-Caveat Lector-
an excerpt from:
The Conspiracy of Death
George Redston w/ Kendell F. Crossen
@1965 George Redston & Kendell F. Crossen ALL RIGHTS RESERVED
LCCCN 65:26505
The Bobbs-Merrill Company, Inc.
248 pps -- First Edition -- Out-of-print
--[2]--
3. ORANGES AND "JUICE"
THE LATE Fred Allen once said that California was a great place to go to if
you were an orange. Following their successes in Chicago and New York, the
Mafia-controlled Syndicate decided it was also a fine place for them. They
started carefully, putting out various feelers, but they were already
beginning to move by the time I arrived from Texas.
Anthony Rizzoti, better known as Jack Dragna, had already lived in California
for many years. As early as 1915 he was sentenced to San Quentin for
attempted extortion and was released three years later. It was to be the only
time he ever spent in prison although he was arrested many times in the
following years. It was generally known that he was important in the Mafia
leadership, second only to John Rosselli, "Don" or Mafia leader in the
Southwest area.
The first gang execution of an important member had already taken place
before I arrived. Harry "Big Greenie" Greenberg had a record as a gunman,
burglar and bookmaker and was thought to be a part of the Syndicate, but he
must have gotten out of line for he was killed in Hollywood on November 22,
1939. No one was ever convicted of the murder although there were three
suspects. They were Frank Carbo, Harry M. Segal, and Benjamin "Bugsy" Siegel,
the latter in Los Angeles in connection with the plans to organize California.
I arrived in Los Angeles shortly after all of this had happened. As a result
of my trial and three years in prison I was broke and in debt. I had
previously worked for the Continental Press Service in Chicago and in Texas.
This was a wire service selling race results to bookmakers all over the
United States. By subscribing to its services, bookmakers could receive
results on a horse race anywhere in the country shortly after it was over.
This brought them more bets and also protected them against individuals who
might arrange to get results before the bookmaker did and put in a bet on a
horse that had already won. Continental was owned by Jim Ragen, originally a
partner with Annenberg, and he and I were good friends.
I went to see Russell Brophy, Ragen's son-in-law and head of the Los Angeles
office for Continental, and told him I wanted a job. He checked with Ragen in
Chicago and I went on the payroll.
Before I knew what was happening, I was up to my neck in the same kind of
characters I'd known in Chicago. A wire service was not only extremely
profitable; it was also essential to the existence of many independent
bookmakers. The Syndicate was well aware of this and they wanted to get their
hands on Continental because it would mean they could also control
bookmaking. They first tried to buy Continental but Ragen refused. Then they
suggested that they give Ragen $100,000 for a part interest in Continental
and that Ragen could still run it. He was smart enough to know that they
would let him stay around just long enough to learn everything he knew about
the business, so he refused again.
In the meantime, Jack Dragna and his men were working on Russell Brophy in
Los Angeles, hoping to cut in on the local office. They had been getting
scratch sheets (a daily publication giving information about which horses
have been withdrawn from a race, morning odds on the horses and the choices
of various handicappers), bookmakers' sheets and the Metropolitan, which gave
more detailed information about the horses running that day. Ragen ordered
Brophy to make sure that none of the gang got those publications in the
future. With that, they stepped up their campaign of terror against Brophy.
Brophy wasn't the man his father-in-law was and he began to (yet nervous. He
wanted Ragen to do business with the Syndicate. I had several arguments with
him about it and finally quit. Ragen called me the next day and asked me to
come to Chicago. I went and he put me on his personal payroll to keep him as
well informed as I could about what was going on in Los Angeles.
Ragen did sell a minor interest in Continental to Mickey McBride in
Cleveland, Ohio. McBride had once worked with Continental and wanted to buy
the interest for his son who was then in the Army. There was no connection
there with the Syndicate, so Rauen took him in.
While the Syndicate did not let up on Ragen or Brophy, they did start a rival
wire service, which they had often threatened to do. It was called
Trans-America. They leased wires from Western Union, established their
headquarters in Phoenix, Arizona, and a secondary franchise in Las Vegas,
Nevada. Moe Sedway, long in the organization, was sent to Nevada to operate
it. Sedway was also an old friend of Bugsy Siegel. He arrived in Las Vegas in
1941 and it was soon obvious how it was to be run. Gambling was legal in
Nevada, with the big money coming from the tables, but the casinos also took
bets on horses in order to bring customers in during the day, since in
between races many of the bettors would take a few turns at the dice table or
the other games. They had all signed up for service when Trans-America moved
in, but they soon found things would be different under Moe Sedway. He cut
the service off for all but a few places and those few were the ones who gave
a percentage of their bookmaking to Sedway. As the money started coming in,
Sedway began to give a lot of money to civic and community enterprises,
trying to build up the image of a solid citizen.
