Supermob

by Gus Russo

  Given all the Pritzker associates involved in the management of Castle, it came as no surprise when Pulitzer Prize-winning journalist Knut Royce determined in 1982 that the Pritzkers were in fact the bank's largest depositors. 49 A September 1972 IRS statement noted, "An informant [F. Eugene Poe, a former VP and director of Castle Bank] with access to the records of Castle Trust has stated that the Pritzker family of Chicago, through their Hyatt Corporation, received their initial backing from organized crime."50

  Castle Bank was not the only shady partnership entered into by Kanter and the Pritzkers. In the 1970s, Kanter and Pritzker were also involved in a massive kickback scheme with two executives from the real estate wing of Prudential Insurance Company, which controlled $20 billion in properties across America.51 In a complex setup that took prosecutors over twenty years to unravel, Kanter and the Pritzkers devised a scheme wherein contractors paid them and the Prudential executives under the table in exchange for lucrative Prudential business.52

  The Castle Bank saga was but a pointed reminder that while agents like Andy Furfaro were allowed to pursue the mob in Vegas, and years earlier the FBI had resorted to illegal wiretaps to learn about the mob's skim operation, the government tacitly declared the offshore tax dodges of the former residents of 134 N. LaSalle (Kanter, Pritzker, etc.) and the similar schemes by the likes of Korshak's friends at MCA to be off-limits. It is also worth noting that the tax losses sustained due to Supermob scams (estimated in the billions) dwarfed those of the regular mobsters, who, like Capone, were regularly carted off to prison.

  The Presidential Offshore Pension Fund

  Although it did not appear on the purloined master list obtained by Jaffe and Kennedy, one U.S. president's name had been observed on another Castle list by a Castle executive working undercover for the IRS. "One of the first names I saw," bank officer Norman Casper said in 1997, "was the name of Richard Nixon." Although Nixon's name was deleted from the master list, a Castle Bank transfer slip bore the name "N&R," who had transferred over $11 million to Cosmos Bank, a Zurich, Switzerland, Privatbank. Casper was told by a Castle source that the initials stood for "Nixon and Rebozo." (Millionaire businessman/banker Charles "Bebe" Rebozo was a longtime confidant and adviser of Nixon's; he was also the bagman for the Hughes cash transfers to Nixon.) A Swiss hotelier is on record as saying Nixon and Rebozo visited Zurich at least once a year.53

  In separate investigations, both New York district attorney Robert Mor-genthau and Herschel Clesner, chief counsel of the House Commerce and Monetary Affairs Subcommittee, concluded that Nixon had money in both the Castle and Cosmos banks. Lastly, Maurice Stans, Nixon's reelection finance chief, admitted in 1997 that Rebozo had in fact set up a trust fund for Nixon's family. He also donated $19 million to Nixon's presidential library.54

  Unfortunate Sons

  Kanter also offered his tax consulting services to Berkeley-based jazz label Fantasy Records, the recording home of such giants as Thelonious Monk, Miles Davis, John Coltrane, and Chet Baker, among others. Founded in 1949, Fantasy was purchased in 1967 by Saul Zaentz, a New Jerseyite of Russian-Polish extraction. When Zaentz expanded the company to include rock and roll, he hit the jackpot almost immediately with the signing of "swamp rock" kings Creedence Clearwater Revival (CCR), who went on to record eight successive gold singles, such as "Proud Mary," "Green River," and "Fortunate Son." Kanter and Zaentz convinced CCR that they had an airtight shelter for the band's millions: Castle Bank. Thus, for most of the seventies, CCR's royalties, some of which financed Zaentz's production of the 1975 Oscar-winning film One Flew Over the Cuckoo's Nest, made the circuitous Supermob journey before actually arriving in the band's bank accounts. *

  In their book, The Cheating of America, Lewis and Allison described the scheme: "Kanter and his partners then designed a complex scheme that involved shifting income from the film through various foreign entities and trusts in twenty-six separate steps before it was repatriated to the United States. The money was funneled through companies with names like Zwaluw N.V, Leeuwirik N.V., Nellthrope Cayman, Campobello Panamanian, and Inversiones Mixtas. Payments back and forth were disguised as loans, investments in other films, or repayments of loans, until what was income for whom was thoroughly confused."55 During one year of the tax dodge, CCR paid not one cent in taxes on $2.5 million in income.

