by Gus Russo
• A first-ever listing of the numerous Pritzker holdings (see appendix B).
• A thorough discussion of the allegations of the Pritzkers' ties to the Chicago Outfit, including a quote from an informant saying, "The Pritzker family of Chicago through their Hyatt Corp. initially received their backing from organized crime."
• The revelation of the Pritzkers' offshore tax-dodging setup in the Bahamas' Castle Bank, as directed by their attorney Burt Kanter.
"Jay Pritzker almost bought the paper after the first installment," said Royce.18 Royce was fortunate that the purchase didn't transpire, as the series earned Royce the second of his three Pulitzers.
The Curse of Korsa I
One month after the Royce series, the Pritzker name was in the news again, this time through its linkages to Playboy's Hugh Hefner and—again—Sid Korshak.
On April 7, 1982, Hefner was denied a New Jersey gaming license for his Atlantic City Playboy Casino, a partnership with the Pritzkers (under their Elsinore banner), who had a 45 percent stake in the venture. The Hefner-Pritzker team benefited Hefner because the Pritzkers had ready access to the Teamsters Pension Fund through Korshak, while the Pritzkers hoped to trade on the Playboy cachet. The team bought a $1.8 million site on the Atlantic City boardwalk, but it was on the corner and at the end of a street, almost unnoticeable to the public except from farther down the street. Since the $135 million, five-hundred-room hotel-casino had opened a year before the license denial, it was operating on a temporary permit while the gaming board held hearings to determine the owners' fitness for a permanent license.
Although interested in the Pritzkers' long ties to the Teamsters Pension Fund, the New Jersey Casino Control Commission's hearings were hampered by the nonappearance of pension-fund assets chief Alvin Baron and fund adviser Allen Dorfman, who'd worked so closely with Korshak, Hoffa, and the Chicago Outfit. The commission had wanted to grill them over their contacts with Pritzkers for past loans, since both Baron and Dorfman had previously been convicted for taking kickbacks for loans; both had also dealt with Pritzkers.19 Outfit associate Mike Corbitt (see chapter 6) was among those who knew of the Dorfman connection to the Pritzkers. "It was common knowledge," Corbitt wrote in his autobiography, "that most of the Pritzkers' financial backing at that time came from the Teamsters, meaning Pension Fund manager Allen Dorfman."20 However, without appearances by fund associates, the Pritzkers were able to successfully deny the accusation that they had, like so many others, provided kickbacks for their loans.
On January 11, 1982, Hefner was questioned under oath by the New Jersey Casino Control Commission, which expressed most concern about Hefner's supposed bribe of New York's State Liquor Authority (SLA) board members in 1961 (see chapter 11) and Sid Korshak's $50,000 bilking of Hefner in 1978 over MCA's film library. New Jersey deputy attorney general James F. Flanagan III described Hefner's $50,000 as a payment to Korshak to "whisper in Lew Wasserman's ear." Hefner said he regretted the entire Korshak-MCA matter, but he thought there had been "nothing inappropriate" about it.
Although the Control Commission located the six-thousand-word transcript of the 1961 SLA grand jury proceeding, in which, after obtaining immunity, Hefner admitted bribing the SLA, it appeared to have never linked the Korshak brothers to that affair. Without the relevant FBI and Chicago Crime Commission files, the board failed to make the connection, an oversight that became moot when the board denied the Playboy license with just the evidence in hand.
