The Bluegrass Conspiracy

by Sally Denton

  Pressured to excel, Johnny horrified his parents by refusing to walk before he was eighteen months old. Alleviating his parents’ fears that he was mentally retarded, medical specialists suggested that Johnny was merely lazy. When Johnny finally decided it was time to walk, he was suddenly like a hog on ice—skating through the family’s fashionable Lexington home.

  The shadow of Brown Sr. was at once intimidating and comforting to Johnny. Johnny would come to yearn for his own style, to escape his father’s legendary status as a college football star and renowned criminal attorney. Yet he would use it as a safety net when it suited his purposes.

  Johnny received good grades at Lexington’s Lafayette High School, spending most of his free time winning golf tournaments for the school team. He frequented the local country clubs, and socialized with the sons and debutantes of Lexington’s finer families. His father yanked him out of Lafayette because the public school had no football team, and was enrolled in the Kentucky Military Institute in Louisville, which Brown Sr. hoped would make Johnny a man. Much to his father’s chagrin, Johnny did not excel on KMI’s football team, or in any other athletic endeavors besides golf. Fearing his father considered him a failure, Johnny vowed to prove himself in other ways. Legend has it that after one of his routine verbal jousts with his dad, Johnny exclaimed, “One of these days, I’m not going to be known as your son. You’re going to be known as my father!”

  Whether or not the statement was ever made has become a moot point. It has been so widely reported throughout Kentucky as to be considered factual—a fact over which John Young Brown, Sr., busted with pride in his twilight years.

  John Y.—as he came to be called after outgrowing the nickname Johnny—had a natural inclination toward sales and gambling.

  He spent his summers during high school selling vacuum cleaners door to door in Lexington, and wagered his earnings on anything that moved. When he entered the University of Kentucky in the fall of 1952, his private stashes of money impressed coeds and attracted male friends. He quickly fell into a crowd of partiers and gamblers, joining the wealthiest fraternity and hanging out with athletes.

  In the early fifties, the University of Kentucky campus had a country club atmosphere in the stereotypical Southern tradition. Johnny and his friends spent their spring and autumn afternoons at the idyllic Keeneland racetrack, drinking mint juleps from mock silver cups.

  Governor Chandler, who sat on the Board of Regents, to coach the Kentucky basketball team into national prominence, had lured Adolph Rupp to Kentucky. Awash in a point-shaving scandal, the ball club had nonetheless become the benchmark of Kentucky’s notoriety and status. Chandler’s son Dan played on the team—a slot that many contended was a patronage position.

  Dan Chandler and John Y. Brown, Jr. became close buddies, sharing an interest in sports and betting, despite, or maybe because of, their fathers’ deep-seated hatred for each other. Chandler and John Y., along with a Henderson, Kentucky, native named Jimmy Lambert, held regular poker nights that continued until dawn. John Y.’s uncanny card sense, high-stakes mentality, and ability to bluff earned him a reputation as a serious gambler—an image that would haunt him in future years.

  The University of Kentucky was not known for its stringent academic standards and John Y. took a minimum course load, selling

  Encyclopedia Britannica in his spare time. “John Y. was a tremendous promoter,” said a former student at Eastern Kentucky University in Richmond. “He’d recruit students from Eastern Kentucky University and other campuses in the state to sell encyclopedias for him. He’d tell us to buy the local newspapers to read the birth announcements so we could try to sell encyclopedias to the parents of the newborns. He would hang out at the old Palms nightclub in Lexington, flashing a bankroll and throwing money around.” By 1956 he was Britannica’s district manager, netting nearly twenty thousand dollars a year. “What kind of education do you have in your home for your children?” John Y. would ask parents in rural Kentucky areas. “They got to feeling guilty,” he would later tell the Washington Post. “It’s amazing…I sold most of ‘em in the mountains and those people who did-n’t have the financial means were the most receptive.”

  Many weekends, John Y. and his buddies drove the eighty-mile stretch north to the plush casinos and speakeasies of northern Kentucky. He loved the lifestyle of the ritzy joints, the dance revues and chorus girls, the dice and card tables, the numbers rackets and slots. He enjoyed the fancy showrooms, which boasted big-name acts such as Sophie Thicker and Tony Martin. “Those were the days,” one old-time gambler recalled wistfully. “Prostitutes were a buck, and people dressed up to come into the places. Even Governor Chandler— once he came to the casino without a coat and tie and the bosses wouldn’t let him in dressed that way.”

