Supermob

by Gus Russo

  Looking for a third book project in 1984, Moldea was drawn to the world of the Supermob after reading both the Hersh 1976 series on Korshak and a subsequent August 17, 1980, Los Angeles Times article by William Knoedel­seder on Reagan's curious history with MCA. With a $5,000 grant from Washington's liberal think tank The Institute for Policy Studies, where he was a visiting fellow, Moldea made a preliminary trip to Los Angeles, where he was introduced to Jack Tobin.

  "You have to go after Sidney Korshak," Tobin told him. "He's where Reagan's connections to MCA, as well as to the underworld, will begin and end."43

  Moldea next sought out Dave Robb, who gave Moldea unlimited access to his document cache, marking the beginning of a lifelong friendship. After securing a book deal with Viking, Moldea went into his "bat mode," working almost around the clock for the next year. He soon concluded that he would have to work primarily from the documentary record. "They were at the height of their power," Moldea recently said. "I couldn't get anyone to talk to me. The book is mostly based on documents." Out of 127 people contacted, only 20 would go on the record; some superstar actors actually broke down crying at the thought that their recollections might get back to Wasserman and Korshak. Nonetheless, Moldea followed in the Supermob's footsteps as best he could in his effort to understand their synergy.

  "I went to the Bistro and asked, 'Where did Reagan sit?'" Moldea remembered. "Right next to Korshak" came the answer from a waiter.

  The resulting book, a 382-page critique entitled Dark Victory: RonaldReagan, MCA, and the Mob, was the most courageous, and well-researched, indictment of a sitting president and his power base in history. The book was critically well received and sold a respectable thirty-five thousand copies, despite being next to impossible to find in bookstores. Despite the depth and import of the research, the national media, so many of whom were tied to MCA product, ignored the book altogether. "I couldn't get on TV," said Moldea. "The book caused me great political problems." Not the least of Moldea's difficulties originated within his own Institute for Policy Studies, whose directors forced him to resign; Jules Stein's daughter was a coveted IPS contributor, whom they could not afford to offend. In addition, Lew Wasserman was planning to throw a Hollywood fund-raiser for IPS.

  Hilton in Atlantic City:

  The Curse of Korshak II

  On February 28, 1985, Hilton Hotels became the second Atlantic City casino wannabe after Hyatt to suffer a major setback due to their long association with Sid Korshak. The company applied for a license at about the same time as Hefner-Pritzker, but was turned down by a 2-2 vote (with one abstention) just three months before the planned May 1985 opening of the $270 million hotel-casino.

  According to Barron Hilton, his company had employed Marshall's firm since the 1940s in its dealings with the Chicago Hotel Association, which his brother Sidney represented in labor "negotiations" with the Chicago Outfit. Former Hilton general counsel E. Timothy Applegate remembered that Marshall had other creative methods for squeezing the golden Hilton goose. As noted previously, Marshall's close relationship with the Cook County tax assessor appeared to play a role in the frequent tax audits Hilton received, a nuisance that conveniently led to more work—and more fees—for Marshall.44

  Since 1971, Hilton's period of greatest expansion, Sidney Korshak had been on retainer to Hilton Hotels as its labor consultant. However, the origins of Sidney's hiring by Hilton was foggy; Barron Hilton, Conrad's son, ventured that it occurred at the recommendation of Hilton's then general counsel, Stanley Zax, whose mother was a friend of Sidney's. According to one Flilton employee, Zax referred to Korshak as "Uncle Sidney." When gaming board investigators spoke with Sidney in his brother's Chicago office, he said he was recommended to Barron Hilton by Patrick Hoy, a VP at Henry Crown's General Dynamics Corporation. Korshak believed both Zax and Hoy went to bat for him, adding that Zax was likely returning favors, since Marshall had secured Zax a job with a local law firm, and Sidney had helped Zax land work with National General Insurance. When the investigators interviewed Henry Crown, he said that Conrad Hilton would likely not approve of Sidney's hiring. "Connie's rolling in his grave over Hilton's retention of Sidney Korshak," Crown said, laughing. He added cryptically that he had recently met up with Korshak at the Beverly Hills Friars Club under "shady circumstances," feeling that he was "set up."

