-Caveat Lector-

an excerpt from:
The Arizona Project
Michael Wendland©1977
ISBN 0-8362-0728-9
Sheed Andrews and McMeel, Inc.
6700 Squibb Rd.
Misson Kansas 66202
276 pps. - first edition - out-of-print
New revised edition - available amazon.com
Paperback, 304pp.
ISBN: 0945165021
Blue Sky Press, Incorporated
June 1988
Frontier Sex

It's an old saying in Arizona that what money won't buy, sex will. And the
saying is not without merit. For in almost every aspect of the state's
business dealings being investigated by the visiting reporters, sex-in the
form of well-paid prostitutes or carefully kept mistresses-played a major
role. Without seeking it out, the reporters kept stumbling across example
after example: a couple of extremely prominent lawyers who staged weekly
sex-party poker games for their well-heeled business clients; a land fraud
huckster who bought a Phoenix tavern for his mistress; a Tucson drug dealer
who kept two Las Vegas hookers on annual retainers; an elderly judge whose
vice was young girls; and a well-known Phoenix politician and businessman
whose kinky sex habits were paid for in diamonds, thus earning him the
nickname "Diamondman" in the trick book of almost every madame in the

Throughout October and into the first week of November, the sex stories
reporters kept uncovering from their growing number of news sources were
often the highlight of the day, boisterously swapped over late-night drinks
in the hotel bar. For the most part, interesting as they were, the stories
were totally without news value. Thus, notes were seldom kept. But, taken as
a whole, the stories nevertheless illustrated an old-fashioned and crudely
exploitative business attitude out of step with the rest of the country in
the open and sophisticated 1970s. In Arizona, it was still chic to have a
mistress. That's what the successful, big-time businessman had. Not a
girlfriend or a lover, but a mistress, bought and paid for just like his
thousand-dollar turquoise belt buckle.

The IRE reporters would soon find that the sex stories they had been
halfheartedly collecting would, in at least one very major case, become the
subject of intense investigation. The story would be uncovered by the team's
newest arrival.

Ron Koziol, the cigar-chomping Chicago Tribune reporter and the president of
IRE, flew in late in the afternoon of Friday, November 5. Since the project
had begun, he had been asked to check out dozens of leads in Chicago, and he
came to Phoenix with nearly a hundred pages of notes. Koziol was amazed at
what he saw. The hotel suite resembled a War Room, he thought, with maps,
graphs, reports, and law enforcement documents marked "confidential"
scattered everywhere. The index card boxes and files were filled to
overflowing. Telephones rang incessantly even late at night, and reporters
hustled in and out of the room.

"Hey," Koziol said upon surveying the scene, "this ain't–too shabby. Not too
shabby at all."

Like the Seattle reporter's "huh" the month before, "ain't too shabby" soon
became the most overused expression heard in suite 1939.

Greene briefed Koziol on the major developments in the investigation over a
long boozy dinner in the hotel restaurant. About ten o'clock Drehsler, who
had been drinking with a police source since five, stopped by the table. As
Greene headed back upstairs, Drehsler invited Koziol for a nightcap.

They went to a place known as the Foxe au-Disco, a small, cozy bar located a
few blocks west of North Central Avenue on Camelback Road. The place was a
frequent hangout for the IRE reporters, not because of its charms—which were
few—but because of those who frequented the place. Owned for the record by a
short, gregarious transplanted New Yorker by the name of Joey Ferrero, it was
really run by Jack Duggan, a convicted gambler and a man identified to
reporters by police as an extortionist, drug financier, and organized crime

IRE had already established Duggan's intimacy with some pretty powerful
mobsters. A confidential U.S. Drug Enforcement Administration report, in
IRE's possession, detailed a meeting between a Mexican lawyer, a Phoenix
judge, and Duggan at which plans were discussed to bring in several kilos of
heroin. Reporters had observed

Duggan meeting and socializing with several notorious hoodlums from the
Joseph "Joe Bananas" Bonanno crime family in Tucson.

And offers to buy cocaine, women, and hot automobiles had been extended by
Duggan's pals to reporters. John Adamson, himself a close pal of Duggan's,
was a frequent hoister at the Foxe, as were dozens of the minor-league
lawyers and businessmen who nurtured the state's land fraud racket.

