Dark Victory

by Moldea, Dan E. ; Miller, Mark Crispin;

  To launch a serious effort, Laxalt needed money for his campaign. He received help from Ruby Kolod, part-owner of the Desert Inn with Moe Dalitz and a member of the Cleveland Mayfield Road Gang, who became one of Laxalt’s major fund-raisers.

  Kolod was not the typical campaign worker. He had been convicted just a year earlier of threatening to kill a Denver attorney over a disputed investment deal. His situation was further clouded because the murder threat prompted the Nevada Gaming Control Board to file a complaint against him, challenging his gaming license. That complaint was pending at the time Laxalt was using him to raise funds for his campaign.

  “My administration had taken away Kolod’s gaming license,” Sawyer said, “because he had been convicted of a crime. He took the position that we should wait until after his appeal had been settled. We said no. So he, therefore, became Laxalt’s prime fund-raiser among the casinos. And he did a hell of a job.”2

  Laxalt later conceded that Kolod “did help us, tremendously.”3

  During the campaign, Sawyer’s criticism of the FBI became an issue—with Laxalt supporting the Bureau.

  “Laxalt indicated that he would want to make peace with J. Edgar Hoover,” Sawyer explained. “He went to see him just before the election. That was a much-heralded meeting. Hoover wrote a letter condemning me, and it was printed on the front page of the Las Vegas Sun—just before the election. In those days, no one went against Hoover and came out alive.”4

  Later, Laxalt suggested that his position on the FBI was based more on politics than on conviction. “We had a rather peculiar situation here in the closing months of a gubernatorial campaign, attempting to assess whether the FBI was the good guys or the bad guys. I adopted a white-hat posture at the time, and I wonder if it wasn’t a questionable political posture.”5

  Paul Laxalt’s first and most important job upon becoming governor was to turn around the state’s depressed economy. To do so, he had to change Nevada’s gangster image and repair the damage done to the state’s relationship with the federal government. At the same time, he had to be sure to balance his actions carefully by appeasing the gambling community.

  Laxalt took office in January 1967—the same month as Reagan took over in California. The two governors both became active in the Western Governors’ Conference. From this association, a close personal and professional friendship developed.

  In February, billionaire Howard Hughes came to Nevada with $500 million in cash, hoping to buy up Las Vegas with the profits he had made from the sale of Trans-World Airlines.

  Robert Maheu—Hughes’s right-hand man and the 1960 liaison between the CIA and the Mafia in the Castro murder plots—said, “Considering the poor condition of the economy, the investigations of organized crime’s involvement in the state’s chief industry, and the consequent public relations problems they caused, Laxalt viewed Hughes’s entry onto the Las Vegas scene as a blessing. Laxalt was convinced that Hughes and his ‘nonmob’ money—which could buy out ‘suspected’ casinos—would ultimately save Nevada’s declining gaming industry.”6

  Laxalt has admitted to having given Hughes preferential treatment. “Let’s face it,” Laxalt told reporters, “Nevada has an image problem—the typical feeling is that sin is rampant here. Anything this man [Hughes] does, from the gaming industry all the way down the line, will be good for Nevada.”

  Regardless of Hughes’s purported “Mr. Clean” image then, it is clear that he was encouraged and helped by members of organized crime when he came to Las Vegas—particularly by mobster Johnny Roselli, who had been Maheu’s contact man in the CIA-Mafia plots against Castro. Roselli and his cohorts assumed that Hughes’s presence would automatically take the heat off those casinos still operating illegally.

  With Roselli’s help—as well as that of Teamsters Union president Jimmy Hoffa, who was en route to Lewisburg Penitentiary—the Hughes Tool Company’s first purchase was the Desert Inn, which it bought for $13.6 million from the Dalitz-Kolod syndicate in March 1967. Roselli and Hoffa’s attorney, Edward Morgan of Washington, D.C., received a $150,000 finder’s fee for greasing the sale by serving as liaison between Hughes and Dalitz.

  Laxalt wanted to help the reclusive Hughes get his license without scrutiny from the Nevada Gaming Commission. Three days before the commission hearing, Hughes, in a brilliant public relations ploy to obtain the license, offered to donate over $200,000 a year for twenty years to a proposed state medical school.