  After CCR disbanded in October 1972, they attempted in vain throughout the 1970s to have their Castle Bank trusts converted into individual accounts elsewhere. After Castle broke up in 1977, the IRS went after CCR for unpaid taxes, and the band turned right around and sued Kanter for malpractice, claiming that Kanter not only lied about the airtight tax shelter, but also misappropriated millions of the band's money?56 Filed by CCR founder and songwriter John Fogerty, the original suit was against Burt Kan­ter; Edward J. Arnold, an Oakland accountant; and Barrie D. Engel, an Oakland attorney. They were charged with professional malpractice, fraud, and breach of fiduciary duty. The suit asked for $10 million in damages. In 1983 a jury in San Francisco Superior Court ruled in favor of Fogerty and his band. John Fogerty was awarded $4.1 million, and the rest of his band-mates received approximately $1.5 million each.57

  The bad publicity surrounding Castle resulted in its losing its Bahamian license before moving to Panama, where it finally dissolved in 1977.58 Kan­ter, Helliwell, Pritzker, and the other bank officers, in no small thanks to IRS commissioner Donald Alexander (appointed by President Nixon) and the CIA, escaped indictments. That the Cincinnati law firm of Dinsmore, Shohl, Coates, and Deupree was among those making deposits in Castle when Commissioner Alexander was a senior partner was not lost on observers of the ill-fated probe?59 Alexander often made his opposition to offshore investigations known: he removed the question about foreign bank investments from IRS Form 1040 and canceled Operation Tradewinds, even though it had reclaimed some $52.5 million in tax penalties.

  When Kanter was eventually investigated, Alexander's IRS gave 90 percent of its Castle Bank file to Kanter and his defense team; one congressman said that the file "provided those under investigation with a blueprint on how to elude prosecution."60 Incredibly, Kanter was given the material after filing a routine request under the Freedom of Information Act, prompting an embarrassed IRS official to term the mistake a "royal screwup." Furthermore, a federal judge in Cleveland ruled that the Castle account-holder list had been illegally obtained and couldn't be used as evidence in criminal cases.61 Lastly, the CIA's general counsel John J. Greaney intervened and demanded that the Department of Justice and IRS end the probe—it seemed that the CIA had also used Castle Bank to launder money in furtherance of its clandestine operations, and it feared that an investigation would jeopardize national security, not to mention its own congressional free ride.62

  Using seed money from Chicago investors including the Pritzkers and Hugh Hefner, Kanter next became the legal adviser to Charles Dolan's nascent Cablevision System, which went on to become the largest privately held cable television company in the United States.* Saul Zaentz was charged by the IRS with sending all the profits from Cuckoo's Nest offshore (at least $38 million), only to have them returned as phony, untaxable loans.63 It is believed he settled with the IRS in 1990 by paying the government $14 or $15 million.64 Donald Alexander quit as IRS commissioner and went into private practice, where he was an expert on offshore tax havens.65

  As will be seen, however, the federal government was far from finished with both Kanter and the Pritzkers.

  Bill Allison of the Center for Public Integrity noted that the IRS conservatively estimates that tax avoidance and evasion will cost the Treasury nearly $2 trillion over the next decade, much of it due to the offshore tax dodges of banks and entertainment conglomerates. Citicorp alone deposits $1.3 billion overseas annually, helping it avoid some $399 million in taxes. Thanks to federal tax lawyers recruited from the staff of the House Ways and Means Committee, Supermob associates lobbied for arcane tax loopholes that allowed them to make inexpensive sham overseas in
vestments, such as in a sewer system in Germany, in order to claim massive tax write-offs. One of the most favored foreign schemes is the "lease in, lease out," or LILO option, * which has been a boon for U.S. banks such as Wachovia. In 2004, Bob Mclntyre, the director of the Institute on Taxation and Economic Policy, told Frontline correspondent Hedrick Smith how Wachovia used the LILO gambit: "Well, Wachovia, amazingly, in 2002, even though it reported four billion dollars in profits, reported that it didn't pay any taxes and, in fact, got a tax rebate from the government of about one hundred and sixty million dollars . . . they saved three billion dollars in taxes over the last three years from leasing."66

  In addition, according to the IRS's most recent statistics, there were 101 returns filed by millionaires who paid absolutely nothing in federal income taxes.67

  *By just 1976, Hersh had amassed the following accolades: The George Polk Award, Worth Bingham Prize, Sigma Delta Chi Distinguished Service Award, and Pulitzer Prize for international reporting, all 1970, all for stories on the My Lai massacre; My Lai Four was named one of the best nonfiction books of the year by Time, 1970; Front Page Award, Scripps-Howard Service Award, and George Polk Award, all 1973, all for stories on bombing in Cambodia; Sidney Hillman Award and George Polk Award, both 1974, both for stories on CIA domestic spying; John Peter Zenger Freedom of the Press Award and Drew Pearson Prize, both 1975, for stories on CIA involvement in Chile.