Bugsy Siegel followed Sedway to Las Vegas and again there were changes.
Siegel let it be known that the only places to get the wire service in the
future would be those willing to turn over anywhere from 75 per cent to 100
per cent of their bookmaking income. The casino owners didn't like it, but
many agreed since bookmaking was only a side line.
As soon as they were lined up, Siegel left Sedway in charge and went on to
Los Angeles. He joined with Jack Dragna in setting up a Trans-America office
to cut into Continental's business. It wasn't as easy as in Las Vegas.
Bookmaking was illegal in California and the individual bookmakers liked
doing business with Continental. Many of them also knew that if they started
dealing with the Syndicate it wouldn't be just a matter of subscribing to the
service, but that they would also have to give up part of their profits.
Dragna and Siegel stepped up the pressure on Brophy at Continental. On July
21, 1942, Dragna sent Joe Sica and Mickey Cohen, just beginning to be
important in Los Angeles crime, to visit Brophy. They ripped out all the
phones, destroyed everything in the office and gave Brophy a beating that put
him in the hospital. Sica and Cohen were arrested but Brophy refused to
appear against them, out of fear, and they got off with fines. Sica's was
$200 and Cohen's $ 100. When Mickey Cohen was questioned at a later date by
the Kefauver Committee he was asked why his fine was less than Sica's. "I
guess I hit him less," he said.
After this incident some of Dragna's men wrecked the press shop that printed
the scratch sheets and racing forms for Continental. They also stopped
Brophy's car on several occasions and told him he'd better "get in or get
out." I think that Brophy would have liked to follow their advice but it was
practically impossible. Ragen was determined to resist the Syndicate and
Brophy had no choice but to go along, no matter how reluctantly.
The gang was not content with merely trying to move in on Continental and
building up their own wire service. They were digging into other rackets,
such as narcotics, prostitution, labor rackets, slot machines, etc., and
spreading "juice" wherever they could buy police or political protection.
They were being fairly successful in all of these endeavors. In addition to
all of his other activities, Siegel was also leading the drive to capture the
legal gambling in Las Vegas.
The off-track betting was, and still is, a source of huge sums of money and a
lot of the gang's work was concentrated on that. Their own wire service
attracted some business but they still wanted a monopoly. As long as the wire
service existed, the bookmaker who had it also had an advantage over the one
who was without service. Although Ragen had never used such tactics, the wire
service could completely control all off-track betting. It was estimated even
then that each year the profit on off-track betting in the nation was
$3,000,000,000. Personally, I believe this to be far below the actual figure.
Whatever the real amount, probably more than 90 per cent of the off-track
betting in America was concentrated in five or six areas. Even if we accept
the figures given and assign only one share to California, the
Mafia-Syndicate was fighting to control more than $60,000,000 per year.
Nevada was the only state with legal bookmaking. Betting at the race track
elsewhere was legal; betting fifty feet away from it was not. Western Union
had a clause in all of its contracts stating that they could cancel any
contract if they discovered that their wires were being used for illegal
activities.
Continental Press had taken this into consideration from the beginning. Their
offices all over the country put up a show of taking the service because of
the news sent over the wire, including race results. They published various
racing papers but included a few items of general news, as such papers do
today. These offices, or "drops" as they were known, would in turn sell the
racing news to bookmakers, but there were never any bookmaking activities in
their offices.
Even in those days there was a ban on phone calls from a track while races
were being run. Continental would have a man at the races who would use a
wigwag system to signal the winner of each race. Another man, outside the
track, would be watching with binoculars and would immediately phone the
nearest Continental office. The results would be in all of their offices
within a very few minutes after the race was over. In most offices the
results would be announced over a loudspeaker in front of which would be a
number of phones with the receivers off the hooks. At the other end of the
phone connection would be a bookmaker who was a subscriber to the service.
Trans-America was set up to operate in much the same manner and also ]eased
wires from Western Union.