  Laxalt made the public announcement of the grant on Hughes’s behalf, praising the billionaire for his unselfish generosity. The gaming commission apparently got the message. During the hearing, Hughes was not required to appear before the panel. In fact, he was granted the Desert Inn gaming license—without ever being subjected to a public investigation of his finances. With Laxalt’s help, Hughes’s privacy was strictly maintained in his subsequent purchases of the Sands, the Castaways, the Frontier, the Silver Slipper, and the Landmark in Las Vegas and Harold’s Club in Reno. But he eventually needed help to run them.

  “At first, Hughes brought in his own business people to run the casinos,” said Tom Mechling, president of the National Gambling Information Center. “But they lost him money. He learned that you have to protect yourself against the people outside and inside the casinos who are trying to cheat you. So Hughes brought Dalitz back into his operations, naming him as a ‘senior consultant.’ Dalitz is the elder statesman for Las Vegas, and he speaks for the whole gambling community. He knows how to make a casino work.”7

  Sidney Korshak also came into the picture in 1967 as he increased his influence over the Associated Booking Company, by then the third largest talent agency in the country.* He took over the booking of acts into Hughes’s hotels. Among the big stars he brought in were Ann-Margret, Dean Martin, Tony Martin, and Barbra Streisand.

  After the Justice Department’s Antitrust Division threatened to take action against Hughes if he bought the Dalitz-owned Stardust hotel/casino, Laxalt protested directly to Attorney General Ramsey Clark. In a letter to Clark, Laxalt charged that, by blocking the $30.5 million Stardust transaction, the Antitrust Division had “jeopardized the employment of 2,000 people in the Stardust enterprise.… The end and only result of an antitrust action of this type that I can see is drastic and permanent damage to our economy.”8

  Laxalt also reminded the attorney general that the federal government owned over eighty-seven percent of the state’s land, or 60,000,000 acres, implying that Nevada could cause the U.S. Department of the Interior and other government agencies jurisdictional problems. “If suit is instituted,” Laxalt warned, “and this most assuredly is no form of threat but simply is offered as a factor in your legal evaluation of whether or not to proceed, we would be faced with no alternative other than to intervene and oppose the action with all the resources of the state.”

  Before the hot-tempered governor had a chance to declare war on the federal government, Hughes backed off from his attempts to purchase the Stardust. Hughes next attempted to acquire the Dunes hotel/casino, which was also blocked by the Antitrust Division. Consequently, Laxalt worked to change state law so that public corporations could purchase gambling casinos and be licensed by the gaming commission. Laxalt claimed that this “reform” would prevent hidden interests by mobsters in Nevada gaming establishments since corporations are required by the Securities and Exchange Commission to disclose their chief operating officers and major stockholders. However, organized crime figures continued to hold hidden interests in Nevada’s casinos.

  Perhaps the most interesting example of this was the Parvin-Dohrmann Company, primarily a hotel and restaurant equipment and supply company that was principally owned by Albert Parvin. In 1955, Parvin had purchased the controlling interest in the Flamingo and later in the Fremont and Aladdin hotels. Among Parvin’s directors was his vice-president and treasurer, Harvey Silbert, who was Sidney Korshak’s friend and business associate from the Riviera. In 1966, Parvin-Dohrmann became embroiled
in a nationally publicized scandal when it was discovered that Supreme Court Associate Justice William O. Douglas had been on the payroll of the Albert Parvin Foundation. Douglas, president of the tax-exempt foundation—which was primarily financed by profits from the 1960 sale of the Flamingo—had received $12,000 a year since 1962. At the time of the 1960 Flamingo purchase, Parvin paid mobster Meyer Lansky a $200,000 finder’s fee for finding the buyer.

  Despite these revelations about his business deals and associates, Parvin still managed to obtain approval from the Nevada Gaming Commission in 1968 to purchase the Stardust from Moe Dalitz—after Howard Hughes withdrew his bid. Dalitz was hoping to finally leave Las Vegas and retire to his La Costa Country Club. Sidney Korshak received a $500,000 finder’s fee from the Dalitz group for arranging the Stardust sale.*

  In 1969, weary of all the problems in Las Vegas, Albert Parvin decided he wanted out. Waiting to buy the corporation was a Korshak business associate, Delbert Coleman, a Harvard man and an attorney. Earlier, Coleman had purchased and sold a Chicago jukebox manufacturer, the J. P. Seeburg Corporation, for which Korshak had served as labor consultant. For $10.5 million, Coleman became the largest stockholder in Parvin-Dohrmann—and consequently, the Stardust, the Fremont, and the Aladdin.