So the reporters, particularly Drehsler and Wendland, did a lot of drinking
at the Foxe. They made no attempt to disguise their identity. Duggan, a
well-built, handsome man in his mid-thirties with a Vandyke beard, seemed
actually to enjoy their presence. The reporters never discussed their
investigations and seldom asked questions, trying to create the impression
that they were simply hanging out there because they needed to unwind after a
long day. Duggan was always playing the good host, inviting the reporters to
after-hours parties and introducing them to his friends. By keeping their
eyes and ears open, IRE reporters often picked up information. Not that
Duggan or his pals volunteered anything. Indeed, it was just the opposite.
Duggan was forever complaining about how unfair it was that police considered
him a hoodlum He was merely a struggling businessman who was drawing law
enforcement heat because he did not hold past mistakes against his friends.
But, like Brutus, Duggan protested too much. And by watching him and his
associates, the reporters came to know who was who in the Phoenix underworld.

The Foxe was full when Drehsler and Koziol arrived. A longhaired kid was
playing disco records in the other room and the dance floor was crowded. Joey
Ferrero spotted Drehsler and came over to say hello.

"With us again? You newspaper people really like to drink, huh? Nothing wrong
with that."

Alex introduced Koziol, and Joey was amazed at the way he talked.

"You sound like you're from Chicago," he said. "You talk like those gangsters
in the old Al Capone movies."

They chatted for a few minutes. When Drehsler got up to use the restroom,
Joey motioned for Koziol to come closer.

"Listen, you come back in a day or so. I might have something to tell you. I
don't want to talk to Alex about it 'cause he knows me, you understand? But
I'll tell you if you keep it just between us."

Koziol shrugged. "Sure, Joey, no problem."

Ferrero turned around. "Hey, see that broad?" He pointed at a young woman in
a tight-fitting sweater-vest that emphasized her huge, round breasts.
"Silicone tits," said Joey. "But that's okay 'Cause she's one hell of a piece
of ass." He snapped his fingers and the girl came over, put her arms around
him, and gave him a long, open-mouthed kiss.

"Mandy," said Ferrero, "I want you to meet my friend, Ron. He's from Chicago."

Mandy was pleased to meet him. "I always like older men," she remarked

Joey whispered something in the woman's ear, clapped Koziol on the shoulder,
and said he had to leave for an appointment. "Get to know my friend Mandy,"
he said. "She'll show you what a great city Phoenix is."

Mandy seemed more than eager to stay with Koziol. They made small talk while
Drehsler sipped on a beer. When she excused herself to go to the restroom,
Koziol told his partner that she had offered to drive Koziol back to the

"Okay," said Drehsler. "Let's play along-it's an obvious setup."

Drehsler would follow Koziol and the girl when they left the bar.

Mandy returned. "I'm ready if you are," she said, noticing that Alex had left.

Out in the parking lot, she wanted to know if Koziol would rather go to her
place. "Don't worry, I've got shaving stuff and an extra toothbrush if you're
too tired to go back downtown tonight."

"That's a great idea, honey, but, see, we got this rule that we can It stay
out of the hotel," Koziol lied. "Like football players, you know? Our boss
worries if we're all not accounted for every night."

It made no difference to her. "I haven't been in a hotel for a long time,"
she said, starting her car.

On the way downtown, Koziol tried to get her to talk about her relationship
with Joey and Duggan.

"Close friends," she said. "They like to party and I like to party." She
didn't volunteer any more. Instead, she wanted to know who the other people
were that Koziol was working with in Phoenix.

"There's lots of us," he said. "There's people from all over."

"How many?" she asked, trying to sound nonchalant.

"I'm not supposed to say, but, what the hell, you're certainly nobody I have
to worry about. Right now, there are seventy-five of us. But don't tell
anyone, okay'? It's a secret."

She wouldn't breathe a word. "And you're all staying at the Adams?"

"Heavens, no. Only some of us. The others are staying all over. They're
undercover, you know."

"Uh huh. That's really exciting. I really like writers. What kind of things
are you guys, like, doing? I mean are you investigating somebody or what?"
"Baby," said Koziol, "we're investigating everybody." "I mean like anyone in

"Lots of people in particular."

"Oh. Well, like who?"

"Well, I'll tell you. There's this one guy who we're really after. I don't
know if I should even be saying this. But he's really heavy. His name is
Millard Fillmore." Koziol bet himself that she had never heard of the
long-dead president.


