, district attorney of Clark County.

As a member of the State tax commission, William Moore's particular function is to deal with licensees engaging in bookmaking and gambling operations. Mr. Moore also has a gambling operation of his own, being a part owner of the Last Frontier. He recently made a deal for wire service and received a rate which in. the opinion of the committee gives him a considerable financial advantage over his competitors. Mr. Moore explained the reason for the comparatively low rate was that his operation was a new one, but the committee found at least one other similarly new operation which had not been given the same low rate.

The conditions above described arc not healthful. Gambling is the big business in the cities of Las Vegas and Reno, the two largest cities of the State of Nevada. A short tour of either of these cities suffices to show that gambling is the major preoccupation of the residents in both places. As a case history of legalized gambling, Nevada speaks eloquently in the negative.

I. Racket pattern

The racket pattern in California was found to be similar in general to that in other sections of the country, in that various forms of gambling furnished the backbone for other rackets by reason of its heavy profit. It was noteworthy, however, that - probably because of an awakening brought about by the activities of the California Crime Commission - law-enforcement officers, grand juries, and prosecutors had combined to accomplish certain results. The committee found that the race wire service had been outlawed in California, although it was obviously obtainable on a sneak basis. Many major gambling figures have utilized neighboring Nevada to base their activities, preferring the less hazardous operation by telephone with their customers in California.

Other indications of the increased vigilance of law-enforcement agencies were found in testimony that table gambling casinos were practically nonexistent, but the gamblers had devised collapsible crap tables which could be hauled about in the rear of an automobile for use in sneak games.

Further evidence of resistance to the shut-down was disclosed in the testimony of' Mayor Fletcher Bowron of Los Angeles, one of the leaders in the war on crime, that the racket element had combined in an abortive attempt to reopen his area to the rackets by forcing a recall election. For a time there were many establishments running "bridgobingo." This is a type of gambling similar to bingo except that the participant is required to demonstrate his ability to engage in the bingo game by engaging in a so-called game of skill beforehand. These games of skill were but a mockery and subterfuge, as a child of tender years could readily accomplish the skill portion of the game. Between the first inquiry by the committee into these games in November 1950, and the committee hearings in February 1951, it was found that the bridgo-bingo games had virtually disappeared because of police activity and the disclosures that, almost without exception, the games were operated by known racketeers hiding behind an individual without a criminal record who fronted for them.

As in other localities, the "lay-off" system in handbooks was found. California bookies were found to be in close touch with "lay-off" establishments as far away as Shreveport, La., and Florida where John O'Rourke testified he received bets over the telephone from Mickey Cohen in Los Angeles, resulting in a loss to O'Rourke of some $50,000 in a short period of time

II. The "vice squad pattern," and diffusion of police responsibility are of material assistance to organized crime

As found nearly everywhere, jurisdictional difficulties of law-enforcement agencies materially assisted the criminal element to operate with a minimum of harassment. The fact that the investigative and police jurisdiction of law-enforcement agencies stopped at a city, county, or State line was used to advantage by the underworld figures who consistently sought refuge in the area where they found more "official tolerance" but, by penetrating the better policed areas by telephone and by a continuously moving operation which never tarried long enough to invite police action, they found themselves able to defeat the law. For instance, the Guarantee Finance Co. case disclosed headquarters in one county which was actually the nerve center of operation but the customers in large measure being serviced by this gambling organization were located across the county line. There was also the peculiar geographic set-up whereby the area known as the Sunset Strip, an island in the midst of Los Angeles, not subject to the law enforcement jurisdiction of the Los Angeles police, became a natural haven for those engaged in activities offensive to the Los Angeles police.

As was the case with Mayor Fletcher Bowron, the vigorous opposition to the racket pattern by Chief of Police William H. Parker of Los Angeles met with resistance. Testimony adduced disclosed the detection and prevention of an attempt on Chief Parker's life.

Meanwhile, in Los Angeles County where officials seen to be more "tolerant," sheriff's deputies from time to time were charged with nonfeasance and even more serious collaboration with criminal figures. Sheriff Eugene Warren Biscailuz of Los Angeles County testified that he questioned the officers involved but they denied the allegations, and he conducted no further investigation of the charges.

As elsewhere in the country, there were interesting examples of accumulation of wealth in the hands of law enforcement officers. William Robertson, a former police officer in Los Angeles, could not remember his net worth but a. admitted that it was over $100,000. He resigned from the police force when an investigation into sources of his income was pending. In the Guarantee Finance case, the books disclosed an item of $108,000 referred to as "juice," the California term for "protection." In Florida it is "ice." In view of the fact that the Guarantee Finance was a "50-50 book" with participating bookmakers sharing the expense, a payoff of $216,000 was indicated. Investigation and testimony thus far have failed to develop the identity of the recipients of this "juice." Further, there were found a number of instances where law enforcement officers profited handsomely from business deals made easy for them. For instance, former Capt. Al Guasti of the Los Angeles sheriff's office, was able to purchase a liquor license for $525 and within a short time sell the license, taken in his wife's name, for about $12,000.

Other officers participated in similar liquor license deals, realizing quick profits. In this connection the "vice squad pattern" was again found. This is a device used in many cities where the rackets thrive. The police department bosses set up a vice squad composed of a chosen few directly accountable to them. They instruct the remaining law-enforcement officers to stay away from gambling and vice and to channel any complaints to the vice squad for action or, in most cases, inaction. By this device, a small clique frequently controls the collection of the protection pay-off. It directs police activity against operations that conflict with those who are "in" or those slow to recognize their responsibilities to purchase "official tolerance" to operate. As an example of how this pattern works, it was found that in Los Angeles County even the vice squad "didn't move freely without instructions from Captain Pearson.” In the case of one raid, Captain Pearson wrote a note to the sergeant in charge of the squad saying:

Make your raids specifically at 10 o'clock. At that time, the gambling tables will be covered. Observe the girl show and then leave. During that time, there will be no gambling conducted so your officers will not be embarrassed.

Captain Pearson admitted that the note was in his own handwriting.