  *Bergman would go on to become one of the country's top investigative journalists, immortalized in the 1999 film The Insider, in which Bergman was portrayed by Al Pacino. The story recounted Bergman's attempts to have CBS's 60 Minutes air his report on tobacco executive Jeffrey Wigand, portrayed in the film by Russell Crowe. The film garnered seven Academy Award nominations and won numerous other accolades.

  *The story of how they obtained the precious document is a drama in and of itself, best described in Alan Block's Masters of Paradise and Penny Lernoux's In Banks We Trust.

  *Zaentz later produced films such as Amadeus (1984) and The English Patient (1996).

  *DoIan also founded the short-lived satellite HDTV service VOOM, which folded in April 2005 after sustaining losses of over $661 million.

  *Simply stated, LILO is a tax-dodging loophole that allows corporations to make minuscule overseas leasings in exchange for massive domestic tax credits.

  CHAPTER 20

  Pursued by the Fourth Estate

  ON JULY 11, 1976, less than two weeks after the Hersh expose appeared, Supermob friends and families convened in Southern California to witness the fourth marriage of their favorite crooner, Frank Sinatra. Notable among the elite guests was Ronald Reagan, who interrupted his presidential campaign to attend Sinatra's wedding at Outfit wire-service boss Moe An-nenberg's son Walter's Sunnylands estate in Rancho Mirage. With Bee Kor­shak serving as matron of honor to bride Barbara Marx, other attendees included Korshak pals such as Gregory Peck, Kirk Douglas, and the disgraced former vice president of the United States, Spiro Agnew.1

  The newest Mrs. Sinatra, Barbara Blakeley Oliver Marx Sinatra, was a friend of the Korshaks' from Las Vegas, where she was a chorus girl at Sid's Riviera Hotel. According to Sinatra's daughter Tina, Korshak "knew Dad's new bride better than any of us."2 When Sinatra and Marx met in 1972, Barbara was married to Marx brother Zeppo, an inveterate gambler whom she met at the Riv and had married in 1959 (recall that the Marx Brothers were part owners of the land on which the Riv was built). The marriage to Zeppo brought Barbara to his home just across the seventeenth fairway from Sinatra's bachelor pad at Palm Springs' Tamarisk Golf Course. Soon, she was recruited into the spirited tennis matches at the Sinatra court, where she joined in doubles contests with the likes of Bee Korshak, Dinah Shore, and others.* The marriage to Zeppo, who was much older—and, more important, in a financial free fall—was doomed; after Barbara divorced Zeppo and moved in with "The Chairman," Zeppo told his brother Groucho's son Arthur Marx, "She left me with a deck of cards and an old Sinatra al­bum." 3 However, the relationship with the volatile Sinatra was anything but smooth sailing, and during the stormy courtship the Korshaks often consoled Barbara.

  The Reagans attending Sinatra's July 11, 1976, marriage to Barbara Marx, where Bee Korshak was matron of honor (David Sutton, MPTV)

  The protective Sinatra clan was suspicious of Marx, and daughter Tina wrote that her fears were only assuaged when she spoke with Sidney Kor­shak after the ceremony* In her autobiography, Tina recalled how, when she was sitting by the pool with Kirk Douglas, she was approached by "a tall, reedy, silver-haired man . . . It was Sidney Korshak, the legendary (and absolutely charming) attorney who'd cut his teeth with Al Capone, a man who could fix the bitterest labor dispute."4 Taking a seat next to Kirk and Tina, Korshak produced a black Flair pen from his breast pocket and told Tina, "Keep this as a memento—it just saved you a lot of money and aggrava­tion." Korshak explained that he had been asked to represent Barbara and convinced her to sign a prenuptial agreement. (Twelve years after the marriage ceremony, Barbara convinced Frank to rescind the agreement, giving her 50 percent of everything Frank earned during their marriage. "It would be as though the prenup had never existed," wrote Tina, "—as though Sidney Korshak's Flair pen had vanished into a parallel universe.")5