"Millard Fillmore. You mean you haven't heard of him?"

"It sounds familiar. Is he in real estate?"

"He's in everything," replied Koziol.

"Yeah, I guess I know who he is after all."

Koziol figured that would confuse whoever it was who had tried to set him up
with the woman. As they neared the hotel, Mandy pointed to a tan Nova just
ahead of them.

"Say, isn't that your buddy, Alex?"

Koziol looked closer. It was Drehsler. What a great tail, he thought.
Drehsler was supposed to be following him, not vice versa.

At the Adams, Mandy was about to park the car when Koziol cut her off. "No,
not tonight, baby, maybe some other time."

"But I don't understand," she said. "It won't cost you anything, you know. I
really like you. Really."

"No, can't do. It's been a rough day."

"I can make it a nice night."

Koziol got out of the car. "Yeah, I bet you could." He stuck his head back
inside. Mandy started to lean across the seat. Instead of kissing her, Koziol
flipped down the ashtray and squashed out his cigar, filling the car with
smoke. "See you around," he said, slamming the door and walking into the

"You asshole! You prick!" she screamed after him.

Back in his room, he had just undressed when the telephone rang. It was

"Where did you go? I couldn't find you."

"Just back to the room. Don't worry. But thanks for looking out for me."

Reporters are far from immune to the pleasures of the flesh. In fact, because
of the varied people they come into contact with daily and the glamorous
aspect of their jobs, they are not known for having low sexual drives. Thus,
when a number of ego-centered reporters used to the good life of an expense
account find themselves on an indefinite assignment away from home in a
fun-loving convention city like Phoenix, celibacy is a difficult state to

But the Arizona Project was different from most out-of-town stories the
reporters had covered.

"You must be constantly aware that a setup is something the other side will
certainly consider doing to you," Greene told the reporters on several
occasions. "I'm not telling you that you can't get laid while you're working
on this story. I'm just telling you to be extremely careful. Those whom we
can hurt the most by our reporting would like nothing better than a chance to
discredit us. And if they can do it by our behavior, then believe me, they'll
do it."

On Sunday, November 7, Bob Teuscher from the St. Louis Globe arrived. This
tall, stocky, forty-three-year-old document mole would spend the rest of the
month on the team. Unlike the other reporters, who had readily taken to the
casual, Western-style clothing of Phoenix, Teuscher was immediately
noticeable by his dress. He was always immaculately attired in a vested suit
and tie, day or night, seven days a week. He looked as though he had just
stepped out of a haberdashery display window.

Teuscher had gotten into the newspaper business in 1960, shortly after his
discharge from the army. Before joining the army, he had studied for four
years at Concordia Seminary in St. Louis, planning to become a Lutheran
minister. But he had done a bit of public relations work in the service,
found he had a flair for writing, and instead landed his first job with a
small downstate Illinois newspaper. In 1966, he moved to the Globe, where he
specialized in exposing public corruption and the abuses of the giant
Teamsters Union Central States Pension Fund. When he came to Phoenix, he
brought with him two huge suitcases containing all his Teamsters files. A
stickler for documentation, his expertise was in the researching of public
records. For the first couple of days in Phoenix he happily immersed himself
in the mountain of files already gathered by the team. He was so enthralled
by the records that he stayed up past 2:00 A.M. one morning, until a
sleepy-eyed Greene literally kicked him out of the IRE office. On his way to
his room, Teuscher bumped into Koziol, who had been down in the hotel bar
with some of the other reporters. Teuscher went on and on about the story
possibilities apropos the many schemes and swindles already suggested by the
files. He brought Koziol into his room to show him the personal files he had
brought from St. Louis, inviting Koziol to go through them.

Koziol hated records. Over the past few days Koziol had read enough files to
last him the rest of his career. He politely refused the offer and went next
door to his own room. Teuscher was still turning the pages of his files in
the adjoining room.

On Tuesday, November 9, Greene paired Koziol and Teuscher as partners. He
handed them a thick file marked "Hobo Joe'sSouthwestern Research." It was
filled with real estate records, financial statements, and corporation
documents. Koziol needed more files like he needed a hangover. Teuscher
eagerly opened the folder and began thumbing through the legal-sized papers.