Evidence of obstruction of justice by violence and the tendency of the criminal to take the law into his own hands was found in the shocking shotgun murder of Attorney Sam Rummel. His voice was forever silenced on December 11, 1950, the day following a conference with Sheriff's Officers Guasti and Pearson. At the time that a grand jury was probing the bookmaking and protection of the Guarantee Finance syndicate, Rummel called on Guasti on Sunday, December 10, 1950. Guasti arranged for a clandestine meeting in an automobile between Rummel, Pearson, and Guasti. Guasti admitted to the committee that Rummel said he was going to discuss the Guarantee Finance case before the grand jury and that he "had some information." Further testimony developed that Pearson met Rummel later in the evening and made available records about the investigation, obtained in his official capacity. It was the following morning that Rummel was "removed permanently" from consideration as a witness who might shed some light upon the corruption that was evident in the Guarantee Finance syndicate. Guasti admitted to the committee that he did not bother to advise the Los Angeles police, who were investigating the murder, of the events on the day prior to the shooting.

In another case, law-enforcement officers found their path toward conviction for narcotic violations of the notorious Sica brothers blocked by the gang murder of Abraham Davidian, the man considered by the prosecution to be the key witness and "sine que non" to conviction. Needless to say, Davidian's death completely stultified their efforts and the Sicas went free. Perhaps the lesson learned from the death of Abe "Kid Twist" Reles, whose untimely demise in New York prevented the prosecution of the triggerman in the Murder, Inc., case, served the California hoodlums well.

Further manifestation of the disregard for the processes of justice was found in the revealing recording adduced in the Los Angeles hearing of the committee in which the unguarded conversation of under-world figures was brought to light. In Dallas, Tex., Herbert Noble, who has just survived the eleventh attempt to take his life by dynamiting his automobile and airplane, among other things, was engaging in a war for control of the Dallas racket with Benny Binion. So many attempts have been made on Noble's life that he is called the Clay Pigeon. Binion left Dallas after Noble's wife was murdered. Her last act was to step on the starter of the automobile usually used by Noble, thereby detonating the dynamite placed in the car by those who wished to eliminate Noble. According to the story brought out in the testimony, Binion moved to Nevada but continued to maintain an interest in the lucrative Dallas rackets and sent an emissary, Harold Shimley, to Dallas in an effort to make peace with Noble.

Vigilant Dallas police learned of the move and recorded the ensuing conversation between Shimley and Noble which took place in a tourist cabin near Dallas. The conversation furnished a graphic insight into the tactics of these lawless elements. Shimley made an effort to convince Noble that Binion did not want trouble and was not responsible for the murder of Noble's wife. Shimley maintained that Binion had spent thousands of dollars of his own to track down the perpetrator of this shocking crime and claimed that he had found the individual who had purchased the dynamite and intended to arrange to square matters by gangland methods. The alleged purchaser of the dynamite had been arrested and incarcerated. Shimley told Noble that he (Binion) said, "I can get the ---- killed in the penitentiary." Noble replied, "Well, that's good enough for me." During the conversation a telephone call was made to Binion, who remained in Nevada, from the men in the tourist cabin in furtherance of the peace effort. There is no record of these individuals ever advising law-enforcement officials of the information they insisted had been developed concerning the killings.

III. The persuasive Mickey Cohen and magnetic William Bonnelli

No discussion of the California crime picture would be complete without reference to the notorious Mickey Cohen. Although the recent police surveillance and publicity attendant to Cohen's activities have undoubtedly exerted a deterrent effect on Cohen's activities, his name is inescapably woven into the pattern of rackets in southern California. Cohen is frequently mentioned in connection with gambling enterprises and has been known in handbook circles as a lay-off man for Nation-wide horse bets. Cohen's tendency toward strong-arm tactics is evidenced by the treatment he administered to Jimmy Utley in broad daylight in a Los Angeles restaurant. It has been related how Cohen pistol-whipped Utley in the presence of numerous patrons of the place but none of them, including Utley, would testify about what they had seen. Again, Cohen accompanied Joe Sica, when the latter called upon Russell Brophy, the race wire service distributor in California, to find out why Brophy had declared Sica "out." Sica was unable to persuade Brophy that he was "in" and, in the ensuing fight, Brophy was administered a bad beating. Cohen's enthusiasm mounted and he tore the telephones out of the place.

Cohen has explained that in recent years he spent money in excess of his reported income by reason of loans made to him by various individuals. These "loans" amounted to over $140,000 and Cohen admitted he was in no position to repay them. In one instance Hyman Miller, a bookmaker, "lent" Cohen $5,000 which Cohen had never repaid. Cohen apparently added insult to injury by administering a beating to Miller after they had "harsh words." On another occasion Cohen successfully "borrowed" more than $20,000 from the then president of the Hollywood State Bank on a completely unsecured basis. Cohen claimed he was able to arrange this loan merely by talking to the president of the bank, without posting collateral or security, and without giving any promissory note. It was emphasized that the loan was from the personal funds of the bank official and did not involve the bank's funds.

William G. Bonelli, a member of the California State Board of Equalization which controls the issuance of liquor licenses, proved to be an interesting witness. Previous testimony had developed that Bonelli's campaigns for office had shown a number of law-enforcement officers and racketeers to be prominent supporters. William Robertson, operator of a gambling establishment and former Los Angeles policeman, made collections for Bonelli's campaign totaling $15,000 to $17,000.

Another admitted backer of Bonelli was Capt. Al Guasti of the Los Angeles County sheriff's office who, as previously related, was able to purchase a liquor license for less than $600 which subsequently sold for $12,000. The individual who arranged for Guasti to obtain the liquor license was William J. Cook, who is one of the principals in Bonelli's campaign. Cook appeared as a partner with Bonelli in a venture known as the Hillview Oil Co., which later became a corporation in which both held stock. Bonelli testified that the stock which he bought at $1 per share was to date a losing proposition. Notwithstanding, Cook was able to sell one share of the Hillview Oil Co. stock which cost him $1 to the operator of the Rainbow Room, a liquor licensee, for $2,000. Another licensee paid $1,000 for half a share of stock which cost Mr. Cook 50 cents.

Under California law the race wire service has been outlawed. Notwithstanding, the bookies seem to be able to circumvent the law to obtain the information so vital to their existence. Although there is no evidence of direct wire outlets in the State, there have been at least four occasions of "tapping" Western Union cables which parallel the Southern Pacific tracks and carry Continental Press racing news through California to Mexico. On one occasion the tapping, obviously for gambling purposes, was so crudely done that it threw off the entire block signals system of the railroad.

