Five Families: The Rise, Decline, and Resurgence of America's Most Powerful Mafia Empires (18 page)

War had helped the Mafia; peace was even better. For the nation, victory in 1945 over Germany in May and Japan in September ushered in a round of national prosperity and a pent-up spending binge. Good times and the lifting of wartime restrictions on wages and traveling was a boon for the five New York borgatas’ biggest racket and money producer—illegal gambling. Bookmaking on sports and the numbers games were certain winners for all mafiosi. Costello and other New York big shots also had extensive interests in illegal casinos near Miami and New Orleans. The largest expansion in underworld wealth, however, would arise from a new concept: exploiting legalized gambling in Las Vegas.

Various types of gambling had been sanctioned in Nevada since its frontier days in the 1870s, and in 1931 almost every conceivable form of gaming was authorized by the legislature in the misconceived hope it would help the state overcome the Depression. At the end of the war, Nevada was the only state with wide-open gambling, but it was a minuscule industry in a hard-to-reach area that was unappealing to the high rollers. The handful of tiny casinos in Reno and Las Vegas resembled desert dude ranches with poker as the main attraction for their gambling clientele.

Transforming Las Vegas from a dreary desert rest stop for drivers on the way to Los Angeles into a gambling mecca was the inspiration of Benjamin “Bugsy” Siegel, a garish Jewish gangster-racketeer from the East Coast. Siegel was born in New York and as a teenager teamed up with another ambitious Jewish hoodlum, Meyer Lansky. Both of them would provide valuable services for Luciano, Costello, and other Mafia bosses.

Lansky, whose birth name was Maier Suchowljansky, emigrated in 1911 as a young boy with his family from Grodno in Byelorussia, or White Russia, part of the Pale of Settlement, the area where Jews were compelled to live under the czars. Street brawls between Italian, Jewish, and Irish teenagers were common on the Lower East Side, and, according to Lansky’s biographer, Robert Lacey, Lansky and Luciano first met during one of these encounters. Lansky, scrawny and slightly built at five-feet three-inches, impressed Luciano with his pluckiness and sharp back talk when outnumbered by a group of Italian toughs.

On the Lower East Side, Siegel and Lansky’s pack of hoodlums were called
schtarkers
, Yiddish for strongmen or tough guys, and became recognized as the “Bug and Meyer Gang.” The gang protected crap games run by Lansky and Siegel, and rode shotgun to prevent hijackings of shipments of beer and liquor for Luciano during Prohibition.

Siegel supposedly acquired his nickname when a judge reviewing charges of a savage street fight, commented, “You boys have bugs in your head.” Throughout their alliance, Lansky was viewed as the inventive idea man and the combustible-tempered Siegel was feared for his reckless violence. Anyone who dared call him “Bugsy” to his face might get punched out and kicked in the ribs, often with the warning: “The name is Ben Siegel. Don’t you ever forget it.” He reportedly admitted participating in twelve murders. Most organized-crime historians believe that Lansky, as a favor to Luciano, drafted Jewish hit men for the murders of Joe Masseria and Salvatore Maranzano, and that Siegel was a triggerman in the two slayings that resolved the Castellammarese War.

By 1936, Siegel was operating mainly out of Los Angeles, where Luciano sent him to revamp a Mafia outpost of his empire that was headed by Jack Dragna. Luciano and other members of his borgata considered Dragna an unproductive remnant of the Mustache Pete generation, lax in developing prostitution and gambling rings, and unable to exploit labor-racketeering opportunities at Hollywood movie studios.

A natty dresser, suave if not handsome, and with inexplicable charm for women, Siegel was the perfect Mafia steward for Los Angeles and Hollywood.
He installed discipline into the disorganized Los Angeles gang, expanded its illegal gambling interests, and added a new wrinkle by launching an offshore casino—on a boat. Looking to cash in on Hollywood’s main industry, he rigged elections in the stagehands’ union, thereby gaining the muscle to extort the studios for labor peace.

Enjoying Hollywood glamour, Siegel palled around with actor George Raft, who was the movie’s stereotypical Italian-American gangster, and toyed with the idea of taking a screen test himself. Besides the social high life, Siegel funneled millions streaming in from gambling and shake-downs before and during the war to Costello’s East Coast borgata. He kept enough to build a thirty-five-room mansion for his wife and two daughters, and to put on a respectable front that enabled him to join some of the area’s exclusive country clubs. On the West Coast, Siegel showed the mafiosi back in the East that he had organizational brains as well as a killer’s instincts. Burton Turkus, the Brooklyn Murder Inc. prosecutor, credited him with opening up and exploiting Southern California for the Mafia.