The Mafia-Syndicate finally grew tired of trying to force Ragen to sell them
part or all of Continental and in August of 1946 he was shot in Chicago. With
the murder of James Ragen, which was never solved, there was no more strong
resistance to the invasion, and the gang moved in. They did, however, keep
their own Trans-America running.
The Syndicate was not the only group interested in the role of wire services
in off-track gambling. The California State Legislature was also taking a
look, as were a number of county district attorneys. The California
Commission for the Study of Organized Crime was created by an executive order
of Governor Earl Warren, who also appointed Admiral William H. Standley as
chairman. The statute that made the Commission possible provided for it to
get its personnel from the State Department of Corrections. Bookmaking was
one of their first targets, as were the wire services.
After a preliminary survey, the Commission wrote to the Public Utilities
Commission of the State of California asking them to make their own
investigation and to take steps to stop communication facilities for illegal
purposes. They responded with an order for such an investigation, sending
copies of the order to the Special Commission, the telephone and telegraph
companies of California, the Attorney General, all district attorneys and
sheriffs and the chiefs of police of the principal cities. All of these were
invited to public hearings to be held in Los Angeles, San Francisco and
Sacramento.
Following the hearings, District Attorney Edmund Brown of San Francisco,
District Attorney Tom Scott and Sheriff John Loustalot of Kern County and
Chief of Police Horace V. Grayson of Bakersfield requested Western Union to
discontinue operations to the drops in their areas. Western Union acted
immediately and stopped all service to thirteen drops. This still left
several drops in Los Angeles, San Diego, San Bernardino, Colton and Palm
Springs, any one of which could supply service to counties in other parts of
the state;
About this time, the Commission discovered that Continental had neglected the
usual "cover" for the drop in Palm Springs. The records showed that there was
an installation in the premises of George Zouganiles in that city. He was a
known bookmaker and there was no pretense on his part of distributing news.
This information was supplied to Mr. Walter Lentz, assistant to Attorney
General Fred Howser in Sacramento. According to a report later sent to the
Commission, Special Investigator John N. Riggs went to Palm Springs and
Cathedral City and reported that he found no evidence of bookmaking on the
part of Zouganiles. The Commission was not satisfied and sent its own
investigator, John H. Hanson, to check it.
John Hanson arrived in Palm Springs with subpoenas to be served on N. D.
Woods, manager of Western Union in Palm Springs, William Nash, District
Manager of California Water and Telephone Company, and George Zouganiles of
Palm Springs and Cathedral City, to be used at his discretion.
Hanson first saw Woods at Western Union. He was told that the only knowledge
that Woods had of wire service to Zouganiles was that he'd heard the Western
Union repairmen talk about it. Woods said that such contracts with
Continental would not be handled through his office and he would not normally
be notified of it. He added that he understood that Zouganiles was a
bookmaker and that he didn't think it was any secret in Palm Springs.
The phone company was the next stop. District Manager Nash said that he knew
Zouganiles and understood that he was a bookmaker and that he operated an
open "horse parlor" in a building which he owned in Cathedral City. The
telephone company rented half of the building, an arrangement which they had
made until they could complete a building of their own in the town, but Nash
had never been in the part occupied by Zou-ganiles. He was aware that the
latter had a large telephone installation. Hanson asked him if he didn't have
the right to visit any place where there were phones installed to check the
equip- ment. Nash said he did and agreed to go with the investigator to
Cathedral City.
Nash and Hanson parked in front of the building when they arrived. There were
no signs on the side of the building occupied by Zouganiles. They entered the
phone company, which consisted of a switchboard, an operator and several
chairs. They talked to the operator for a few minutes, during which she
mentioned that when the horses were running the place next door made and
received many phone calls.
Hanson and Nash then went next door. The front part of the space was occupied
by a soda fountain, with stools and a couple of tables. Business must have
been slow for there were no customers. There was a man sitting behind the
soda fountain, but, since he recognized Nash, he paid no attention as they
walked on to the door connecting with the rear of the building. Hanson noted
that the door contained a one-way mirror, so that anyone entering the soda
fountain could be seen, and that it was equipped with a heavy lock.
Once they were through the door, the two men found themselves in the middle
of the action. There were about twenty bettors in the room, most of them with
tickets in their hands. On one side there was a large blackboard on which the
results of races at Oaklawn and Tropical Park were written. On the other side
there was a counter where two men sold tickets on upcoming races. There was a
third man in a cashier's cage where the lucky few could collect their
winnings.