Hobo Joe's was the name of a restaurant chain, Greene explained. It was owned
by Barry Goldwater's brother, Robert; Robert's longtime partner, Joseph F.
Martori; and a third man, Herbert Applegate. All three men were of interest
to IRE. Robert Goldwater and Martori had been investigated previously in
connection with the Goldmar Corporation and Arrowhead Ranch, continued Greene.

Koziol and Teuscher nodded. They had read the files on the history of the
ranch and were familiar with the people involved in its operation. They also
knew about Wendland's and Drehsler's adventures there the month before when
they had gone out to document the illegal alien situation. Applegate,
however, was a new name.

A native Detroiter, Applegate was a restaurateur who had moved his family to
Arizona in 1964. For a few years, he had tried his hand at managing a couple
of marginal restaurants, with just moderate success. But in the late 1960s,
he hooked up with Goldwater and Martori. From their partnership, Hobo Joe's
was born. Nine outlets were in operation by the late 1960s, with a number of
others in the planning stages. A statue of a hobo with an old cutaway coat
and a handkerchief on a stick stood out in front of each spot. They were
small, family-type restaurants, each featuring the same decor and menu,
including the special "Hoboburger."

A second chain, the Humpty-Dumpty Coffeeshops, developed 'from this three-way
partnership. Applegate also built a large, more luxurious, gourmet restaurant,
 which he named after himself. And for a brief period of time, he even took
over the management of the restaurant of the Adams Hotel.

In 1968, Goldwater, Martori, and Applegate took in a fourth partner, a
corporation known as Southwestern Research. The reason was simple. They
needed cash. In exchange for guaranteeing a $3 million loan, Southwestern was
made a partner. It was this move that prompted the IRE interest. According to
the files, the loan which Southwestern guaranteed was to be used only for
construction of new restaurants. Yet in the preliminary analysis of the Hobo
Joe's corporate records, it looked like most of the money had simply vanished
or been diverted in a number of questionable areas.

"I'm really not sure what the hell we've got here," Greene told Koziol and
Teuscher. "But it looks like there was a $3 million scam."

"What do you want us to do?" asked Koziol.

"You guys are pros. I want you to go out and find out how it was done."

The reporters began to dig into the file. It didn't seem to help much. The
financial transactions were complicated. They learned that Applegate had died
of a heart attack in 1974. And the Hobo Joe's chain had since been bought by
another firm, unconnected with Goldwater or Martori. It seemed as if everyone
who had had a hand in the partnership had faded from the scene. Even
Southwestern Research had left Phoenix, after apparently getting stuck for
the $3 million loan. They were now based in southern California.

>From the index cards, which noted every name and business listed in the main
files, Teuscher found a previous listing for Herbert Applegate. It was in the
file on Peter "Horseface" Licavoli, the former boss of Detroit's old Purple
Gang, now a resident of Tucson.

The notation was brief. A couple of paragraphs in a 1972 Republic story by
Don Bolles mentioned that one of Licavoli's Phoenix friends was restaurateur
Herbert Applegate. Interesting, thought Teuscher. Applegate was quoted as
saying that he knew Pete Licavoli, Sr., from his old days in Detroit, when
both had owned stock in a small coffee company. Applegate denied any business
dealings with the mobster and said he had only seen him a couple of times
since coming to Arizona.

The files also cited some sort of proxy fight between Southwestern and Hobo
Joe's. Koziol figured that a disgruntled partner might be willing to talk.
The Southwestern man who had been involved in the partnership was F. M. "Pat"
McCown. Koziol checked telephone information operators in Los Angeles and
several suburbs with no luck. He much preferred contacting McCown at home.
Hating to tip his mitt, he dialed the main number for Southwestern and asked
where he could reach McCown. "Why he's here, sir," an operator volunteered.
In a moment, a pleasant but all-business voice was on the other end of the

Koziol introduced himself and told McCown that he was interested in learning
the details of Southwestern's involvement in Hobo Joe's. "All I can say is
that I really got screwed by those Arizona slickers," McCown said

"What happened?"

"It's a long story. But let me tell you this. If you have any money, don't
ever go to Arizona, because when you leave, you'll leave without it."

Koziol explained the IRE task force and the Bolles bombing. He told the
executive about their wide-ranging investigation and how they came to be
interested in Herb Applegate, Robert Goldwater, and Joe Martori. "We went
through all the corporate records we could get our hands on," he concluded.
"And while we don't know how, it sure looks to us like the three million you
guys brought into Hobo Joe's was sucked up in some scam."