Russell Brophy, who controlled the distribution of the racing news, testified in the hearing of the Interstate and Foreign Commerce Committee that he was receiving racing information by short-wave radio from Mexico and disseminating it in California. There was no testimony as to how he paid for the information but Edward McGoldrick, of the General News Service in Chicago, a Continental distributor, testified before this committee that his service was receiving $500 per week from Stanley Cohen in San Francisco under an oral agreement that McGoldrick would furnish Cohen with wire service to San Francisco if and when it became legal to run wires into California again. The $500 per week payment closely approximated the amount paid for the racing news in San Francisco when the wire was legal. McGoldrick was unable to explain how Cohen could be assured of exclusive representation of the wire service in San Francisco and it seemed highly incredible that Cohen would be paying $500 per week ad infinitum merely to protect a franchise to obtain news service which could not be transmitted into the State legally. Although there appeared to be no business relationship between Continental Press in Chicago and Stanley Cohen from the record, Cohen's 1949 tax return disclosed an expense item of $46,300 for "Continental Press Service." A further interesting item was an expense of $23.909.24 for "telephone."

When the committee sought to question Cohen about his obvious wire-service activities he refused to give any information and has been cited for contempt. Thus there remains the paradoxical situation in California in 1949 where Brophy, son-in-law of the late James Ragen, murdered Continental Press principal, claimed California wire service was obtained by radio from Mexico, which incidentally has a Continental Press drop, and McGoldrick, of General News, a Continental subdistributor in Chicago, claimed that Stanley Cohen was paying General News $500 per week for a very nebulous consideration. But Cohen's books failed to support these payments and, on the contrary, disclosed $46,000 paid to Continental Press, all of which took place during a year when the wire service was outlawed in the State. The inescapable conclusion again appears that the Continental Press Service subdistributors are merely dummies along the path which the racing news travels from Continental to the bookie, and that the funds extracted from the bookies for the service wind up in the coffers of Continental.

IV. Corruption among internal-revenue employees

A new technique for extracting money from taxpayers was developed by several Internal Revenue Bureau employees in the west coast area. Patrick Mooney, formerly chief field deputy at the Bureau of Internal Revenue at Reno, Nov., for a number of years was an officer in the Mountain City Consolidated Copper Co., which seemed to be nothing more than a "shadow mine." In other words, there is no record of the mine ever producing anything of value and it was not worked. For many years Mooney prepared the tax returns for Elmer "Bones" Remer, a prominent California gambler. Remer had a tax deficiency of $773,535 for the years 1941 to 1946. In 1946, Mooney testified, he had an income-tax warrant against Remer calling for the payment of about $7,000 or $8,000. Remer had a check ready to pay the tax assessment but, after talking with Mooney, instead bought $2,400 worth of the copper company stock and deducted $2,400 from the check to the Government. According to Mooney "it was all adjusted anyhow." Apparently Remer was not bothered further by tax difficulties at this time.

In addition to Remer, several hundred others, most of whom were having tax troubles, bought stock in the mine. Many of them have been identified as gamblers and gambling-house operators in that area. Apparently a participant in the scheme with Mooney was Ernest Mike Schino, the former chief field deputy, office of the collector of the northern district of California. Schino was the recipient of 5,000 shares of the stock from Mooney and, as "it would not be right to put it in Mooney's name" according to Mooney, it was put in the name of Schino's sister.

There was evidence that Gertrude Jenkins, a convicted abortionist who was having tax difficulties, paid $5,000 to Mooney, half of which was to go to Schino to "fix" her case. On the other hand, Robert J. Kaltenborn, the owner of a large wholesale automobile-parts store in Las Vegas, was recently convicted of violation of the internal revenue laws. During the time he was under investigation he was approached by Martin Hartmann, who purported to be a stock salesman for the Mountain City Consolidated Copper Co., with the suggestion that Kaltenborn buy $3,500 worth of M. C. C. C. stock for the purpose of taking a short-term loss to charge off on his income tax. He explained that Mooney, of the internal revenue in Nevada, and secretary-treasurer of the copper company, would show him how to do it to evade prosecution. Kaltenborn did not play ball and subsequently was convicted. There were other incidents of unusual relationships between internal-revenue employees and those under investigation, such as a case where an internal-revenue employee was instrumental in bringing together a taxpayer under investigation with the madam of a house of prostitution also under investigation, for the purpose of establishing a new house of assignation near a military installation.

Subsequent to the committee hearings most of the employees involved have been removed from the service and a Federal grand jury is considering the entire matter.

V. The role of Arthur H. Samish

The strange tale of the part played by an almost unbelievable character, Arthur H. Samish, in the California picture nearly defies description. Mr. Samish can safely be called "Mr. Big" in California. His physical weight, around 300 pounds, can be calculated fairly accurately but the weight of his influence in the affairs of that State would be most difficult to estimate. Mr. Samish describes himself as a "public relations counsel" or a "policy consultant" and has declared on at least one occasion, "I am the legislature." His forte is representation of organizations and associations as a lobbyist before the California Legislature. Prior to the actual arrival of the chairman of the committee for the hearings in California, committee investigators were rebuffed in their attempts to examine Mr. Samish's records; thus it was necessary to explore his methods in open hearing and the revelations were startling.

For many years one of Mr. Samish's clients has been the California State Brewers Institute, a trade association composed of 11 of the 14 breweries in California which accounts for 86 percent of the beer production there. The officers of the institute testified that the organization was a nonprofit association, the stated purposes of which were to "educate and elevate the minds of men" and to "encourage civic enterprises with a view of attaining the maximum benefits for all concerned. The dues of the association were established on a per-barrel basis according to the production of beer by the member breweries. An assessment of 4 cents per barrel produced by the member breweries was turned over to the institute and placed in a bank account to be disbursed under the authority of the directors of the institute. This assessment amounted to a very substantial sum when it is considered that in 6 years the total sum paid into this fund by the breweries amounted to well over $500,000. According to the testimony, the practice of the brewers, some of whom testified, has been to deduct this entire assessment for tax purposes on their books as "an operating expense." The members also pay another 5 cents per barrel to the institute, which money is deposited in a special account in the Crocker First National Bank of San Francisco. Mr. Samish is a virtual dictator over the disbursement of funds from this account. Deposits from the 5-cent assessment in the last 6 years from the brewers to the institute aggregated $935,943.19. It has been the practice of the member breweries, according to the testimony, to deduct again as "an operating expense" 50 percent of this additional assessment. The other 50 percent is considered non-deductible as an operating expense on the theory that half of the fund is used for nondeductible purposes. Thus the member brewers contribute a total of 9 cents per barrel of beer to the institute. Under this agreement nearly $2,000,000 has been paid in during the past 6 years with the brewers charging off, as an "operating expense," 6 1/2 cents on each barrel as a tax deduction. But examination of the record to determine if this, in fact, is "operating expense" is in order.