Nash asked one of the men for George and was told he was in the office but
would be right out. In a few minutes a door behind the counter opened and a
heavy-set man came out. He was introduced to Hanson as George Zouganiles.
When he heard that Hanson wanted to talk to him, he suggested that they go to
the soda fountain and have some coffee.
When they were seated at the fountain, Hanson identified himself and told
Zouganiles that he wanted to see whatever telephone and telegraph
installations there were in connection with his bookmaking. He also told the
bookmaker that he didn't have to worry about an immediate arrest because that
was not within the authority of an investigator for the Commission.
Zouganiles was more amused than frightened. He took the investigator around
the building, showing him the room where two men took phone bets and also
received race results. There was a microphone in front of them and when they
received results, one of them would switch on the microphone and announce
them. His voice went out over a loudspeaker in the main room.
The three men then drove back to Palm Springs, meeting at a hotel. Zouganiles
led the way to a room in the hotel, knocked several times on the door and it
was opened. They stepped into the hotel room, normal in every respect except
for the presence of a telegraph key. This was the drop. The man who let them
into the room was the telegrapher and Zouganiles bragged that he was one of
the best in the country.
Both Zouganiles and the telegrapher talked openly about the business, the
latter taking down results even as he talked and then phoning them to
Cathedral City. Obviously they had no feeling that anything would come of the
investigation.
When John Hanson returned to the offices of the Commission, a copy of his
report was sent to Attorney General Fred Howser. According to Mr. Howser, he
again sent investigators to Palm Springs but they were unable to find any
evidence to support the statements of John Hanson and therefore his office
could take no action. He suggested that if the Commission felt that their
information was correct they should proceed against George Zouganiles—a
ridiculous suggestion since it was clearly stated that the Commission did not
have the power to arrest anyone or to initiate prosecution of any case.
While this was going on, the wire service was fighting back in the areas
where Western Union had terminated services. Pending an appeal, Western Union
received a court order forcing them to resume service. This was also brought
to the attention of the Attorney General with a request that he take an
active part in assisting the attorneys for Western Union. Mr. Howser replied
by stating that it was his belief that the law did not permit him to do so.
An appeal was then made to Governor Warren, who immediately directed the
Public Utilities Commission to represent the State of California in the
matter.
Despite the attempts by the Attorney General and his men, the days of the
wire service were numbered. Before long, thanks to the Commission and a few
determined police officials, it was impossible to lease a Western Union wire
in California for the purpose of getting race results.
pps. 17-26
=====
4. YOUR FRIENDLY FINANCE COMPANY
THE BOOKMAKING of George Zouganiles in Palm Springs was really a small
business despite its volume, part of which certainly found its way into the
pockets of the Syndicate. There were many far larger operations in California
and elsewhere, and since the organization saw they could not hold out forever
against the attack on the wire services, they began to adapt themselves. This
is a "talent" which can be noticed throughout the history of organized crime;
stopped in one method, they will either adopt new tactics or switch their
efforts to another way of making huge profits.
Shortly after the death of Bugsy Siegel in 1947, a new "front" was set up in
Los Angeles for a bookmaking operation. A man named Marvin D. Kobey had been
running a bookmaking business in which he used the names of Colby Collection
Agency and Colby Collection Service. The chief function of the two companies
was to get telephone service. Now something better was needed.
On July 17, 1947, the Guarantee Finance Company was incorporated in
California with Marvin Kobey as president. It was authorized to issue 500
shares of stock with a par value of $100 per share. Doris Horn, Kobey's
sister and wife of attorney Albert A. Horn, was listed as vice president with
50 shares of stock. Dorothy Kogus, wife of Albert Kogus, owned 100 shares of
stock. Rose C. Allen held 50 shares. Philip H. Colbert was
secretary-treasurer and held 100 shares. Georgia Rockwell, wife of Harry
Rockwell, owned 100 shares.
Four men, Kobey, Colbert, Rockwell and Kogus, held or controlled four fifths
of the corporation. Previously, Kobey and Colbert had operated as bookmakers
under the Colby Collection companies while Rockwell and Kogus had also been
in partnership in bookmaking. Now, they were all together, with offices at
1747-49 East Florence Avenue. The address was outside the city limits of Los
Angeles, under the jurisdiction of Los Angeles County. Two months after
Guarantee Finance was incorporated, they obtained a personal property
broker's license permitting them to engage in the general finance and loan
business.