  Newport and Covington, on the banks of the Ohio River, were meccas to John Y. He frequented the Beverly Hills Country Club, the Latin Quarter, the Red Rooster, the Merchants Club, the Primrose Club, the Glenn Rendezvous, and Jack’s Shack. He loved the Little Club—the downstairs hideaway at Jimmy Brink’s Lookout House-— anxious for the day when he could afford the stakes of that most prestigious of clubs. That was where the real money changed hands; where players like “Sleep Out” Louie Levinson and Ray Ryan dropped hundreds of thousands of dollars. “‘Sleep Out’ could come to a joint at closing time, and we’d always keep it open,” remembered ones of the dealers at the Little Club. Some say “Sleep Out” was so-named for his much revered ability to sleep between poker hands; others say he was nicknamed for his notorious failure to return home to bed every night.

  The illegal casinos operated openly in those days, controlled by organized crime syndicates from Detroit, Miami, Cleveland, and New York. Individuals such as Moe Dalitz, “Niggy” Devine, Morris Kleinman, Sleep Out’s brother Eddie Levinson, and the Lansky brothers—Meyer and Jack-—were the men commonly referred to as the “juice” or “muscle” in the joints.

  John Y. got to know the working men—the dealers and pit bosses and shift bosses—men who would relocate in Las Vegas when illegal gamblers were finally run out of northern Kentucky. In the early 1950s, the Estes Kefauver congressional committee’s revelations temporarily halted gambling, but before long the joints were back operating at full scale. “Except when the grand jury was in session,” remembered a casino employee. “We all went to Florida every year while the grand jury was meeting. We’d take bail money in our pockets, and just stay down there in the sun till the coast was clear.”

  It wasn’t until 1960—when a Cleveland Browns football player named George Ratterman was elected as a reform sheriff in Newport, Kentucky—that the illegal gambling that had operated since the Prohibition era came to a final standstill.

  More than fifty gambling figures—most of whom were Kentucky natives—moved to Las Vegas where gambling was legal and the bosses were the same. “All you had to say when you landed in Vegas was that you were from Kentucky, and you had a new job that day,” said a dealer who was chased out of Newport.

  Rumors about John Y.’s gambling started flying as soon as he entered the governor’s race. In a state known for beautiful horses and fast women, combined with the history of speakeasies and moonshine in northern Kentucky, gambling isn’t really frowned upon by most voters. John Y,’s Republican opponent tried to make gambling an issue, but nobody seemed to care much. Except some of the voters in Kentucky’s dry counties.

  After John Y. won the primary election, Ralph Ross decided to build a dossier on him. Surprisingly, the state police didn’t have any information on Brown because he had kept a low profile. He had spent most of his adult life in Tennessee, Florida, and Nevada, jetting in and out of Kentucky for parties. Ralph read all the news accounts available and talked to sources in order to find out what kind of man was going to be his next boss. The fact gathering started out to be pretty routine. But then, Ralph thought that what his investigators began
turning up was “right interesting”—especially in light of the fact that Brown was destined to be the next governor. Ralph saw patterns in John Y.’s behavior that dated back to his formative years.

  By his senior year in college, John Y. Brown was already talking about someday running for the U.S. Senate. He entered the University of Kentucky law school, with a vision of parlaying a high-visibility law practice into a life as a potentate. After a brief hiatus during which he was called to serve time at Fort Knox Army base in Kentucky, he was able to finish law school by 1961. While a student, in 1960, John Y. met Bob Strauss, who was spearheading fundraising efforts for the Democratic National Committee. John F. Kennedy was running for president, and Strauss had encouraged Brown to become the chairman of Kennedy’s campaign in Kentucky.

  At the time, twenty-six-year-old John Y. was managing his father’s bitterly fought bid for the U.S. Senate—a campaign that would become one of the most humiliating of Brown Sr.’s defeats. “To watch my father get beat by people less capable was frustrating,” John Y. was quoted as saying. “And watching the political machine at work was distasteful too. I thought I could help change that…I had a lot of bitterness in 1960. I’d seen the races in 1939 and 1948 when he had them stolen in the aftermath of the count. I’m the kind of person who likes to be the underdog, who likes the challenge, because I’ve seen so much accomplished by those who had the drive and the desire to accomplish what they wanted.”