The committee labored through a lengthy interrogation of the institute officers, member brewers, Samish's bookkeepers and Samish himself in an effort to find out what became of this tremendous sum of money. In connection with the $1,000,000 "Samish fund", Mr. James G. Hamilton, Secretary of the California State Brewers Institute, testified that the checks are drawn at the request of either Mr. Samish or his representatives in his office. From the record:

Question. So, that Mr. Samish directs these three gentlemen to draw the checks. Would you say that he is in complete control of that account?

The CHAIRMAN. For practical purposes.

Answer: For practical purposes; yes.

Question. Now, who keeps the books and records as to that account?

Answer. I don't know.

Mr. Hamilton, who is a full-time paid employee handling the administrative affairs of the institute, appeared strangely uninformed with respect to what became of the bank statements and canceled checks of the account. He advised that the statements and checks were sent to Mr. Samish's office and that the institute had no record of the expenditures; that the institute "acts merely as an agent in the collection and deposit of the funds."

Mr. Samish's function, as described by Mr. Hamilton, was summed up by Senator Kefauver in this question. "For practical purposes he makes the legislative and political decisions for the brewers of California?" Mr. Hamilton answered "Yes."

Further it was estimated that members of the institute, persons connected with organizations and their families, wholesalers, and retailers who would be affected by the Samish influence would number around 500,000 in California. Senator Kefauver inquired of Mr. Hamilton: "Now, when it comes up as to whether a proposed referendum is to be good or bad for the brewing industry, whether an election of a State Senator, a member of the legislature or the passage of a bill in the legislature will be good or bad, that decision is made exclusively and wholly by Mr. Samish?" Mr. Hamilton said, "That is my understanding; yes."

The examination of William P. Baker, president of the California State Brewers Institute and also president of the Regal-Amber Brewing Co., was very enlightening. Mr. Baker was one of the three individuals authorized to draw checks on the "Samish account" of the institute. He testified that he did not question the checks which were presented to him for signature. He "imagined" they came from Samish's office, but he had never had occasion to refuse to sign any checks and "supposed" that Samish kept a record of the checks; further that the only checks he remembered signing were to Mr. Samish and these took up all of the fund. The net result of that interrogation of the members of the Brewers Institute with respect to the disbursement of the funds from the special account was, "See Mr. Samish."

Mr. Samish proved to be not at all disturbed by his inability to account for expenditures traced to him and deducted by, the brewers as expense to save themselves many thousands of dollars in Federal taxes. After considerable fencing, Mr. Samish finally testified that the checks on the "Samish fund” were made up in his office and sent to the institute for signature and returned to his office. When the canceled checks were returned by the bank with the monthly statement, the canceled checks and the statement and a handwritten record of the checks drawn for the month were delivered to his office by the institute. In answer to a question as to what became of the statement and canceled checks, Mr. Samish testified:

I take the recapitulation, the bank statement, and the canceled checks and I throw them in the wastebasket.

From time to time Mr. Samish referred to a written agreement he had with the institute. It was pointed out that, under its terms concerning expenditures, there was to be a "report made." He was asked how a report was made in the light of his testimony that he destroyed all records, and the testimony from the institute officials was that they kept no records. Mr. Samish replied, "I don't work on that end of it." The agreement further provided that Mr. Samish should have no authority to incur expenditures until the institute authorized them. He was asked how this could be reconciled with the statement he made that he drew checks upon his own authority. He said, "I just do it." He was asked if this did not breach his contract. He answered, "I haven't even given that any consideration."

During the interrogation Mr. Samish produced a handwritten notation of a number of checks drawn in the past year. It was noted that on October 3, 1950, a check was drawn to cash in the amount of $15,000. Mr. Samish was asked where the cash went. He explained that during the general election period many "cash" checks were drawn looking toward seeing that— honest, outstanding officials that subscribe to the temperate use of beer, wine, spirits and other things are returned to office.

This colloquy followed:

Question. And where does the money go, sir?

Answer. It is expended.

Question. It is expended?

Answer (nodding affirmatively).

Question. And what does that mean?

Answer. Well, it is expended in connection with campaigns.

Question. And who gets it?

Answer. The cash is handled through me.

Question. You get the cash, then?

Answer. Yes.

Question. And what do you do with the cash?

Answer. We spend it. Make contributions and distributions. .

* * * * * *

Question. Well, sir, we are not arguing policy with you. We are trying to find out where the money went, physically; whose hands it got into.

Answer. Well, it comes into mine.

Question. And then where does it go from yours?

Answer. It is given in contributions.

Question. To whom?

Answer. To different campaigns.

Question. Name one

Answer. Well, I don't keep a record of that. I would be glad to see if - to see if I can find it for you.

* * * * * * *

Question. Now you have the money in your hand; you have $10,000; you are going to give it to the campaign committee. How do you do it?

Answer. I handle it. I have been doing it for a great many years.

Question. Do you handle it in cash?

Answer. Well, we pay bills sometimes. Sometimes we may handle it in cash.

Question. What is wrong with writing a little check to the campaign committee?

Answer. I tell you what I decided after this situation: I told Mr. Hoertkorn [his bookkeeper], "For your information, starting March 1, [1951] everything in that fund is going to be by check."

The CHAIRMAN. May I ask a question at that point. Mr. Samish, just looking here at one month - for instance in May of 1950 - you have "contributions $10,000," "$10,000," "$10,000," "$10,000" - four of them definitely marked "contributions" there; others here, "liquor," and somebody is a trustee, and "Louis Lurie Company" - I guess that is printing. But anyway, there is $40,000 in "contributions" that I assume that you handle by paying some bills or giving to the candidates, or whatever it may be.

Question. Is there a distinction between "cash" and "contributions"?

The CHAIRMAN. Is that the same thing?

Answer. "Cash" and "contributions" are the same thing.

Question. Who decides whether it is going to be a contribution or cash?

Answer. All of our contributions, with rare exceptions - once in a while we may make a check out if I don't happen to be around, or for what reason I don't know. But I would say 95 percent of it is in cash.