Guarantee Finance occupied the first floor of the building on East Florence
Avenue. What they didn't include in their business statements was the
information that they also paid the rent on the second floor. In that space
there were some dozen telephones listed for furniture storage companies,
magazine solicitors, wakeup services, etc. The windows on the second floor
were blacked out and a special key was necessary for anyone who wanted to
enter the offices. This was where the accounting of the bookmaking took place.
Under the cover of the finance company, they built up an organization that
had 160 runners taking bets throughout the Los Angeles area with a betting
volume of more than $7,000,000 per year, according to evidence presented
before the Public Utilities Commission in 1949.
The first suspicion came from people who lived in the neighborhood. Many of
them who had applied to Guarantee for loans were told that the company was
temporarily out of money. There was also an "architect" listed with the phone
company at the address who said that he was too busy when he was approached
about doing the plans for a new church to be built in the community.
When the Special Crime Study Commission was formed, they asked the Los
Angeles Police Department about possible bookmaking syndicates in the Los
Angeles area. The first name on the list was that of Marvin Kobey. Other
files were made available to the Commission.
Seraeant James Fiske (later Lieutenant) was in charge of the bookmaking
detail of the vice squad in Los Angeles. He and his men had arrested a number
of runners in the city and had learned that they worked out of Guarantee
Finance. This information had been forwarded to the office of the Sheriff of
Los Angeles County but no action had been taken. Finally Fiske and another
police officer paid a visit to the second floor of the building on Florence
Avenue and observed the employees busily taking bets over the phone. No
arrests were made because they had no authority there.
The runners remained active within the city limits and Fiske made another
trip to the county. This time he took some accounting records which he had
found. These crave the Police Department information about the persons
involved. All of this was also forwarded to the sheriff's office.
This brought prompt action. Captain Al Guasti, of the sheriff's office,
delivered a letter to Assistant Chief of Police Joseph Reed which stated,
over Guasti's signature, that he had been advised of Fiske's visit to a
location that was in the area which was the sheriff's responsibility and that
in the future it would be wise for the police to confine their activities to
the City of Los Anaeles. The city police did have the right to investigate
outside the city limits, although no authority to make arrests, but they
tried to continue co-operation with the office of Sheriff Biscailuz and
complied with this unusual request.
The Commission was also getting information similar to that obtained by
Fiske. They wrote the sheriff about this and received a reply which stated
that they had investigated and found nothing but scratch sheets and other
equipment used in bookmaking and that they could find no violation of the
law. At about the same time, the State Division of Corporations asked the
Commission if they had any information about the Guarantee Finance Company.
It was sent to the Division of Corporations at once.
A few days later the Division dropped in to visit the finance company. They
subpoenaed the records and questioned the officers and employees who were
present to learn if the company's license should be revoked. The officers,
"off the record," confessed to the investigators that they were engaged in
bookmaking and offered to surrender the license if the investigators would
leave without taking the records. This generous offer was refused.
These records were in turn subpoenaed by the Special Crime Study Commission
and proved to be as exciting to read as the latest suspense novel. The
records were in two sets. One covered the loans made by Guarantee and the
other, marked Confidential, had to do with the bookmaking.
There were quite a few loans on the books, secured by wage assignments or ch
attel mortgages on household furniture or cars. Some of the applications
stated that the loan was to cover gambling losses. Some of them carried the
notation that the husband or wife was not to know about the loan. There were
a number of larger loans made to companies in which the principals of
Guarantee were also interested. One of the largest loans was made to Harry
Sackman, their tax consultant, to make a trip to Mexico City in connection
with the formation of a lottery known as the International Sweepstakes of
Mexico.
The books also showed a large number of loans to members of the Los Angeles
Police Department, men from the sheriff's office and various political
figures. One of the frequent "borrowers" in this category was Sergeant Robert
Sumner of the Los Angeles Police Department. According to the Commission, he
appreciated this service so much that he helped the company collect from
delinquent bettors. In at least one case he told a man to get a loan from
Guarantee to cover his losses or he would be arrested.
Another case-and hundreds of similar ones were uncovered—was that of a Los
Angeles physician. He was at the Hollywood Park race track one day when he
got into a conversation about betting with a stranger. This man finally gave
him several phone numbers, a code name to identify himself and told him he
could place bets whenever he wanted to at those numbers.