  Barron Hilton also said he knew of Sidney's Las Vegas reputation, where he arranged sweetheart contracts for his Riviera Hotel. "I have got to say this about Sidney," Hilton later testified. "He told me, cW7hatever you do, don't give the union people even a pencil, give them nothing.' "45

  According to records that Korshak provided to Hilton in 1983, Hilton had paid Sidney $612,000 over the years, and $366,000 to his brother's firm, where the work was actually done. The New Jersey Casino Control Commission noted that Sidney's fees seemed exorbitant "for the few identifiable legal services" he rendered. However, Hilton general counsel E. Timothy Applegate and his superiors believed that the Korshak brothers' fees were a bargain, considering all the successful work they had rendered over the years, including the successful defenses in all of the eighty-plus Equal Employment Opportunity Commission (EEOC) appeals cases, largely handled in Marshall's office by Don Peters. According to Applegate, Sidney, now a multimillionaire, was not even remotely interested in his own cut of the fees, telling Applegate, "Look, I don't need the money, and I enjoy having a class company like Hilton as a client."46 Interestingly, Hilton was Korshak's adversary in Las Vegas, where they refused to join his rogue hotel association. That decision cost Hilton millions when they were subsequently forced to close down due to a strike by Ed Hanley's Hotel Workers Union.

  The Hilton-Korshak relationship went smoothly until Hilton's expensive gamble in Atlantic City. Hilton had invested so much in the venture because it had come to realize the vast profits to be made in the casino game; its two Las Vegas locations, the Las Vegas Hilton and the Flamingo Hilton, accounted for 45 percent of the company's total profit ($70 million by 1988).47 The Atlantic City venture, with 614 rooms—with a possible expansion to 2,000 rooms—represented the largest undertaking in the history of the company, which had started out as partnership with Kirkeby and assorted underworld luminaries.

  During the requisite hearings before Jersey gaming officials, Hilton began to realize that its association with the Fixer could be devastating. As noted, the company had previously checked out Korshak after the Hersh New York Times series and came away satisfied. Barron Hilton testified that he sympathized with Korshak after the 1976 series hit: "I frankly felt kind of sorry for the individual because I felt he had some special talent and still do, as far as doing a job in labor relations. I think the man, [and] his office, has done an outstanding job for our company." However, the gaming board wasn't buying and continually berated Hilton for still associating with Korshak.

  Under intense questioning by division director Thomas O'Brien and other commission members, Hilton finally caved, saying, "I wish to hell we would have never hired him, because I can see it's a very distinct problem here in the minds of you gentlemen about this fellow's integrity. I'm sorry we ever had this problem occur."

  Under a constant battering, the company relented and decided to sever its long relationship with Korshak, not only because of the board's objections, but also Sidney's recent refusal to cooperate with the congressional panel looking into the union corruption under Ed Hanley. Applegate was assigned the unenviable job of delivering the bad news. "At about the same time as Barron's testimony, Sidney was subpoenaed by a congressional committee on corruption in the hotel industry," Applegate recently recalled, "and when he said he'd plead the Fifth Amendment, that was the last straw for Hilton. I called Sidney [to fire him], and he was very unhappy, saying that we were kowtowing to 'those pricks.' I asked for his Hilton work files to give to the board, and he said, 'To hell with them. I would do it for Hilton, but not for those people.'" Korshak eventually delivered approximately twenty linear feet of work fil
es to Hilton, and when they were perused by Hilton's New Jersey law firm, it was reported that "all legal services provided to Hilton Hotels by the Sidney R. Korshak law firm were performed exclusively by Donald E Peters, Jr., Esq., and David Mendelsohn, Esq."*'48 During their interview with Mendelsohn, New Jersey gaming officials also learned that 90 percent of the work done for the Chicago Hotel Association over the years had, in fact, also been performed by Mendelsohn, pursuant to an arrangement worked out with Korshak, who disdained the nuts-and-bolts work.49 Gaming commissioner Carl Zeitz wanted to know whether Korshak "ever did a lick of legal work for the company," and Applegate responded, "I don't know."