  A partner in his father’s law firm, John Y. ran the company as his father continued his downhill battle with politics. John Y.’s mother had grown increasingly impatient with Brown Sr.’s political failures. While his parents were openly contemplating divorce, John Y. married a gracious brunette schoolteacher named Ellie Durall. A coalminer’s daughter, Ellie equaled John Y. in a passion for ambition and excellence. He considered her a perfect complement for his future in politics.

  Through the law firm John Y. met one of his father’s old friends and clients—a former bootlegger, insurance salesman, and rural restaurateur named Harland Sanders. The white-haired, crotchety old man who had had no formal education had been running Sanders’ Cafe in Corbin, Kentucky, since 1929. Famous for its fried chicken, Sanders spent years refining his recipe. Finally, with the invention of the pressure cooker in 1939, he was able to fast-fry his chicken, which kept the moisture sealed in. His famous blend of eleven herbs and spices attracted customers from miles around to visit his remodeled restaurant. Sanders fell on hard luck when a new highway junction bypassed his café. Forced to auction off his restaurant to pay his debts, Sanders loaded his pressure cooker and a bag of spices into the back of his old Ford, collected his savings and $105-a-month Social Security check, and traversed Kentucky with the hopes of franchising his recipe.

  Sanders signed up only five restaurants in the first two years, but by 1963 had managed to franchise more than six hundred restaurants.

  Kentucky Fried Chicken, as he called it, was a real mom-and-pop operation. His wife Claudia mixed and mailed the spices, while Sanders kept the books. Sanders’ white goatee, white suit, and black bolo tie became a trademark for the honorary Kentucky Colonel, who netted three hundred thousand dollars that year. Since the franchise business was growing faster than he could manage alone, the seventythree-year-old Colonel began searching for investors.

  Tired of riding on his father’s coattails at the law firm, John Y. saw Kentucky Fried Chicken as a potential gold mine. He felt that his sales aplomb and innate business sense suited him better than law, and he saw financial success as a perfect springboard into politics. To John Y., politics and sales were synonymous.

  Colonel Sanders apparently didn’t envision a buyout, but in a deal orchestrated by John Y. in 1964, Colonel Sanders signed a contract turning over most of the business to John Y. and Jack Massey—a Tennessee millionaire and friend of John Y.’s. Massey put up $1.8 million, and John Y. borrowed $120,000 from a Louisville bank to finance his stake. For that, John Y. and Massey acquired the franchise rights for most of the world, while Colonel Sanders retained ownership of all Canadian franchises.

  Sanders was apparently disenchanted with the deal, which consisted of $2 million—paid over time at a three percent interest rate— and a lifetime annual salary of $40,000, which was later increased to $75,000 for advisory and publicity work. “I don’t like some of the things John Y. done to me. Let the record speak for itself,” Sanders told the Washington Post, refusing to elaborate. “He overpersuaded me to get out.” Massey was left with a sour taste in his mouth, but refused to discuss the partnership publicly.

  At the helm of Kentucky Fried Chicken, John Y. gave lucrative jobs to several of his college buddies. He made Dan Chandler head of public relations, and put Jimmy Lambert in charge of the South American franchises. Two years after acquiring the company, John Y. and

  Massey decided to take the cash-only enterprise public. Following the initial offering of fifteen dollars per share, the trading of Kentucky Fried Chicken made John Y. a multimillionaire and the nation’s most famous fast-food entrepreneur. Thirty-one individuals, mostly John Y.’s friends, became millionaires in the endeavor. He scheduled the board of directors meetings and Kentucky Fried Chicken conventions in Las Vegas, often at the Sahara Hotel, which gave him the opportunity to pursue his gambling interests as well.

  John Y. had maintained his casino contacts from the northern Kentucky joints, and was treated like a king (during his Vegas visits). He quickly earned a reputation on the Las Vegas Strip as a high-stakes dice and baccarat player, prompting a Las Vegas newspaper columnist to write that John Y. was “considered a hometown boy out here.”