After the war, Las Vegas became Siegel’s obsession. He had previously been there to look after minor Mob bookmaking matters at the existing shabby casinos, and became convinced that the desert town was ideal for a unique casino-hotel concept. With travel restrictions lifted, Las Vegas was in easy reach by car for Southern California’s exploding population, and air travel could bring in well-heeled suckers from the Midwest and East to the only legal luxury casino in the country.

In 1946 Siegel raised $3 million from Costello, Lansky, and a consortium of Mafia and Jewish underworld investors. Siegel was hardly a novice in the gambling business, having been a longtime partner with Costello and Lansky in an illegal gambling club in Hallandale, Florida, near Miami, that was run by Lansky. By most estimates, Siegel’s dream casino-hotel, the Flamingo, should have cost about $1 million to build, but he spent three times over the original budget and still needed more. The Flamingo’s rushed opening on December 26, 1946, was a disaster. In its first weeks the casino had an incredible run of bad luck, actually losing money; and there was no income from the hotel because its rooms were unready for occupancy.

Siegel closed the Flamingo for two months to straighten out the kinks and to gather more investments and loans from his backers. The casino reopened in March 1947, but continued to lose money.

On June 20, 1947, Siegel was alone in the Los Angeles home of his mistress,
Virginia Hill, who had stormed out after a spat. Besides her liaison with Siegel, Virginia had earlier been a companion to several other gangsters and reputedly was an underworld courier employed to transfer money and messages.

Siegel sat reading a newspaper on a living-room couch when, shortly before midnight, he was killed by a barrage of nine .30 caliber bullets from an army carbine, fired through a window, that riddled his head and upper body.

There was no shortage of suspects but, like almost all gangland murders of that era, the crime was unsolved. The financial losses at the Flamingo had antagonized and alienated many of Siegel’s backers, who believed he was cheating them. Though there were press rumors that Jewish underworld investors ordered and arranged the execution, the Mob grapevine attributed the slaying to East Coast mafiosi upset by Siegel’s independence and incessant demands for more of their money.

“The Jews don’t fuck with the Italians,” observed Jimmy “the Weasel” Fratianno, a Los Angeles-based mobster from the Siegel era. “They learned that lesson a long time ago.”

Eventually, the Flamingo, under new Mob management, became a resounding success, the forerunner of a building surge of casinos that were controlled by the Mafia for decades. The Flamingo brought Las Vegas into the modern era and it was the original centerpiece of Las Vegas’s famous Strip. Las Vegas was a new resource and territory for the Cosa Nostra and, to avoid jurisdictional conflicts, the Commission declared it an open city, which meant that any crime family could operate there.

In the late 1940s, Nevada’s casino regulators welcomed with open arms the Italian and Jewish gambling specialists who flocked to Las Vegas. Protecting and encouraging the growth of an infant industry that promised to become the state’s largest revenue gusher, state officials discreetly ignored the underworld links of these casino investors. The officials pretended that the newcomers were professional gamblers, not professional criminals.

At several of the Mob-run Las Vegas casinos, Meyer Lansky, an experienced major domo of illegal clubs in Florida, New York, and Texas, and of legal ones in Havana, Cuba, was brought in as a trusted behind-the-scenes manager. Lansky’s illegal gambling clubs, commonly known as “carpet joints,” were more upscale, with fine food and drinks, and better furnished than the ordinary grimy parlors run by the Mob in New York and other big cities. He was unequaled at the bookkeeping art of “skimming,” diverting cash before it was counted as a
casino’s winnings, to avoid paying the state of Nevada its share of the earnings.

Despite his
affiliations
with Luciano and Costello, Lansky was at best a junior partner who knew his subservient status in the Mafia universe. Among his unschooled criminal companions, he was admired as a financial wizard, a deep thinker who was a member of the Book-of-the-Month Club. More important to his underworld survival was his reputation as a trusted big earner for important mafiosi who profited from his gambling deals. Yet because he was not of Italian heritage, Lansky could never become a made man or be admitted into the Cosa Nostra’s inner councils, where policies were set and life and death decisions were made. He took orders and never gave them.