The doctor began using the phone to place his bets. He had a streak of bad
luck and lost between $500 and $600, which he paid in cash when the runner
came around. He was then short on cash but was encouraged to bet anyway. He
did so and was in debt to the bookmaker. Then he made a lucky bet and won
enough to more than cover what he owed. But the runner refused to admit that
he had won anything and insisted on his paying what he owed. The doctor
refused.
The runner was back two days later. With him was a man who was obviously
there for strong-arm reasons. The doctor was told that he'd been betting with
a large syndicate which never made mistakes and that he had been lucky so far
because "the boys can be real tough." The doctor was frightened just by the
appearance of the muscleman, but explained that he didn't have the money. The
runner then told him to write five checks, dating them ahead, payable to the
Guarantee Finance Company. He did so. The following day, the two men returned
and made him also sign a promissory note. He was still making payments when
the records were seized.
The second group of books was even more interesting. Here were the payroll
records of the Colby Collection Agency, the name under which reports were
filed with the State Department of Employment for the people working on the
second floor, telephone bills, rent receipts and leases for the first and
second floors and other locations throughout the city where they paid the
overhead, accounting work sheets listing the betting volume received from
runners and the manner of settlement, listings of the sale of lottery
tickets, personal records of Marvin Kobey for expenses in connection with his
secret ownership of race horses.
Most of the bookmaking money was put through the Guarantee Discount Company,
using the same address as the finance company. The expressed reason for this
second company was to handle negotiable paper which the finance company
couldn't accept. Actually, its function was to deposit in its bank account
all checks received from bookmaking and to maintain the accounts receivable
and the settlements made with the runners, and others, on behalf of the
gambling activities on the second floor.
The Colby Collection Agency and the Guarantee Discount Company mostly handled
cash settlements and cash outlays.
A separate sheet was kept for each bettor. At the end of the day a sheet was
made for each runner, showing losses and winnings. The runner settled in cash
or was given cash to pay off a client. If a bettor couldn't pay, he borrowed
money from Guarantee Finance and still paid his losses in cash.
The second group of records also included a list of seventyfour telephones on
which the bills were paid by Guarantee. There were many other telephones used
in the business where the bills were paid by runners or bookmakers who worked
through Guarantee and received a percentage on their volume of business.
The attitude of the telephone company in these cases would be amusing if it
weren't for the fact that it played a role-with a cast including many other
businesses as well as private and public individuals-which made it possible
for these white-shirt-and-tie hoodlums to exist.
One of the individual bookmakers, whose name appeared in the Guarantee
records, was Henry Kosar, who operated out of an office next door to the
telephone company on Whittier Boulevard. The telephone company was short of
equipment and they, aware that the next-door bookie had plenty of service,
were somewhat embarrassed by the potential customer who had to be told he
couldn't get a phone.
Under the rules of the Public Utilities Commission, the telephone company had
the right to discontinue service once they learned that it was being used for
illegal purposes. Not only the right, but the duty to do so. There is no
doubt that the telephone company knew about Kosar, but they did not exercise
this right and duty. Instead, several months prior to investigation of
Guarantee, a General Sales Manager for the telephone company sent a notice to
the sheriff's office that they had information that the telephones listed to
Kosar were being used for bookmaking. This notice adds: "Manager feels it is
not helping our public relations in that district to have a bookie next door
to office where we take applications for service. Too many people who are
unable to get a telephone call attention to the fact that 'the bookie can get
telephones, why can't we?' "
The notice was given to Captain Pearson of the sheriff's office and received
the same attention the matter had been given by the telephone company. It was
filed somewhere.
In another instance, the phone company received so many complaints that it
did discontinue services on a telephone at the Guarantee address and sent a
report to Walter Lentz, assistant to Attorney General Fred Howser. There is
no record of his investigation but the service was soon restored.
The story of the telephone company, however, does not end there. The manager
of the branch serving the Guarantee offices was James B. Smart, Jr. He had
once owned race horses and was recognized by the track officials as a
registered owner. Marvin Kobey was a friend of Mr. Smart and when Guarantee
became successful he arranged to buy race horses in Smart's name to be raced
under Smart's colors. A checking account was opened in the latter's name at
the Security First National Bank and Smart issued checks for the purchase of
the horses. After they were bought, Smart signed numerous blank checks to
cover the expenses of the horses.