Although three of the five commissioners voted to grant Hefner and Playboy Enterprises Inc. a gaming license, the law required approval of four of the members (Elsinore/Pritzker had already been approved unanimously). The commission found that Hefner was "unsuitable for licensure and association with a licensed New Jersey casino." Commissioner Carl Zeitz cited the SLA bribery as a chief factor in the denial, while commissioner Martin Danziger quoted not only the bribery, but also regulatory offenses in the United Kingdom, an SEC investigation, and Playboy's "organized crime ties" as his reasons for the rebuke.21
Hefner immediately pulled up stakes in Atlantic City, receiving $45.4 million in a note at 10 percent interest from Pritzker-Elsinore, due in installments over the next six years, plus $5.6 million in management fees. As Playboy chronicler Russell Miller wrote, "Unquestionably, Playboy had arrived at its darkest hour . . . Instead of the 'significant profits' promised by Hefner in November, Playboy Enterprises, Inc., reported a loss of $51,681,000 [for fiscal 1982]."22 The losses prompted Hefner to reach out to Abe Pritzker for some help with his cash flow. "[Hefner] wanted to borrow money," Abe Pritzker said in 1985. "I offered some, but as compensation I wanted an option on part of his magazine. He didn't want that. In Atlantic City, let's say we're kissed out."23
However, the buyout of Playboy's share weighed down Pritzker/Elsinore, which now operated the casino under the name the Atlantis Casino-Hotel. (In 1985, Elsinore disclosed that it might not meet interest payments to creditors, including Playboy Enterprises. Eventually, Elsinore filed for bankruptcy protection from its creditors and the Atlantis Casino closed in 1989, the only Atlantic City casino to have failed.)
The Pritzkers next figured in the background of an event that had major repercussions for the continued survival not only of Sid Korshak, but of others within the Supermob. The trouble began in December 1982, when Korshak's Teamsters Pension Fund contact Allen Dorfman was convicted along with Teamster president Roy Williams for bribing U.S. senator Howard Cannon of Nevada in return for Cannon's influence on pending pro-Teamster legislation.24 Dorfman's sentence could have landed him a maximum fifty-five- year sentence, but even before the sentence could be pronounced, Dorfman was indicted with four others on January 11, 1983, on kickback and other charges related to Ed Hanley's Hotel and Restaurant Employees Union. Although the indictment did not charge Korshak, it described him as the man Dorfman had gone to in order to influence Hanley.25 Many assumed Korshak's own indictment was imminent. However, the key witness was about to disappear.
On January 19, just eight days after Dorfman's indictment, he was murdered in the parking lot of the Pritzkers' Hyatt Hotel in Lincolnwood, Illinois, a Chicago suburb.26 At the time, Dorfman was rumored to be cutting a Joe Hauser-like deal with the FBI regarding their investigation (known as PENDORF) into the Teamster fund kickbacks to the mob; and Dorfman knew infinitely more about the inner workings of the Teamsters Pension Fund irregularities.
"There was real fear among the Chicago Outfit that Dorfman was ready to talk to save himself," said then president of the Chicago Crime Commission Patrick Healy "And if Dorfman had decided to talk, he could have done some serious damage. They knew that he was not prepared to spend the rest of his life in jail."27 A source close to both Dorfman and Korshak recently stated his belief that Korshak was well aware of Dorfman's impending demise. "I was told that Dorfman had been drinking too much at La Costa," said the source, "blabbing about knowing what happened to Hoffa. Korshak told someone that Dorfman wasn't long for this world. I know he had to be concerned that Dorfman was a time bomb."
At least one "connected" individual believed that even the location of the murder was not a coincidence. During the run-up to the murder, slot king Hy Larner's partner Mike Corbitt, who doubled as the director of security for the Chicago Hyatt, had been putting up visiting Outfit-connected Panamanian generals at the same Lincolnwood Hyatt. "We received a tip—I don't know who the tip came from," Corbitt said. "I was told to go to the Hyatt in Lincolnwood, a little town outside of Chicago, and get the generals out of that fucking hotel."28 It was the same hotel where Dorfman would be killed.
Seven days after the Dorfman hit, the FBI contacted Korshak in L.A., but he "refused to discuss the Dorfman matter with agents."29 On April 27 and 28, 1983, Joe Hauser, the "flipped" witness with considerable information about the Dorfman-Korshak-Hanley world, gave the explosive details to a Senate subcommittee investigating links between Hanley's Hotel Union and organized crime. When that same body subpoena
ed Korshak, his lawyer informed them that he would merely invoke the Fifth; he was never called.