McCown was silent for a moment. "You sure got that right."

"Then how was it done?"

Again a silence. "How do I know you really are who you say you are?"

It was a good question. Koziol carefully gave him the spelling of his name,
his telephone number in Phoenix, and the city desk number of the Chicago Tribu
ne. "Look, we'd really like to talk to you about this. You just tell us

"If I do agree to talk to you, it won't be in Phoenix. I won't ever set foot
in Arizona again. You don't know the people you're dealing with."

Koziol felt the familiar tension that overcomes all reporters when they've
just discovered something big. He hadn't really learned a thing from McCown.
But he knew that if he could persuade the man to talk, he soon would. "No
problem. We'll come out to California or anywhere you want. I can be there in
the morning if you want."

"No. I'm still not convinced you're a reporter. I have to check you out

"Fine. Please do. I can't blame you for being cautious. I just want your
promise to meet with us after you see that I am who I say I am."

"If you are, I'll talk with you. But I'll tell you this, there are some
pretty powerful and ruthless people out there that you'll be looking into.
You can get your heads blown off if you go too far."

Koziol told McCown that they needed to meet as soon as possible. But McCown
would not set a time until he was sure of Koziol. He promised to phone the
reporter back.

"I hope you understand my alarm. It's just that I've dealt with that Arizona
bunch before. There have been threats. I'm afraid of a setup. I just don't
want to take any chances." McCown hung up.

There was nothing Koziol could do but hope that he indeed would call back.

Meanwhile, Greene had plans for the IRE reporters.

"I want you guys to do more bar-hopping at night," he announced just before

The reporters glanced at each other quizzically. News people are not
particularly known for their aversion to alcohol. On most any given night the
downstairs hotel bar appeared to have been taken over by a convention of
thirsty war correspondents.

"No, don't get me wrong. It's not that you haven't been drinking," Greene
laughed, recalling the bloodshot eyes he saw in the troops each morning. "No,
what I'm saying is that if you're going to have a couple to unwind each
night, why not have them someplace where you can work at the same time?"

Again, there was puzzlement.

"What I've done," said Greene, who had been nicknamed, behind his back, "the
Buddha," owing to his shape and commanding position, "is to prepare a list
for you guys. We made this up with some sources in law enforcement. On it,
you'll find every major hoodlum hangout in and around Phoenix. I want you
guys to visit them all. Keep your eyes and ears open. Find out who the big
shooters are. Figure out the scams. It's just good, basic backgrounding for
us. Maybe none of the bar stuff will ever make the stories we'll be doing,
but we're bound to understand the local scene a hell of a lot better."

The list contained the names of forty-seven bars, taverns, disco spots, and
cocktail lounges. He gave the reporters a copy of it. "Have fun."

That night, Drehsler, Koziol, John Rawlinson, George Weisz, and Dick Levitan,
the Boston reporter for CBS radio station WEEI, went out to check a few of
the spots Greene had recommended.

Levitan, the only broadcast media representative of the team, had also
acquired a nickname. He was called "Blackjack Levitan." Back in Boston,
Levitan covered the city's infamous "Jungle" district of sleazy honky-tonks
and trick houses. He had been threatened many times for his exposes on
prostitution and organized crime activities. He carried a gun, a blackjack,
and a can of Mace.

"I wanted to bring my piece out here," he told the reporters shortly after
his arrival, "but I checked with the local cops before leaving and it would
have been too much of a hassle to get a concealed weapons permit. So instead,
I brought these." In his back pocket was a neat, fold-over blackjack. In his
shirt pocket was a tear-gas pen. Levitan, forty-three years old and engaged
to a motorcycle policewoman, never went anywhere without both. One night,
following Drehsler on a tour of Phoenix nightspots, he had difficulty
distinguishing the IRE car in traffic. So he got out of his car at the first
stop and smashed the right rear taillight of Drehsler's car with his sap.
Then he followed the car with the busted light. Levitan, who bore an uncanny
resemblance to the actor Robert Blake of television's "Baretta" program, did
not drink alcohol. Instead, he sipped Cokes.