It is doubtful if Smart ever saw "his" horses run but-in view of their
records-it's just as well. The horses may have accomplished one thing in that
Guarantee had no trouble getting telephones.
When the house of Guarantee began to leak at the seams, the ownership of the
horses was uncovered and track officials permanently barred Smart and Kobey
from thoroughbred racing. James B. Smart was transferred to the Oceanside
branch of the telephone company.
Another facet of organized bookmaking came to light before the final
investigation. At the time that Sergeant Fiske made his first unauthorized
raid on Guarantee, Marvin Kobey wrongfully thought that the raid was made by
the squad under Lieutenant Rudy Wellpott, a Los Angeles officer with a long,
fine record. He made a point of arranging a meeting with the lieutenant.
"It's pretty serious when the gangster squad starts checking on me as if I
were a hoodlum," he complained. "I'm running a clean business."
He admitted to Wellpott that he was a bookmaker—a safe enough confession
since the lieutenant had no authority to make an arrest in the area where
Kobey operated-and related how he had started his business on Florence
Avenue. He said that he had been told that is was possible to open a gambling
business in Los Angeles County if it was arranged through Dave Rubin. Mr.
Kobey claimed that he had called Rubin and was told that there was no room
for another bookmaker. Kobey then got in touch with a friend who was the
foreman of the Los Angeles grand jury and related the conversation. His
friend told him that he did not have to do business with Rubin and to tell
Rubin so. And so Guarantee Finance was born.
There was one set of books marked "Confidential" which proved the most
interesting-and mysterious—of all. The following items kept many an
investigator awake at night:
Phone man $ 1,025.00
Donation 1,890.00
Horses 8,629.00
Bonus 2,585.00
B. B . 515.00
Tango 50.00
Smart ... 300.00
Shakedown 102.00
Hold-up 3,000.00
Baseball 406.05
Special 108,985.00
Lopez 247,000.00
The last two items got special attention, with the least results. There were
indications that the Special item was only half of what had been paid, the
other half being put up by the runners and sub-bookies. This made a total of
$464,970 paid out in a short period and there was nothing to indicate where
it had gone. Where? It was certainly too much to have been paid out as juice.
Cops didn't come that high, nor did politicians. Perhaps it went to the
Mafia-Syndicate in New York or Chicago or elsewhere.... So many things, and
people, have vanished into their embrace.
After the Guarantee books were thoroughly studied, the State Department of
Employment decided that the runners working for the company did not operate
their own business but were employees of it. Unemployment insurance had not
been deducted from the money they earned and it was estimated that Guarantee
owed the state $82,000.
Although the books showed that Guarantee had made a profit of only $12,000
for the last year of operation, the company chose to pay the state rather
than to explain their records.
This left only one hope of learning where the two large sums of money had
gone. They had been deducted as part of normal overhead and no taxes had been
paid on that money. After examining their books, the Bureau of Internal
Revenue ruled that the deductions could not be allowed. This left the company
owing tax for two years, penalties for late payment of taxes for the year
before, and made them subject to criminal prosecution. This would also mean
that the officials of Guarantee Finance would have to explain the deductions
because the people who received that money would also be liable for taxes and
subject to prosecution.
The state Commission had a meeting with various officials of the Bureau of
Internal Revenue in Washington. At the meeting, it was noted that the Bureau
did not have a single case against any of the gangsters in California, and
the Commission left with the impression that there was great enthusiasm for
the investigation and prosecution of the Guarantee officials.
Shortly thereafter, Harry Sackman, Guarantee's tax consultant, arrived in
Washington. When he registered at a hotel he gave his profession as
"teataster." Mr. Sackman told the Bureau that he would file amended income
tax returns for the last year of operation for the company and the principals
without deducting the questionable amounts and that the tax would be paid
promptly.
A few weeks later, the Bureau announced that the acceptance by the government
of Mr. Sackman's proposal made it impractical to proceed against the various
people involved in the company, to compel them to reveal the names of the
persons who had been paid or to initiate criminal prosecution.
I would guess that the owners and officials of Guarantee Finance-or, for that
matter, the mysterious "special" and "Lopez"—never questioned Mr. Sackman's
fee for that trip, no matter what it was. And I like to think that Mr.
Sackman, Teataster, used California lemons in adding juice to his beverage.
pps.27-36
-----
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Em Hotep, Peace Be,
All My Relations.
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Amen.
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