As for Ed Hanley, he wisely declined to go the Hauser-Dorfman route, and during his 1984 testimony before the same subcommittee, he asserted his Fifth Amendment right against self-incrimination thirty-six times. In 1995, a court-appointed monitor began to review the business practices and mob infiltration of Hanley's union, a proceeding that led to the removal of both Hanley and his son, Thomas Hanley, who was the union's director of organization. However, instead of being indicted, Hanley was feted by the Cook County Democratic Association on June 17, 1997, at a $125-per-person fund-raising dinner. "The very fact that Hanley is being used as the lure to bring money into this event indicates how pervasive the stranglehold of organized crime is on our everyday lives," said former Cook County Police organized crime specialist John Flood. The monitor's final report accused Hanley of a wide range of corruption, and he was forced to resign in 1998 due to the allegations. However, he swung criminal and civil immunities deals with the Department of Justice, infuriating agents who had worked the case, and secured a $267,000 annual pension, more than his annual salary of $250,000. Hanley died in an auto accident on January 7, 2000, at age sixty-seven.30
Allen Dorfman was not the only Supermob associate to shed his mortal coil in early 1983. On January 19, 1983, Charlie Bluhdorn, age fifty-six, died of a heart attack while in flight from a business trip in the Dominican Republic. He had a small private funeral at St. Mary's Church, which was attended by the former secretary of state Henry Kissinger. In addition to his vast conglomerate, Bluhdorn left his visible mark in Manhattan, where his Gulf & Western building became a prominent feature of the New York City skyline, reaching heights of forty-two stories just off the southwest corner of Central Park, at Columbus Circle.31
The Fourth Estate Stay son the Supermob T r a il
It seemed that once a journalist was bitten by the Supermob bug, there was little chance it could be shaken off. Over the decades, the same handful of investigators continued to try to call attention to what was happening in the country's shadow power structure. Such was the case with Frank McCulloch, who had covered the well-connected players for both the Los AngelesTimes and Life magazine, then briefly taking a job away from the national news deadlines. One night in 1975, he told his wife, "I'm going to die of boredom, but I can't bring myself to ask Time magazine or the Los AngelesTimes for a job." Fate stepped in almost immediately, when the very next morning McCulloch received a call from C. K. McClatchy, editor of his family's five West Coast Bee newspapers, with an offer.32 McCulloch thus became the executive editor of all the papers, reuniting him with crack corruption and organized crime reporter, Pulitzer-winning Denny Walsh. The duo churned out hard-hitting reports that gained not only attention, but their share of lawsuits, all of which they successfully defended. Not surprisingly, the largest action came courtesy of the Supermob. Although Paul Laxalt's 1983 $250 million libel suit was not as large as Dalitz's filing against Penthouse, it certainly got the attention of the Bee staff.
Laxalt's lawsuit was instigated by Walsh's November 1, 1983, story in the flagship Sacramento Bee, which cited IRS and Gaming Control Board sources for their conclusion that Laxalt's Ormsby House Casino, which he owned from 1971 to 1976, was skimming the wagers—a full 20 percent of the profits—and diverting the lucre back to the Chicago mob via its subordinates in the Milwaukee Mafia. The article also ticked off the numerous hoods who seemed to be overly friendly toward Laxalt. The contentions were especially worrisome to Laxalt because he was lining up support for a possible run at the presidency in 1988.
Refusing to be intimidated, the McClatchy newspapers countersued, and toward the end of an exhausting three-and-a-half-year process, the name of Sidney Korshak was finally brought to the forefront. "When Laxalt sued, we deposed Korshak," remembered McCulloch, "and it was settled just before Korshak was called."33 Former Bee reporter Dick Brenneman heard a similar account. "I was told that it was settled on the day before the FBI was to turn over its Korshak files to the defense," said Brenneman.34 "Laxalt still considered himself a presidential candidate," added McCulloch.
The suits were thus dropped in June 1987, with the paper paying Laxalt's legal fees and issuing a carefully worded statement to the effect that their pretrial investigation failed to prove that the skim allegations were known to Laxalt—of course, their job was not to prove it, but to make the case for it in order that officialdom might follow up. Immediately after the dismissal, McCulloch told the press, "We have not retracted, we have not apologized, and we have not paid any damages. Regardless of what the senator may say to further his efforts in his campaign, we are not backing away from anything we say in the news story."35 Today, McCulloch has no reservations about his paper's essential conclusions. "Paul Laxalt had Chicago money in his Carson City casino, and he was being totally skimmed," he said recently.