The touring reporters stopped at a couple of places on Greene's bar list. But
it was a Tuesday night and they were mostly empty. In suburban Scottsdale,
they ordered drinks at a hole-in-the-wall joint whose chief drawing card was
a bunch of aging strippers. Koziol counted six other nondescript patrons in
the place. The biggest excitement came when Rawlinson returned from the
restroom with a prophylactic he had bought from a vending machine attached to
the wall over a urinal. The rubber, however, was not the standard kind. This
one was for the tongue—"For safe, enjoyable oral sex," touted its foil
packet. The reporters broke up. The place was a dump. They left without
bothering to watch the dancer, a fortyish dyed redhead, finish stripping out
of her dirty white nightgown.

The next stop was the Foxe au-Disco. Levitan almost overreacted there. It was
his first visit to the place. So when Joey came over to Drehsler and
playfully put his hands around Alex's throat in a mock strangulation
greeting, Levitan thought it was the real thing. He reacted quickly, pulling
the sap from his pocket. Fortunately, before Levitan could apply it, Koziol
and Weisz pulled him off. Joey thought it was hilarious and ordered a round
of drinks for the reporters. Then he motioned Koziol aside. "Meet me outside,
around the comer, in five minutes," he whispered.

Koziol expected Joey to ask about his drive home the other night with Mandy.
Instead, Joey had something else to talk about.

"Listen," he began, looking over his shoulder to make sure he wasn't
followed. "I told you I had something for you. Okay, here it is. This is one
hundred percent solid. The cops are barking up the wrong tree with Adamson."

"How's that?" asked Koziol.

"Adamson wasn't the guy that did it. The guy who rigged the bomb is a guy
named Suitcase Willie. Check it out." Joey started to go back.

"Wait a minute, now. How the hell do you propose I do that?"

"You're the reporter. All I know is that this Suitcase was spending money
like a drunken sailor after the bombing. He was spreading it all over town,
including this place. And he was in the army, where he handled explosives."

"What's this Suitcase Willie's real name?"

"That's it. I don't know his last name. They call him Suitcase because he's
always carrying one."

This was ridiculous. "Okay, Joey, we'll get right on it. Thanks.

These guys were crazy, thought Koziol. First the woman the other night, now
Joey was trying to send him off on a wild-goose chase.

Back in the bar, Jack Duggan, the other owner, came by. He shot the breeze
with the reporters for a while, volunteering that he knew Adamson and "He's
no killer. He's being framed."

The night had been a waste of time. But the next morning, things started to
pick up. McCown called back from California. He had verified Koziol's
identity and agreed to a meeting. It was arranged for the next day at the
airport in Ontario, not far from Los Angeles.

At seven o'clock the morning of November 12, Koziol and Teuscher were on an
Air West flight to Ontario. McCown, a tall, distinguished-looking man in his
early fifties, was waiting for them at the airport. He carefully examined the
reporters' press cards. They drove in McCown's car to a nearby Holiday Inn
and went into the coffee shop. McCown sat down across from the two reporters,
who could barely squeeze into a single booth seat.

"I don't know where to start," he grinned.

"Let's try from the beginning," said Teuscher.

"Okay. But I want you to know that everything I'm going to say can be proven.
I've got canceled checks from Hobo Joe's. witnesses and everything. If I
can't document a certain point, I can lead you to someone who can." McCown
couldn't have said anything more promising to the reporters.

His investment company, Southwestern Research, was formed back in the mid-
1960s. At the time it became involved in Hobo Joe's, its assets were only
about six million dollars, consisting mostly of various holdings in
unimproved land it hoped eventually to sell at a profit. Southwestern was a
relatively small concern built on anticipated growth rather than performance.
And it was in need of cash. So when the opportunity came in 1968 to buy into
what appeared to be a dynamic chain of restaurants, it jumped at the chance.
Under the terms of the deal, Southwestern became a fourth partner. Applegate
didn't sell any of his stock, thus retaining major ownership and remaining
Hobo Joe's president. But Goldwater and Martori each sold off about a third
of their stock holdings, giving Southwestern a 271/2 percent share of the
chain's ownership. In exchange, Southwestern paid $275,109 in cash and
guaranteed a $3 million loan agreement between Hobo Joe's and the Valley
National Bank of Phoenix.

The idea, explained McCown, was that Southwestern would never have to repay
the loan. Indeed, three million dollars was too much for the small firm.
Instead, the three million was pegged to finance construction of a string of
new Hobo Joe's outlets whose profits would make the loan payments.