  Applegate followed up with a condolence letter to Korshak on March 30, 1984, thanking Korshak for his understanding. "We very much regret this situation," Applegate wrote. "We feel however, that we cannot risk jeopardizing in any way the huge investment we have committed in Atlantic City." Applegate added, "My own inquiries and reading of the public press have never revealed to me any reason to consider terminating our relationship." However, he observed, gaming officials "appear to believe that you have questionable associations and have made an issue of your retention by Hilton." Applegate also acknowledged the quality of Korshak's work over the years for Hilton:

  I appreciate very much your understanding the action we feel we're forced to take in dissolving the long-standing relationship between you and Hilton Hotels Corporation . . .

  You know that it has always been my opinion that we would have had to pay far more elsewhere for the services of comparable quality over the past twelve years, and I certainly don't question your entitlement to the full annual fee for 1984. You can also rest assured that you continue to be held in huge esteem and affection by those of us at Hilton who have had the pleasure of having you as a friend and advisor.

  Sincerely, Tim

  However, the New Jersey officials were not impressed with Hilton's too-little-too-late action. One commissioner remarked that Hilton "apparently didn't get religion until it was pounding on the pearly gates of licensure." The Casino Control Commission called Applegate's post-Hersh investigation of Korshak "perfunctory."50

  The Korshak connection was a major but not the only reason for the official problems with the Hilton application. Commissioner Carl Zeitz pointed out that in 1975 the Las Vegas Hilton had cashed $100,000 in checks for the Aladdin Hotel's general counsel Sorkis Webbe, "which we know were kickback payments on the Aladdin hotel-casino construction financed by the Teamsters." Webbe, a St. Louis associate of Morris Schenker's, was later convicted and sentenced to prison for concealing the kickbacks on his tax returns, and federal prosecutors charged that the checks, totaling over $1 million, were "laundered" at the Hilton. And there was the matter of Hilton's casino division VP Henry Lewin, who had been indicted in 1979 for comps given to Jimmy Fratianno's Teamsters boss pal Rudy Tham.

  Thus, on February 28, 1985, two years into construction, the commission rejected Hilton's bid. In its decision, the gaming commission called Korshak "a key actor in organized crime's unholy alliance with corrupt union officials and its pernicious efforts to frustrate the rights of working men and women by infecting legitimate unions, to rob their members' future by stealing the benefits they have earned in the past from honest labor." At the conclusion of the hearings, New Jersey gaming commissioner Joel R. Jacobson said, "In my judgment, the . . . relationship of the Hilton Hotels Corporation with Sidney Korshak is the fatal link upon which I primarily based the conclusion that this applicant has not established its suitability for licensure in New Jersey."

  When Hilton's testimony was released to the press months later, his rebuke of Korshak prompted a rare display of acrimony from the famously unflappable Fixer. On November 29, 1985, Korshak fired off a vitriolic letter to his former friend Barron Hilton. The letter in its entirety stated:

  Dear Sir:

  I find it extremely difficult to address you in any other fashion.

  I read with interest your disparaging remarks about me to the New Jersey Gaming Commission. When did you discover that I was unworthy of being an attorney or that I was associated with characters that shocked your most decent sensibilities?

  I have in my possession a number of letters from your staff attorneys extolling my virtues as an attorney and telling me how happy the hotels were with my representation of your corporation. Those letters were also sent to your office for your personal perusal. I am sending them to you again today.

  Was I in a sorry plight when I met you in New York and worked out a deal with Charlie Bluhdorn of Gulf & Western, giving you their airport hotel and the Arlington Hotel to manage without you investing one penny, despite your offer to pay Gulf & Western $10,000,000 for one-half investment in these hotels? If you recall, I never billed you for my services in these matters. My fee would ordinarily be a very high one. Do you remember calling me in Las Vegas at 6 one morning while you were with Kirk Kerkorian and Frank Rothman for me to ask the unions not to strike you, namely Dick Thomas of the Teamsters and Bob Fox of the Engineers? As you well know, there was no fee involved.

  You have caused me irreparable harm, and as long as I live I will never forget that. When did I become a shady character? I imagine when you were having difficulty getting a license in Atlantic City.