In view of the prohibitions in the Federal Corrupt Practices Act, the disbursements by Samish of substantial sums "in connection with campaigns" indicate that there is a strong possibility of a violation of this act by the Samish group. Among other things, the act prohibits campaign contributions by corporations. Samish was found to have issued a circular letter to the brewers discussing "all candidates" and admitted that they had been called upon by some of the

Attorney General of the United States has been asked to look into the matter.

Samish testified that about $153,000 per year was received into the special account to be disbursed according to his direction. In the 1-year period of 1950 at least $105,000 of this sum was checked out for "cash." Samish claimed in his books that the money was spent for "contributions." Notwithstanding, he was unable to tell the committee during his testimony exactly where as much as $1 of this sum was spent. An interesting example of his vagueness and indefiniteness was a passage which took place about an item of $13,317.94 which Samish reported in his personal income-tax return for the year 1949 under "rentals." Samish said the money came from "a little oil venture." He said he owned oil properties in Indiana and Texas and he didn't know which one - "really I don't."

Question: A "little" item you can't remember?

Answer: Oh, it's small. That's right. I can't remember.

Question: All right, sir. See if you can remember this one: Another $13,000 in your expense for 1949 for entertaining - $13,899.35. What is that for?

Answer: Oh, I can't give you any details.

* * * * * * *

Question: In general, who is entertained $13,000 worth?

Answer: I can't tell you. If you want to ask or inquire about those things, I think our tax consultant, or our tax counsel, will explain everything to your satisfaction.

Question: Is he the one who spends the money?

Answer: That isn't a question of that.

Question: Yes; it is the question.

Answer: Well, I don't know. I just don't know, Mr. Rice.

The light regard with which Samish holds money is further illustrated by his statement about some of his fees. Samish related that he received a yearly income from a number of accounts, one of which was Schenley Industries of New York. He said, "I get $36,000 flat fee from Schenley Industries." Senator Kefauver said, "You must do a lot of work for them for $36,000. Samish replied, "Well, I do at times, Senator, I do but not always. I mean I am `callable' when they want me." Samish testified that he had previously been paid as much as $46,000 by Schenley but the amount of his fee was reduced to $36,000, the reason being that "I was earning too much money."

Apparently Samish has been none too discriminating in his choice of friends and associates. For instance, he testified he had on several occasions gone to Hot Springs, Ark., for the baths there. While there he talked with the notorious Joe Adonis, alias Joseph Doto, one of the major racket figures in the country. He said, in answer to a question about meeting Adonis any place outside of Hot Springs, "Oh, I eight have seen him around New York.'' While in Hot Springs there was a telephone call placed from his room to the Beverly Country Club in New Orleans, which at that time was one of the best known gambling casinos in the country. The committee testimony has reflected that the club is operated principally by "Dandy Phil" Kastel and that Frank Costello has an interest in. the place. When asked the reason for his call to the Beverly Club from Hot Springs in April of 1950, Samish replied, "Well, I couldn't tell you. Maybe I wanted to say, `Hello', to Mr. Kastel or Mrs. Kastel.' Pressed further about the conversation, he said "I don't recall. I really can't say. I just can't say. I don’t know. I don't know the nature of the conversation." It was also indicated to Samish that while at Hot Springs he had made numerous calls to Chicago to a telephone listed to the Jack Stone Cigar Store, 217 North Clark Street. He was asked what the calls were for, and answered that he probably was looking for a tip on "a horse or anything."

An example of another type of Samish influence and accomplishment was brought out through the testimony of C. H. Palmer, counsel for the Alfred Hart Distilleries, of Los Angeles, Calif. In1943, Alfred Hart was anxious to open a new liquor distributorship in San Bernardino County, one of the largest counties in the United States. A partnership with Edward Seeman was formed in 1943 for this purpose. Seeman, according to Sheriff James Stocker, was operating slot machines and pinball machines in that section. After about 2 months, there were some negotiations between Arthur Samish, State Senator Ralph Swing, Alfred Hart, and his attorney. Mr. Palmer, the attorney, advised that "Mr. Seeman was in some sense representing Mr. Ralph Swing." A new arrangement was made and a new partnership formed with Alfred Hart retaining 51 percent of the interest and the balance distributed to Ralph Swing, Edward Seeman, and Miss Edith Mack identified as a friend of Samish. The testimony reflected that almost immediately the enterprise flourished. Seeman's investment was said to be $100, Senator Swing's $500, and Edith Mack $100 or $200. Within the first 3 months of the operation, Miss Mack's share of the profits was at least $2,700.

When there was a reorganization in 1948, Hart purchased the interest of Seeman and Swing. In addition to his dividends over the years, Senator Swing received $16,000 in cash, plus 6,000 shares of stock which were sold for $24,000. In addition to his substantial dividends, Seeman received $16,000 cash and 8,000 shares which were sold for $48,000. Miss Mack retained her interest. In discussing Samish's participation in bringing these people together, Senator Kefauver commented to Mr. Palmer, "It was very pleasing to Mr. Samish to have some participation in getting Mr. Swing a good business deal like that?" Palmer answered, "Well. I think it is fair to say that it was a feather in his cap." Senator Kefauver went on to say, "I suppose it would be helpful to Mr. Samish to have Senator Swing on his side,'' to which Mr. Palmer agreed. Thus, we find an apt illustration of Samish's ability to accomplish a very profitable financial arrangement for a State senator, although there would be no record traceable to Samish.

What makes the Samish story even more incredible is the fact that many of the disclosures of questionable practices made during the committee hearings of 1951 had been exposed in part as long ago as 1938 when there was a legislative investigation in California. The results were incorporated in a report prepared by Howard R. Philbrick made September 28, 1938. Strangely enough, the report, after being made a part of the record of the California Legislature, was almost immediately expunged from the record and copies disappeared to the extent that the report became a virtual collector's item. The report was a work of several former FBI agents and extremely exhaustive. Parts were read into the committee record. Among other things, charged in its summary findings were:

The principal source of corruption has been money pressure. The principal offender among lobbyists has been Arthur H. Samish, of San Francisco, through whose accounts has passed at least a total of $496,138.62 during the years 1935 to 1938. * * * Lobbying of the type represented by Mr. Samish as distinguished from open legislative representation has been a major corrupting influence. * * * Mr. Samish from one client industry obtained a political fund in excess of $97,000 between 1935 and 1938 - quite distinct from Mr. Samish's own compensation fund from the client. He could spend the political fund without accounting and in fact kept no disbursement records.