Walsh pointed out that the revelations were instrumental in Laxalt's ultimate decision not to seek the Oval Office in 1988, this despite Reagan's touting him for the job in a March 3,1986, $l,000-a-plate dinner held in Laxalt's honor.* "The story sank Laxalt's attempts to become president," Walsh said proudly.36 However, the Supermob, as usual, emerged largely unscathed. IRS agent Laurence A. Rooker later testified that he resigned his post back in 1973 when his superiors made it clear they were not going to pursue what they were learning about the Ormsby House a decade before the Walsh article. Rooker said that the case was solid and "the only logical explanation [for dropping it] was the fact that there was a political figure involved in the case."37
Rooker was thus inducted into the ranks of those frustrated over the decades with the staggering lack of interest in prosecuting the Supermob. Even Frank McCulloch still sometimes feels exasperated. "I must say at this distance, I sometimes wonder whether all the money that was spent to defend the libel suits that I created, and all the energy that went into it, whether it was a good trade-off or not," McCulloch said in 2004. "I'm not so sure now. I'll bet you that very few people remember the stories per se. They remember the libel suits, but I don't think they remember the stories."^,38
And the frustrations spilled over into the television industry as well. One year after Walsh's 1983 piece on Laxalt, California investigative reporter Lowell Bergman, then working as a producer for CBS's 60 Minutes, joined the anti-Laxalt journalistic klatch when he produced an episode that focused on Laxalt's ties not only to Dalitz, but also to the Wassermans (recall that Lew's wife, Edie, had her own ancient history with Dalitz). However, just days before the piece was to air, Bergman was stunned to discover that 60 Minutes executive producer Don Hewitt had just dined with his good friends the Wassermans (with whom he often stayed when in California) and had also discussed the story with GOP fund-raiser Pete Peterson, all of whom dissuaded him from airing the expose. According to Bergman, it wasn't just Hewitt's bowing to his friends that derailed the investigation, but the fear that President Reagan, who was in the midst of deregulating the broadcast industry, might bring the hammer down on the network. "It was the first episode in my career in which I became aware of self-censorship," Bergman said.39
To many observers, the sad fact remained that only God could intervene in the high-flying affairs of the untouchables from Chicago. Three years after the death of philanthropist Jules Stein and five years after the passing of philanthropist Al Hart, Jake "the Barber" Factor, the man who had used Hart as an INS character reference to avoid spending his life in a British prison, died of natural causes in January 1984 in Beverly Hills. Not surprisingly, his Los Angeles Times obituary headline read JOHN FACTOR, NOTED PHILANTHROPIST, DIES AFTER LONG ILLNESS.40
Like so many other Supermob associates, Factor had learned that the quickest way to rewrite one's CV was to move to L.A. and give away some money, as he had been doing in the downtrodden Watts district. Former California mob investigator Connie Carlson, who had followed the Supermob doings for years, recently said about Factor, "To the
end, he was trying to acquire more social status. He tried to get a diplomatic passport—he didn't need one, he just wanted it for social status."41
Jake Factor, philanthropist (Library of Congress)
Next it was L.A. labor expert David Robb's turn to take on the untouchables. As a staff reporter for Daily Variety, Robb began looking into the history of President Reagan's relationship with MCA, Wasserman, et al. Robb, a dogged pursuer of the paper trail, was able to obtain over six thousand pages of unsorted Department of Justice documents about Reagan, MCA, and the Screen Actors Guild through the Freedom of Information Act.42 His resultant April 18, 1984, Variety article explained previously untold details of Reagan's relationship with MCA, including the infamous waiver granted by SAG, and culminating with Reagan's previously undisclosed testimony before the 1962 federal grand jury. But, like every other Supermob expose, Robb's fell on deaf federal ears. No U.S. agency was about to look into the conflicted affairs of the president whose appointees headed those agencies.
The journalistic gauntlet next fell to thirty-four-year-old, Washington-based investigative journalist Dan Moldea, a similarly indefatigable investigator of all things Mafia since his landmark 1978 work on Jimmy Hoffa and the mob (The Hoffa Wars), and a mob murder case in his Ohio hometown, a case in which Moldea elicited confessions from three of the conspirators {The Hunting of Cain)*