  At the time of Coleman’s 300,000-share purchase, Parvin-Dohrmann was valued at thirty-five dollars a share on the American Stock Exchange. Within months, a bizarre and complex series of financial manipulations sent the stock skyrocketing to $141. When the corporation peaked, Coleman and his stockholders, through Korshak, tried to sell it to the National General Corporation, which owned a large theatre chain. However, the negotiations between National General and Korshak broke down. Harold Butler, the president of Denny’s Restaurants, then stepped forward and bought out Coleman, Korshak, and three other investors at $150 a share when its market value had already started to drop below one hundred dollars a share. Then, suddenly, Parvin-Dohrmann’s stock collapsed to a low of $12.50, forcing the Securities and Exchange Commission to suspend trading.

  Coleman went to a close friend of Korshak, Washington lobbyist Nathan Voloshen, who was asked to help lift the suspension and to avoid possible prosecution. Voloshen went to Martin Sweig, the top aide to Democratic Massachusetts congressman John McCormack, the speaker of the House, and asked for Sweig’s assistance to set up a meeting with the head of the SEC. After the meeting—in which the SEC refused to allow Parvin-Dohrmann to begin trading again—it was discovered that Voloshen had received $50,000 from Coleman, which was prohibited under SEC rules. After a lengthy investigation, Voloshen pleaded guilty for influence peddling and was sent to jail. Speaker McCormack, who was reportedly seen accepting a $15,000 payment from Voloshen but was not indicted, did not seek another term.

  The SEC charged that Parvin-Dohrmann, under Coleman, had filed false reports with the SEC during its purchase of the corporation, concealed the true identity of certain participants in the control group, allowed this group to buy into the corporation at thirty-five dollars a share when it was trading for seventy-five dollars a share, and then fraudulently manipulated the worth of the company’s stock. Among those named in the complaint were Sidney Korshak; his brother Marshall Korshak, who was then Chicago city treasurer; Las Vegas gambling boss Edward Torres; and actress Jill St. John,* who owned 1,000 shares and made $150,000 on the deal. Sid Korshak, who had had 12,500 shares of stock, made nearly $2 million.

  Also charged by the SEC in the Parvin-Dohrmann scheme was Denny’s Restaurants, a California-based restaurant franchise. At the time of the Parvin-Dohrmann purchase by Denny’s, those holding Parvin-Dohrmann stock were promised four shares of Denny’s for one share of Parvin-Dohrmann.

  During Korshak’s deposition to the SEC, he was asked what other corporations had come to him asking for his help in buying Las Vegas properties. Korshak replied, “There were half a dozen people talking to me at different times … about possible acquisitions in Nevada. They would have been companies I was close to, probably represented. There was a period immediately following Mr. Howard Hughes’s acquisitions, where everybody became interested in making an acquisition in Nevada.”

  “Do you remember the name or names of any of those corporations in 1968, Mr. Korshak?” asked the SEC attorney.

  “It is possible that the Gulf & Western people that I do general labor work for could have talked to me about the possibility of an acquisition in Vegas.”

  “Are there any other—excuse me—”

  “I do work for the Hilton Corporation. It is possible that they talked to me. At this particular time, many hotels were interested in expanding their holdings into Nevada. And it is possible that the Hilton people talked to me about it. I believe it is possible that the Hyatt Hotel Corporation talked to me also about the possibility of their making an acquisition in Nevada. Maybe others, as I have stated; at this particular moment, I can’t think of any.”10

  In the end, a settlement was reached with the SEC, in which the defendants had to neither admit nor deny the charges against them—although Coleman was forced to resign as the head of Parvin-Dohrmann. Parvin returned and again took control of his corporation but changed its name to Recrion, giving Korshak another $500,000 finder’s fee for making the arrangements.

  *Upon Joseph Glaser’s death on June 4, 1969, Korshak gained full authority over the Associated Booking Company.