Teuscher had been mystified by the loan guarantee. Valley National Bank
certainly did not need Southwestern as guarantor. Robert Goldwater's
connection with Hobo Joe's alone would surely have been enough to push through
 the loan. Besides being one of the city's most prominent businessmen,
Goldwater was also a director of Valley National. That led the reporter to a
single question: If Hobo Joe's didn't really need Southwestern to guarantee
the loan, why did it get them to do so? One possible answer came immediately
to mind. Perhaps somebody at Hobo Joe's knew all along that the loan would
never be repaid and wanted to make sure that when the bank started hollering,
somebody else would be stuck with the obligation.

"Anyway, we got suckered, pure and simple," McCown was saying. "Two years
after we bought in, the three million was gone, the bank was pressuring us to
pay the loan or completely buy out Applegate and the others. We were had. We
were in a real crisis. They stuck it to us royally."

"The big question is, where did the money go?" Koziol asked.

"It was all diverted. Who knows exactly where? We could only account for a
million and a half. That, we know, went to Applegate.

In all, my guess is that closer to eight million was skimmed. I can't tell
you for sure whether Goldwater and Martori got any. But they didn't lose
anything, that's for sure. The bottom line is that a prosperous chain of
restaurants in 1968, that should have been making money and growing by leaps
and bounds over the next two years, instead went more than three million
dollars in the red."

"What did Applegate do with the million and a half?" Teuscher wanted to know.

"For starters, he built himself a home worth about $350,000. Then he built a
little corporate party house which he staffed with former Playboy bunnies. He
threw all sorts of wild orgies there. He made payoffs to the Mafia, he—"

"Hold it a minute. One thing at a time," said Koziol. "What about the house?"

"Sorry. Okay. Well, Applegate, you have to understand, fancied himself quite
the swinger. I mean he always dressed in expensive clothes, carried huge
bankrolls around, smoked Cuban cigars, you get the picture. Anyway, he built
himself a house out of diverted funds. I'll give you the name of the

"Let's get one thing straight," interjected Teuscher. "All this was going on
after you guys bought in?"

McCown nodded. "Right, we were supposed to be partners. I was sent to Phoenix
to help run the chain."

"Then how did this all go on without you getting wise?"

"Fair question. Under the terms of the loan arrangement with the bank, none
of the three million was to be disbursed unless there were two signatures.
One from Hobo Joe's and one from Southwestern. What I found out, much too
late to make any difference, was that some of the payout papers had no
signature at all. Most had just Applegate's. But never was there a signature
from Southwestern."

"Okay. Go on."

"Well, anyway, one of the legitimate things some of the loan money was to go
for was to build a central commissary, a main supply center for all the
restaurants. It was budgeted at $400,000. In the end, it cost $800,000. Well
it was the extra $400,000 that built Applegate's house and the corporate
party house.

"The what?" said Koziol.

"You heard me right. It was a duplex, out in Mesa just outside of Phoenix.
Applegate put two or three broads in there. They were ex-bunnies or dancers I
think. One of the girls was Applegate's mistress. Sandra Peterson was her
name. Anyway, this place was used strictly for sex parties. And it was
decorated like something out of a wet dream."

"What's this you said a minute ago about the Mafia?" asked Teuscher.

"Ever hear of Pete Licavoli, Sr.? Hell, I'm sure you have. Anyway, he was a
close pal of Applegate's. So close that Applegate was paying him twenty-five
hundred a month."

"Out of his own pocket?"

"Hell, no. Out of the company funds. The deal was that Licavoli was supplying
paintings. He owns an art studio or something down in Tucson. Anyway, once
each month, he'd bring a load of them up to Applegate, collect the
twenty-five hundred, and leave. Now I know something about art. And they were
garbage. They looked like cheap reproductions. I found out about it one day
when I was in the office. Applegate had a mild heart attack or something and
was off for a few days. So this one day his secretary comes in and says that
there's a Mr. Licavoli outside with a new shipment of paintings. I asked,
'What shipment?' I wasn't expecting any shipment. She looked real worried and
said it was the usual delivery. I looked around. There was no purchase order,
no delivery slip, no invoice. Nothing. And the whole place is full of
pictures. I was up to my ass in paintings. They were laying on the floors, on
the walls, on tables, all over. So I told her to go tell Licavoli that I
didn't want any more paintings. She got more worried and told me that if she
were me, she'd give him the usual check. I said no and she started to cry.
Can you imagine that? So I got on the phone and called Applegate at home. He
says to give Licavoli the money and not to ask questions. Well, I refused.
The next day, I found out that he got the money anyway from somebody else in
the company. Then, to top it all off, I'm driving home two nights later. All
of a sudden, two cars come up from behind and force me over to the curb.
These two goons get out of one of the cars and come over to me, and one of
them says that if I value my life, I'll stop nosing around in the internal
affairs of the company. That's what I'm talking about. That's what I mean by