  Very Truly Yours,

  Sidney R. Korshak

  Korshak's anguish was, uncharacteristically, conveyed to his Hollywood pals. Paramount president Frank Yablans said, "What Barron did pained Sidney so."51

  In retrospect, Tim Applegate believed Korshak was only part of Hilton's problem. "Sidney was the ostensible reason for the denial, although lying behind that was a general feeling that we were arrogant as hell—and there was some truth to that," Applegate said recently. "When we showed up for the first hearing, Christ, we showed up in five limousines. And Barron has a way of seeing the world revolve around him. He didn't want to be bothered with having us prep him for his testimony: 'I already know it all,' he'd say. Barron claimed to have approved all the attorneys hired, when in fact I hired over one hundred, and I doubt he even met two of them."

  And there may even have been other hidden agendas, in Applegate's view. "At the time, Barron and I were highly suspicious that some competitor had done us in," said Applegate. "We knew that there were a lot of suspicious people operating casinos back there that didn't want us in. Initially, New Jersey was practically begging us to come in. There was a Democratic administration in place, and our attorneys were very friendly with the governor. But we backed off for a year due to a nationwide recession. In the meantime, the Republicans took over, and our attorneys had no rapport with them."

  Applegate was not alone in his suspicions. When Hilton's bid was officially declined, knowledgeable people pointed out the quixotic nature of the decision; the same board had recently voted 3-2 in favor of a license for Resorts International, over the objections of gaming enforcement staff members who believed Resorts had bribed the head of a foreign government, the Bahamian prime minister.

  Less than a month after it denied Hilton a gaming license, the Casino Control Commission agreed to reopen its hearing into Hilton's qualifications for a license, but on April 27, Hilton announced that it had accepted an offer of $325 million from Donald Trump for the nearly finished complex on which Hilton had spent about $308 million. Trump would later belittle Bar­ron Hilton in his book Trump: The Art of the Deal, calling him a member of "The Lucky Sperm Club," and bragging about how he'd pressured Hilton into a bargain deal.52 However, Trump paid Hilton more than Hilton had spent in its costs and had to borrow every cent for the purchase, for which he managed to overcome his great humility in naming it Trump's Castle.

  Ironically, Trump was quickly granted a license, although his attorney was Roy Cohn, who had been indicted four times—Korshak was never indicted. Cohn would later be disbarred, after racking up an appalling list of alleged misdeeds, including being accused of ordering a luxury yacht set ablaze to collect on a $200,000 insurance poli
cy, as well as committing the federal crimes of fraud, conspiracy, and corporate manipulations. Though he was acquitted of all charges in 1986 (the same year he was disbarred for borrowing $109,000 from a client and never repaying), he died mere weeks later on August 2 from the AIDS he was diagnosed with in 1984. 53

  Years later, when Trump ran into a close friend of Korshak's, he said, "Oh, Sidney Korshak. Great guy—if it wasn't for him, I never would have gotten Trump's Castle." Trump's crowing, as usual, was premature: his Atlantic City investment has been a steady money loser ever since.54

  Tim Applegate, like every other executive besides Barron, was forced to resign from Hilton in order to salvage the precious application. But Apple-gate, who said he was given "a platinum parachute," was not bitter. "Bar­ron felt very badly about it and gave me everything he could to ease the pain," remembered Applegate. But the experience had one bizarre twist remaining. "Barron dropped his application anyway," said a still quizzical Applegate. " 'To hell with them,' he said. I thought, 'Barron, why didn't you say that three months ago?'" Another executive who was forced to resign ran into Applegate months later and gave him a message. "Korshak told him that I was really a stand-up guy, and that if I needed any help in L.A., to let him know," said Applegate. "And I thought to myself that's probably the last thing I need. Knowing him, he probably would have gotten me located with one of the studios. I was later told by a union guy that once a week Korshak would go down to Drucker's Barbershop and meet with local mobsters."

  After some years in private practice, Applegate landed another counselor's position with a national corporation. Hilton finally got its Atlantic City license in 1991, taking over Steve Wynn's Golden Nugget and renaming it the Atlantic City Hilton—but they would sell that off in short time, and the property continues to shift ownership. At the time of Hilton's purchase of the Golden Nugget, Frank J. Dodd, a new member of the Casino Control Commission, noted, "It was a major blunder to deny a casino license to Hilton [in 1985]. The industry has since fallen on hard times in Atlantic City; the decision sent out a hostile signal to investors about how arbitrary and unreasonable New Jersey gambling officials could be. I don't think I would have denied them a license. That was a major turning point in the history of Atlantic City. It sent out a bad signal."-55