In that report, Samish was quoted as saying, "I am the governor of the legislature. To hell with the Governor of the State." As far back as 1938, the investigators encountered the same difficulties in dealing with Mr. Samish's record as had the Senate committee representatives. Those predecessor investigators said that, "Mr. Samish's records were not records as a bookkeeper would understand the term. They were notations of income items and check-stub records of bank-account withdrawals. Further, there was no itemization of Samish's expense, deduction. * * * Mr. Samish's return to the Federal Government in 1937 is not in compliance with rules and regulations of the United States Treasury Department and does not attempt to set up figures which actually reveal Mr. Samish's true income."

In view of the findings of this committee, recommendations have been made to both the Commissioner of Internal Revenue and the Attorney General of the United States that Arthur Samish's practices and those of the California Brewers Institute and the brewer members thereof be examined with a view to:

1. Disallowing the deductions of the brewers as "operating expense" in the 9-cent assessment fund, amounting to nearly $2,000,000 in the past 6 years. This fund has obviously been expended principally by Arthur H. Samish for purposes almost entirely unexplained.

2. Assessing Samish for additional income in view of the fact that Samish admitted personally receiving, in the past 6 years, nearly $1,000,000 in cash from the brewers. This sum should be considered income to him and taxable accordingly, unless he is able to show that the money was expended for properly deductible purposes. In other words, from the record it could be said that the money went into Samish's own pocket and stopped there.

VI. Attempt to circumvent new Federal law against shipment of slot machines

During the hearing in San Francisco early in March 1951 there was brought into the hearing room a new contraption just shipped to California from Chicago. Testimony of Allen Krause showed that despite the very recent passage of Federal legislation prohibiting the interstate shipment of slot machines, at least one company, the Buckley Manufacturing Co. of Chicago, had already produced a machine which was said to be a non-coin-operated device but appeared to be very similar to a console slot machine and had already shipped a pilot model to California. Mr. Krause had ordered one of the machines and explained that the machine would operate after the bar-tender or operator of the establishment had thrown a switch which would permit the playing of the machine. Obviously it was intended that any coins which changed hands would go to the bartender and the pay-off as indicated after the turning of the wheels would be made by the bartender. Thus, it was intended by the operators to argue that although the machine might be adapted to accomplish the same purpose as a slot machine, "it was not coin-operated." It appears that the racket element has no intention of abandoning the lucrative slot-machine business even though recent Federal legislation has been designed to paralyze this illicit industry.

The testimony before this committee clearly established that sometime toward the end of July or beginning of August 1947, Superintendent of State Police John A. Gaffney requested a survey to be made of gambling in Saratoga County. This order was transmitted to Inspector Charles LaForge, who made the survey assisted by several troopers. Their findings were incorporated in a report which Inspector LaForge made on August 4, 1947. This report describes in detail six separate gambling establishments, namely, the Chicago Club, Delmonicos, Smith's Interlochen, Piping Rock, Arrowhead, and Newman's Lake House. Each report indicates by whom the establishment is operated, a description of the property, and its location, together with the gambling equipment observed therein.

A typical example of such description is the following: Club Arrowhead, operated by Joe Adonis of Brooklyn, Charley Manny, New York City, J. A. Coakley, alias O. K. Coakley, Lefty Clark, Detroit; description, frame building, outskirts of city, consisting of bar, restaurant, and casino all on first floor; gambling equipment, five roulette wheels, one large wheel, five card tables, two crap tables, two bird cages.

All of the establishments described in the LaForge report in addition to having open gambling, sold food and liquor, and were all duly licensed by the State Liquor Authority. This La Forge report was forwarded by Inspector LaForge to Chief Inspector Francis S. McGarvey, who prepared a condensed memorandum bearing the same date, August 6, 1947, covering 1 1/2 pages, listing each of the clubs.

The LaForge report and the McGarvey memorandum were transmitted to Superintendent of State Police Gaffney on the same date, August 6, 1947. Up to this point police action was more than prompt. The report was completed and personally delivered to Gaffney with unusual expedition, not being permitted to go through the usual channels.

Despite the great hurry to complete the report and deliver it to Gaffney, Gaffney testified that he merely read the report and immediately filed it away. He only remarked to Chief Inspector McGarvey, who had delivered it in person that, "This looks like a sizable operation." He took no further action although both Chief Inspector McGarvey and Inspector LaForge were awaiting orders to close the gambling joints, an order which never came. Superintendent Gaffney stated that the report submitted to him through his own organization made him aware of the fact that there was a very substantial operation going on in Saratoga which was run by some well-known and unsavory characters with national criminal reputations, such as Joe Adonis, Lefty Clark, and others. He further testified that the only reason he took no action was because he received no request from the local authorities to intervene and that the Governor had failed to give him orders to do so.

According to Superintendent Gaffney State troopers can only take action in cities at the request of local authorities or at the order of the Governor. He based his opinion on section 97 of the executive law. This provision of law was read to him and it was pointed out that this statute grants to the State troopers the powers of peace officers anywhere in the State. The only limitation on State police activities within cities is contained in the last sentence of section 97, which reads:

but they, the State police, shall not exercise their powers within the limits of any city to suppress riots and disorder except by direction of the Governor, or upon request of the mayor of the city, with the approval of the Governor.

Thus, the sole restriction on the activity of the State troopers within cities relates to the suppression of riots and disorder. This has no application to the subject of gambling. When this was pointed out to Superintendent Gaffney, he shifted his position and stated that State police did not intervene in cities without express order or request, because of policy and not, because of any statute.

Superintendent Gaffney testified that neither he nor anybody on his behalf took the matter of gambling in Saratoga up with the Governor, or with any member of his staff. When pressed as to the cause of his failure to inform the Governor or his staff, Gaffney stated that he felt that they knew about it since, "It's been going on for 25 years to my knowledge." In this connection, it should be stated, that one of the committee's investigators testified that LaForge told him the report had been ordered by the Governor's office and was "delivered to the Governor's office. LaForge denied having said this and he and the other members of the State police denied it to be the fact.

When the chairman asked, "In other words, you just knew you just weren't supposed to do anything about it," Mr. Gaffney answered in the affirmative. He also stated that when one gets to be the superintendent of the State police he is supposed to have enough savvy or understanding to leave gambling in Saratoga alone unless he is told to go in.