"Can you prove any of this? Earlier, you said you had documentation,"
Teuscher reminded.

"I told you, I've got checks, canceled checks which document the payoffs to

The reporters exchanged glances. McCown was giving them an incredible story.

But he wasn't finished yet. "They were stealing every way you can imagine.
One day I got a phone call from this hysterical woman, who just had to see
me. She came to my office terrified. She said she was threatened to keep
quiet. But what she said was that every store manager placed a double order
when ordering food supplies from the Hobo Joe's commissary. And when the
stuff was delivered at night, it was always in two batches. One went into the
restaurant food locker. The other was left just inside the back door. Soon
after the commissary truck dropped it off, a second truck came by for the
extra order. The woman asked the second driver one time where the extra order
went. He said Tucson. Guess who lives in Tucson? Pete Licavoli, Sr."

McCown said that he guessed a quarter of a million dollars worth of food went
out the back doors of Hobo Joe's restaurants during a five-month period.

There was still more. A killing, the shooting death of a private detective
sent by Applegate to Les Vegas to reclaim the clothes and automobile he had
bought for another of his girlfriends, had been covered up, said McCown, most
probably with Hobo Joe's funds.

"The girl's name was Dianna Willis," said McCown, spelling the name for the
reporters. "It was in January 1969. She had dumped Applegate for another guy,
a swimming pool attendant or something up there, and he was furious. So he
sent this private eye and another guy. When they tried to force their way in,
boom, the girl's new lover opened fire. The private eye died."

McCown said he knew of $7000 that was suddenly withdrawn from Hobo Joe's bank
account after the killing. "I know Robert Goldwater was extremely upset by
the whole thing. I mean he was Applegate's business partner. Anyway, the girl
got some of the money. The rest was spread around up in Vegas to buy off any
official investigation. You'll have to prove that one yourself. All I know is
that the killing occurred, Applegate sent the private detective up there and
his name was never connected to the incident in the Phoenix papers. It was a
hell of a scandal at the time. The detective was the son of a justice of the
peace. His brother was a real respected officer in the state Department of
Public Safety. But Goldwater and his pals saw to it that the Republic and Gaze
tte kept Applegate's name out." McCown gave the reporters the name of the
dead private detective and a few other details which would help them later
try to unravel the incident.

The reporters changed the subject for a few minutes, talking about McCown's
background, his family, California weather, and a number of other things that
gave them a chance to evaluate him. He was obviously bitter and vindictive
over his Arizona experiences but, concluded Koziol and Teuscher, not without
justification. The Hobo Joe's debacle had forced him to quit Southwestern and
struggle among a number of poorly paying jobs to support his family. Finally,
Southwestern got out of Hobo Joe's and returned to California in 1971 with
its meager assets decimated. A couple of years later, McCown was asked to
return to Southwestern, then run by an entirely new board of directors. At
the time, he explained, the firm's payroll was $40,000 a month; it had just
$1,200 in the bank and zero cash flow. But business had improved dramatically
by 1976, and it appeared that the firm was on solid ground again, though not
nearly as well off as it would have been had they stayed out of Arizona.

They had been talking for two hours. A thin band of perspiration shone across
McCown's forehead. As he drove the reporters back to the airport, he seemed
to relax for the first time. As they walked into the bustling little airport,
McCown promised to get back to the reporters soon and arrange another
meeting, at which he would turn over the canceled checks.

"There's another guy I want you two to meet," he said. "He was as deeply into
the Hobo Joe's thing as I was. Maybe more so. He was the chief financial
officer. He can verify a lot of what I've said and he saw a lot of things
that I didn't. I don't want to give you his name right now because he's sort
of in hiding out here, but I think I can persuade him to talk to you."

They shook hands and McCown walked back outside.
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Roads End

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