  The buckets of money would make John Y. even more restless. Ellie stayed home with their three kids—John Y. III, Eleanor, and Sandra—becoming increasingly dissatisfied with John Y.’s workaholic, jet-setting lifestyle. The more time John Y. spent in Vegas, the more unstable his marriage became. Ellie felt uncomfortable in his crowd of high rollers and ostentatious millionaires, preferring the role of the elegant, classy homebound wife.

  The more time he spent at Caesar’s—his home-away-from-home— the closer John Y. came to the casino’s owners, Cliff and Stu Perlman. Through them he met other big players, such as Lee and Jimmy Chagra. He usually stayed in a plush suite Caesars provided for its VIP guests amid the Roman statues and indoor fountains. The Perlman brothers granted him an unlimited credit line, and the croupiers loved waiting on the boyish Southern gentleman they called “The Chicken Man.”

  “As the boys say along the Strip,” the Las Vegas Sun reported about John Y., “‘There’s a guy you can feel comfortable with.’ He can walk into any joint with his buddy Jimmy the Greek or his local pal Dan Chandler—the Kentucky flash—and the welcome mat is out.”

  Bored with the day-to-day details of running a huge corporation, after seven years John Y. decided it was time to bail out. He had turned Kentucky Fried Chicken into the nation’s largest commercial food organization—outranked only by the Army, Navy, and Department of Agriculture—whose annual sales exceeded $700 million. In 1971, at thirty-eight years old, John Y. reevaluated his life: His marriage was in shambles; he had become rich beyond his dreams, yet felt unchallenged intellectually; being a chicken magnate had provided him the financial freedom he had coveted, yet his incentive was waning; he had saturated the country with thousands of fried chicken franchises; and a recession was lurking in the stock market. In the spring of 1971, he jumped at the chance to merge Kentucky Fried Chicken with Heublein Inc. in a $288 million stock swap. John

  Y. walked away with $35 million worth of Heublein stock.

  Less than a month later he paid $4 million for three hundred and fifty Lum’s restaurants and franchise rights. What began in 1956 as a Miami Beach hot-dog stand had been parlayed by Clifford and Stuart Perlman into an international chain, enriching the brothers and enabling the weenie czars to purchase Caesars Palace in 1969 for $5
8 million.

  Through a complicated series of financial transactions, John Y. made Jimmy Lambert president of two companies that bought the Lums restaurants from Caesars World, Inc., then sold them to John Y. The machinations—which were further clouded by false press releases issued to newspapers—were scrutinized by Nevada gambling authorities, who wondered if John Y. was acquiring a “hidden interest” in Caesars, Speculation increased when John Y. insisted that his lackey, Dan Chandler, be given an executive position at Caesars, ostensibly threatening to take his gambling business to another casino if Caesars refused to employ Chandler.

  Brown’s friendship with the Perlmans went hand in hand with his high-stakes betting habits. Chandler had publicly taken credit for introducing John Y. to the Perlmans, and for arranging the Lums transactions between the two men. Because of the Perlmans’ corporate ties with alleged lieutenants in the Lansky crime organization, the Perlmans were under investigation at the time by the New Jersey Casino Control Commission and the Securities and Exchange Commission (SEC). Meanwhile, Ralph had learned through the Bradley Bryant matter that Caesars Palace was under investigation by the DEA for allegedly allowing drug dealers such as Jimmy Chagra to launder narcotics profits through the casino.

  The actual details of the Lums restaurants purchase by John Y. were contained in a quagmire of paper. Basically, between 1971 and 1977 Lums had sold the assets of at least three hundred and fifty restaurants to John Y. and Ted Strauss—the brother of Democratic National Committee Chairman Robert Strauss—and Jimmy Lambert had somehow played a significant role in the corporate transactions. Because most of the sales, acquisitions, and mergers involved the exchange of shares of stock, rather than cash, even the professionals and government experts charged with understanding the web were stumped. Nevada and New Jersey gaming authorities, the SEC, as well as the Dade County Organized Crime Strike Force in Florida, had pored over the financial documents for different reasons. John Y. was sensitive about the Lum’s transactions, refusing to discuss them during his campaign. He contended that his personal dealings were “nobody’s business and have nothing to do with Brown as governor.”