Gaffney also testified that if he brought the matter to the Governor's attention on his own initiative, he would be "out, on the side-walk." But he took the opposite position when pressed by Senator Tobey who asked: Gaffney, "Well, if you saw Tom Dewey and said, `This is a rotten condition, what shall I do, Mr. Governor,' what do you suppose he would say." Superintendent Gaffney answered, "Go in and clean it up." These two answers are irreconcilable.

Subsequent to the testimony of Superintendent Gaffney, this committee received from Hon. Thomas E. Dewey, Governor of the State of New York, a report made to him by his counsel, Lawrence E. Walsh, together with a statement from the Governor himself. The report is a substantial whitewash of Superintendent Gaffney, going so far as to state, "At several points during Superintendent Gaffney's examination, he was victimized by complicated questions which assumed facts not proven but even facts contrary to those proven." Nevertheless the report concludes:

Since September 1949 weekly inspections by the State police have completely eliminated organized gambling in the city of Saratoga. Even this conclusion is at variance with the facts. The undisputed testimony shows that gambling was going full blast in. August 1949, during the racing: season when the gambling houses are wide open. The season ends at the beginning of September. When the racing season of 1950 began in August of that year, the State Police closed down gambling. Right up to the beginning of the season; the gamblers made preparations to open. There was no general understanding that the city was closed down. The Walsh report fails to explain why the State police acted to prevent organized gambling during the racing season of 1950 but did not take any action during any prior years.

It should also be noted that Superintendent Gaffney, as well as his subordinates, testified that all of the gambling establishments referred to in the LaForge report, were licensed by the State liquor authority. These witnesses stated that it was a ground for revocation of the liquor license, if gambling were permitted on licensed premises. No valid explanation was given for the failure of these State officials to report these conditions to the liquor-authority or of the failure of the latter agency to take any action. Mr. Walsh's report is also significantly silent on this subject.

Walter A’Hearn, one of two detectives on the Saratoga Police force, testified that in the 19 years he had been a member of the force, he never made an arrest for gambling and his general practice on going into the various clubs in Saratoga was to go as far as the lobby but not to go into the gaining rooms. He would not go beyond the dining room. He also testified he never had orders to go into the gaming rooms, and that it was his opinion that if he had gone in he would have been out of a job.

A study of this witness' savings bank account showed the significant fact that in the years when gambling was permitted in Saratoga, he made substantial deposits at the end of the gambling season. In the years when there was no gambling, he made no such deposits. The witness testified that he and his partner earned extra income by escorting the cash to some of the gambling establishments from the bank, for which he was paid at the rate of $10 a night. For this purpose, a police automobile was used. This practice was carried on with the knowledge of Chief of Police Patrick F. Rox. It is apparent from the testimony in executive session of both Chief of Police Rox and Sheriff Hathorn, that they knew of the gambling conditions in Saratoga. Chief of Police Rox like Detective A'Hearn, felt that it was to his own best interest to take no action and to issue no instructions for taking of action in connection with the gambling. Sheriff Hathorn took a similar position.

It is gratifying to note that on the basis of the disclosures of this committee, the Governor has ordered a special investigation in Saratoga. Despite the critical tone of Mr. Walsh's report the Governor's statement is most complimentary, pointing out the "great positive contributions made by the Senate subcommittee * * *."

It is apparent to this committee that open gambling in Saratoga has existed for many years with the knowledge of the New York State police and of public officials and the local political organizations that control such public officials. It is the opinion of the committee that these public officials and political organizations profited from the flagrant disregard of criminal statutes. But what is equally disturbing to the committee is that these Saratoga operations contributed enormous sums to the coffers of some of the most notorious hoodlums in the country.

INTRODUCTION

Public concern over organized crime was at a high point when this committee held its hearings in New York City. A Brooklyn grand jury was inquiring into the ramifications of a bookmaking empire that was reputed to have done a $20,000,000 business and to have paid over $1,000,000 a year to the police for protection. Grand juries in New York County had under consideration the misuse of firemen's funds and the heartbreaking degradation of our college students through basketball fixes, arranged by professional gamblers. There was public: apprehension over the increased narcotics traffic and its mounting toll among teen-agers.

In contrast to other cities visited by the committee, however, some of the principal law-enforcement officials in New York City were keenly alert to the menace of organized crime. The struggle against organized crime, with its deep roots in gambling, received tremendous impetus from the prompt and effective action of New York County District Attorney Frank Hogan against Frank Erickson following his confession of bookmaking activity before the McFarland Committee in Washington last year. Erickson's incarceration on a gambling charge was remarkable in that a top-flight gambler had suffered a sizable penalty for flouting the law. Hogan has been waging a courageous war against Costello and the crime syndicate for many years. Miles McDonald, district attorney of Kings County, deserves great credit for the tireless way in which he has been digging into the operations of the Gross bookmaking empire, despite repeated attempts to discourage their investigations.

Both District Attorney Hogan and District Attorney McDonald, and many able members of their staffs, were extremely cooperative with the committee in making available to it data from current and prior investigations. These data were of great assistance to the committee in its task of following the ramifications of organized crime in interstate commerce.

The New York hearings were vital to the committee for a number of reasons. New York City, because of its size, location, dominance in the country, complexity of its population and governmental problems, is one of the major centers of organized crime. It is, in fact, the headquarters of the Costello-Adonis-Lansky crime syndicate which is in close and cordial relationship with the country's other major criminal syndicate, the Accardo-Guzik-Fischetti group based on Chicago. The committee wished to determine what there was in the local situation that fostered the illegal operations of the Costello-Adonis-Lansky criminal syndicate in New York City as well as in other States.

In its 8 days of public hearings and 3 days of private hearings in 1951, following 2 private hearings held in 1950, the committee heard a total of 89 witnesses in addition to interviews and conferences with approximately 500 others. There were 40 at the open hearings and 49 at the closed hearings. These witnesses included public officials, political leaders, law-enforcement officials, Federal officials, including those of the Bureau of Narcotics, the Bureau of Internal Revenue, the Bureau of Immigration, and others. The committee heard from former Mayor William O'Dwyer; from two of his chief aides and intimate friends, Frank Bale and James F. Moran; from another former O'Dwyer aide, John Murtagh, who was former commissioner of investigation, and now chief magistrate of the city, having been appointed to that position by O'Dwyer. The committee heard considerable testimony concerning water-front conditions from such witnesses as Mr. Philip Stephens, business manager of the New, York Daily News; Mr. Walter Hedden of the Port Authority of New York; and from various water-front racketeers, including Albert Anastasia, who was heard at closed hearing, and his brother Anthony, who was heard at the open hearings.