  *Korshak had continued to remain busy. In 1966, while serving as the chief negotiator for Schenley Industries, the liquor company, Korshak settled a labor dispute between Schenley’s president, Lewis Rosenstiel, and Cesar Chavez, the director of the United Farm Workers Union. Advised by Korshak, Rosenstiel broke with other grape growers, recognized the UFW over the Teamsters Union as the bargaining agent for California’s migrant farmers and signed a one-year contract.

  Rosenstiel’s impetus to settle was Korshak’s power within the Culinary Workers Union, which threatened a boycott of Schenley’s products in bars and restaurants.

  *Korshak had met St. John with Frank Sinatra during the early 1960s. Both men became interested in her and advised her to divorce her second husband, Woolworth heir Lance Reventlow, and pursue a movie career. Grateful for their advice, St. John, who dumped Reventlow and became a star, remarked, “Fortunately, all Frank’s friends happen to be Very influential.”9

  CHAPTER THIRTY

  In the late 1960s, corporations were beginning to diversify, merge, or sell out—so much so that the word “conglomerate” and its application to the business world became part of the English language. Numerous corporations successfully added major entertainment companies to their empires.

  Seven Arts bought out Warner Brothers, making Jack Warner board chairman. The National General Corporation had wanted to buy out Warner Brothers-Seven Arts but was thwarted by the Antitrust Division. Eventually, the film interest was sold to a funeral, parking lot, and cleaning services company, the Kinney Corporation, headed by Steven J. Ross, for $400 million. Kinney later changed its name to Warner Communications. Ted Ashley, who was bought out of Ashley–Famous Artists talent agency by Kinney, was picked to head Warner Brothers.*

  Screen Gems merged with Columbia Pictures Industries, Inc., which was being run by president Leo Jaffe, Abe and Stanley Schneider, and Mike Frankovich, who took over in the wake of Harry Cohn’s death. Korshak’s client Gulf & Western took over Paramount Pictures. Transamerica, an insurance and financing company, accumulated ninety percent of United Artists—which bought Warner Brothers’ pre-1948 film library, giving it the largest such library in the business. Avco, which specialized in military and aerospace equipment, merged with Embassy Pictures, creating Avco–Embassy Pictures.

  In the midst of hard times at MGM and the death of former board chairman Joe Vogel, the studio sold its controlling interest to Kirk Kerkorian. A tall, dark, and handsome man, Kerkorian was described by rivals as “a poor man’s Howard Hughes.” He was an eighth-grade dropout who, after working as a used-car salesman, bought a
single World War II surplus airplane, beginning an airline company, which became Trans International Airlines, making runs from Los Angeles to Las Vegas after Bugsy Siegel built the Flamingo. In 1968, Kerkorian sold his firm to Transamerica—which had already bought United Artists—for stock eventually worth $104 million. With his profit, he managed to borrow another $73 million in unsecured loans and acquired a thirty-percent interest in Western Airlines and the Bonanza casino in downtown Las Vegas. He then bought the Flamingo in 1969 and merged it with his newly constructed International Hotel.

  With his hotel and casino profits, Kerkorian bought MGM, naming James T. Aubrey, the former president of CBS, as MGM’s president.*

  Kerkorian was a long-time friend of Charles “The Blade” Tourine, a top New York mobster and an associate of Meyer Lansky. Federal investigators had wiretapped a telephone call Tourine had made to Kerkorian in Beverly Hills on October 5, 1961. During the conversation, Kerkorian said that he was going to give Tourine $21,300, and that actor George Raft would be his bagman.1

  In 1966, Lew Wasserman was elected chairman of the Association of Motion Picture and Television Producers. The AMPTP was principally responsible for negotiating the studios’ contracts with Hollywood’s labor unions. The AMPTP’s lobbying arm in Washington was the Motion Picture Association of America, which was headed in 1966 by Jack Valenti, a former aide to President Lyndon Johnson who was hand-picked by Wasserman. Louis Nizer, the prominent trial lawyer, became the MPAA’s general counsel. By nearly everyone’s standards, there was now no doubt that Wasserman had become the most powerful legitimate force in Hollywood.

  To help the film industry, Governor Reagan pushed legislation through the California State Assembly, giving all Hollywood studios, including MCA-Universal and Twentieth Century–Fox, huge breaks on their film libraries. The tax savings at each studio was estimated to be worth a minimum of $3 million. Former California governor Pat Brown had previously vetoed the same bill.