  Bee Korshak, interior decorator, undated (Dominick Dunne)

  Soon after Barbara settled in, the new couple enlisted interior decorator Bee Korshak to redo their Palm Springs eighteen-bedroom, twenty-three-bath compound, where over the years there had been a constant flow of guests, including President Kennedy, who had once used the Sinatra guest room during his 1960 presidential campaign. "It was almost a hotel at times," Bee later said. "Frank liked having people around him." Among other changes, Bee tried in vain to diminish the ubiquitousness of Frank's favorite color: "I couldn't quite get the orange out of him," she lamented years later*6

  As the years progressed, the Korshaks and Sinatras were regularly seen in each others' company: Bee and Barbara often shopped together and even traveled to Monaco for Princess Grace's annual Red Cross benefit, and to Senegal to christen a new medical dispensary and church on behalf of the World Mercy Fund, a favorite Frank Sinatra charity.7 And the spotlight-dodging Sidney even showed up backstage at the Universal Amphitheater for a 1980 Frank Sinatra concert.8

  Nineteen seventy-seven saw the opening of Kurt Niklas's Bistro Gardens just down the street from the Bistro, at 176 N. Canon. Bistro maitre d' Jimmy Murphy remembered the reasoning behind Niklas's seeming desire to go into competition with himself. "Kurt always wanted an outdoor gar­den," said Murphy, "and the space wasn't there at the old Bistro, which was very formal, whereas the Bistro Gardens was casual dining for a younger group of people. But Kurt shot himself in the foot when he opened the Bistro Gardens—he spread himself too thin." Nonetheless, the Gardens became the home to Irving "Swifty" Lazar's soon-to-be-famous Oscar parties. And although Sidney Korshak was no longer a stockholder in the Bistro, he continued to hold court at the original restaurant as well as putting in regular appearances at the Gardens.* (The location now boasts the celebrity-friendly Spago Restaurant.)

  That spring, the buzz at both the Bistro and the Bistro Gardens—and every other Beverly Hills hot spot—was the March 11,1977, handcuff arrest of Bob Evans's director friend Roman Polanski in the lobby of the Beverly Wilshire on six counts of child molestation—offenses that carried a maximum fifty-year prison sentence.^ It was not unnoticed that the judge who was assigned the case, Laurence J. Rittenband, was the great friend of Bob Evans's consigliere, Sidney Korshak.

  According to then thirteen-year-old Samantha Geimer, the forty-four-year- old Polanski had lured her to the Mulholland Drive home of actor Jack Nicholson, who had appeared in Evans-Polanski's Chinatown, under the pretense of introducing her to Nicholson and taking photos of her for the French edition of Vogue magazine. Of course, Polanski knew that Nicholson was off skiing in Colorado at the time. Geimer reported that Polanski drugged her into unconsciousness before raping he
r in every conceivable manner—she awoke with Polanski's head between her legs. Amazingly, Polan­ski admitted to all, including the police, that he had had sex with Geimer, whom he knew to be thirteen—they only differed over whether the tryst was consensual. According to LAPD detective Phil Vanatter, Polanski hadn't a clue regarding the immorality of having sex with children. "He'd screwed plenty of girls younger than this one, he said," Vanatter recalled, "and nobody gave a damn."9 In France, according to his biographer, Polanski's "reputation as a seducer of pubescent girls was legendary."10

  When the pretrial hearings got under way, Rittenband, who normally was a harsh judge, was excoriated in the press for what seemed to be the preferential treatment he was affording Polanski, who was allowed to go to the South Pacific to work on DeLaurentiis's next film, Hurricane. "The man has a right to make a living," Rittenband answered his critics. The judge next gave Polanski a ninety-day stay before having to submit to a court-appointed psychiatric workup. The Hollywood Reporter wondered if Rittenband was "going soft in the head." Others wondered if he had succumbed to industry pressure from the likes of his and Evans's pal Sid Korshak. SantaMonica Evening Outlook court reporter Dick Brenneman, who was then meeting regularly with Rittenband—once in Korshak's company—in order to write a profile of him, had no doubt about Korshak's input into the Polanski affair, noting that the two dined together at least twice a week. "I am morally certain Rittenband had asked [Korshak] to advise him on Polanski," Brenneman later wrote. "Korshak was the judge's best friend, a lawyer renowned for his political media savvy. Besides, Korshak's specialty was advice."11