District Attorney Miles McDonald and his able assistant, Julius Helfand, appeared to testify about police corruption in Brooklyn and to portray for the committee the gambling operations they had uncovered and the ramifications of these operations in New Jersey and in other States. The chairman of the newly formed New York City Crime Commission, former Assistant Secretary of a of State Spruille Braden, appeared to give his views. At a later hearing in Washington, Judge Samuel Leibowitz, who had played a prominent part in connection with the grand jury investigation in Brooklyn, also testified and gave the committee the benefit of its factual knowledge and its views.

The New York hearings covered many facets, including the links between crime and politics, crime on the waterfront, large scale book-making and gambling operations, narcotics racketeering, operations at the Roosevelt Raceway, gambling conditions in Saratoga, and links between gambling in New York and New Jersey. It particularly stressed both the personnel and the form of the huge crime syndicate which is primarily directed by Costello, Adonis, and Lansky. Not all of these subjects were explored at the open hearings, but all of them were covered either at closed hearings, open hearings, or in the committee's investigations. Most of the subject matter, however, revolved around the testimony of two major witnesses, Frank Costello and William O'Dwyer. Both of these witnesses were questioned on a wide variety of subjects bearing on organized crime and its links with politics with the result that practically all of the information developed in the New York hearings could most expeditiously be related by reference to the testimony of these two witnesses.

A simple point illustrates the stature of Frank Costello in New York City. According to Ambassador O'Dwyer, when he was an Army officer attached to the Air Force in 1942 with orders "to keep Wright Field clean," he found it necessary to obtain some information from Frank Costello. Despite the obvious disinclination which the former prosecutor of Murder, Inc., must have had to go into the home of Costello, O'Dwyer did not even think of calling Costello to the offices of the Army Air Corps; he went to Costello's home. The record is complete with evidence of persons in high political positions going to Costello's home at Costello's call. In fact, one former judge, during the regime of Tammany leader Hugo Rogers, as recently as 1948, was known to be the man behind the throne. Hugo Rogers stated on private examination, "If Costello wanted me, he would send for me."

I. Costello-The legitimate businessman

What manner of man exercises this power and has this prestige? Both Costello and his counsel, George Wolf, protested at the executive and public hearings that Costello was falsely charged with being the leader of a national crime syndicate. They were thankful for the opportunity to testify so that they could dispose of the fantastically untrue stories about Costello.

Costello stressed his legitimate business interests in real estate, oil, and other things. According to Costello, he is not a politician, but only a friend of politicians. His political influence goes no further than that of any man who has lived in one neighborhood for many years. He maintains an apartment in one of the most fashionable buildings on the West Side of New York, has a. summer home, in Sands Point, and travels regularly to Florida, New Orleans, and Hot Springs. He claimed that he had no connection with bookmakers. His associations with known racketeers were purely out of friendship and when he met them in other States, it was purely by chance.

This picture of Costello as a legitimate businessman, which he and his counsel were trying to create, was blurred considerably by additional testimony. His legitimate interests, it was shown, were slight, taking little of his time. From 1944 to 1950, he had owned a parcel of hind and the buildings thereon at 79 Wall Street. A management company managed it for him. He had recently invested in a company, making infra-red ray broilers, but until his counsel told him, he could not answer the committee's question as to the characteristic feature of his product. While Costello testified that his counsel, Wolf, was his principal advisor on business interests, Costello had invested on the advice and casual conversation of his good, friend, Frank Erickson, $4,000 in cash in oil, which he increased through the years to a total of $41,000. He admitted he didn't know anything about the oil business, had made the additional investments solely by laying hunches. He also was an investor for a time in Consolidated Television Co., in which Meyer Lansky and Joe Adonis also had investments. Apart from real-estate investments, Costello admitted, his last previous legitimate business had been a company manufacturing chocolate-covered ice-cream sticks in 1920. Before that, he had had other real-estate ventures, had manufactured kewpie dolls as punchboard prizes, and, prior to his arrest and incarceration on a charge of carrying a gun, had been employed in a piano factory.

On detailed examination of Costello, it became perfectly apparent that his legitimate business consisted of a very few investments about which, on examination, he had practically no knowledge himself and which required practically no time or attention from him. The characterization which he gave himself as being a legitimate businessman simply cannot be sustained.

II. Illegal activities of Costello

Costello's illegal enterprises were neither so quickly ascertained nor so easily described. He admitted a present 20-percent interest in the Beverly Club from which he received first $1,000 and more recently, $1,500 a month for acting as a good-will agent and talent scout. The Beverly Club has one of the most elaborate gambling casinos in the New Orleans area, operating all kinds of gaming devices in clear violation of Louisiana law. With some reluctance, Costello also admitted to an interest in the Piping Rock Casino in Saratoga in 1943, but he claimed that he was not personally responsible for this operation, sharing only in the profits because he financed a man who was interested in it. A letter from Meyer Lansky. to his accountant, however, indicates that Costello had an outright 30-percent interest in the casino and that Meyer's brother Jack and Joe Adonis also shared in it.

Costello was in the slot machine business in the early thirties in New York City. He admitted that it was in partnership with his present New Orleans partner, Phil Kastel. Mayor Fiorello LaGuardia put him out of business in New York City. In the mid-thirties, the late Huey Long invited him and his slot-machine business into Louisiana, intending, as Costello stated, to legalize them and tax them for various State enterprises. Before he saw Long again, Costello said, Long was assassinated and the plan failed of accomplishment. But Costello's illegal slot-machine business remained under the management of Phil Kastel and flourished. Costello admitted that his income from this slot-machine operation was over $70,000 in 1946. Costello insisted that he left the active management of the slot-machine business wholly to Kastel since the time of the survey made at Long's request. Legally made telephone taps in 1943, raised considerable doubt as to this contention. They show Costello giving specific orders with respect to the purchase price and makes of machines. Costello, moreover, visited New Orleans every year for about 30 days. However, he denied that his annual visits to New Orleans were in connection with the slot machines or Beverly Club business. He denied that Kastel or the Louisiana businesses in which he was interested paid his expenses. While the hotel bill was listed in Kastel's name, Costello said he always reimburs