The inspiration for the Mafia’s bonanza in Las Vegas must be attributed to the pioneering efforts of Bugsy Siegel. He was “the first important criminal to recognize the potential of legalized gambling in Nevada,” Howard Abadinsky, an organized-crime historian, says. Lansky biographer Lacey points out that Siegel’s murder put his new gambling palace on the front pages of most newspapers in America. Ironically, it was the enormous coverage of Bugsy’s death that publicized the Flamingo and helped make the entire Las Vegas Strip famous.

Expanding into Las Vegas was another Mafia success that met no concentrated resistance from the authorities. Even when not corrupted by Mob money, federal and local law-enforcement efforts against the high and low ranks were woeful and uncoordinated. Federal agencies and police departments around the country operated independently, rarely sharing intelligence information, and sometimes stumbling over each other in their infrequent investigations of a mobster or a Cosa Nostra racket.

The Federal Bureau of Investigation, the nation’s largest crime-fighting force, had the interstate jurisdiction to delve into almost any crime that occurred from coast to coast. J. (John) Edgar Hoover, the FBI’s director since its inception in 1924, dismissed as fantasy suggestions that an American Mafia or any interrelated national crime organization existed. As a result, there were no FBI authorities on organized crime; through the 1940s not a single agent, even in Mob-infested cities like New York and Chicago, was assigned exclusively to organized-crime work.

An unsurpassed manipulator of the press, movies, television, and radio, Hoover crafted the spurious image of the omnipotent, incorruptible “G-Man” overcoming the nation’s most dangerous criminals and foreign enemies. His main targets in the 1930s were kidnappers and bank robbers, and he reaped
enormous acclaim from his agents’ stalking and gunning down John Dillinger, the much-publicized bank bandit. During World War II, the FBI’s emphasis shifted to enemy spies and saboteurs. With the beginning of the Cold War in the late 1940s, the bureau focused on Soviet espionage and suspected Communist and leftist traitors.

Hoover’s standard rebuttal to questions about the possible existence of an interstate “crime syndicate” and sophisticated organized-crime gangs was to label them as mere hoodlums and regional police problems outside the FBI’s jurisdiction. “The federal government can never be a satisfactory substitute for local government in the enforcement field,” Hoover once chided a congressional committee that raised the question.

Even the use of the word “Mafia” in internal bureau communiqués and reports was banned by Hoover. He prohibited agents from working undercover to infiltrate and expose illicit complex enterprises, fearing that associating in any manner with criminals might someday taint or compromise the FBI’s integrity.

Playing it safe, Hoover compiled glowing statistics by concentrating on easily solved federal crimes, especially interstate shipments of stolen cars and bank robberies. Stolen cars could be traced through tips on where they were stored and vehicle identification numbers. Bank holdups were often committed by inept amateurs who could be traced down easily through witness identifications and license-plate numbers of getaway cars.

A consummate bureaucrat and power broker, Hoover maintained confidential, unflattering dossiers on congressmen and government officials, “greymail,” to discourage critics who might have the courage to challenge his views. Typically, he would use messengers to subtly inform a legislator or an official that the bureau was aware of an ethical or romantic lapse, and that Hoover—as a friendly gesture—would do his best to suppress the embarrassing information.

The FBI director serves at the pleasure of the president, and Hoover held on to the post for forty-eight years, even though Presidents Harry Truman and John F. Kennedy despised him. He ran the bureau as his private kingdom, and his idiosyncrasies became enshrined. Agents were supposed to represent his vision of the ideal white American male. Until the final years of his reign, Hoover personally vetted each trainee at a brief meeting in his office, and a damp or limp handshake automatically disqualified the prospective agent. He instituted a rigid dress code, known as “Hoover Blue,” requiring all agents on duty to wear dark business suits with a white breast-pocket handkerchief, white shirts,
gleamingly polished black shoes, and hats. Ties, of course, were de rigueur, but rookies in training school were informed that red ones were banned because Hoover considered the color “insincere.” For almost half a century, the dressed-alike agents (during Hoover’s tenure they were also forbidden to grow mustaches and beards) were easily recognizable at crime scenes, and their “Hoover Blue” outfits often compromised them on surveillance and other investigative assignments.