LESTER VELIE, ROBERT GOE, Art White, Sandy Smith, Frank McCulloch, Jack Tobin, and Paul Steiger had all taken their best shots at Sid Korshak. Now the gauntlet would be passed to a red-hot firebrand of a journalist who was certain to find any dirt that was there to be found. It was inevitable that the two would be pitted against one another: Sidney Korshak, the immovable object, and Seymour Hersh, the irresistible force.
Sidney and Seymour
Hersh, at just thirty-nine years old, had already established himself as one of the most respected and most persistent investigative reporters of his time. Born and raised in Sid Korshak's Chicago, "Sy" Hersh entered the journalistic fray as a police reporter for the Chicago City News Bureau and later worked for the national wire services, before a sabbatical in 1968, when he was the press secretary for Senator Eugene McCarthy's antiwar presidential bid. Hersh's investigative talents first gained national prominence in November 1969, when he broke the story of the My Lai massacre in Vietnam, earning him a Pulitzer Prize for international reporting as well as several other prestigious awards.*
Hersh parlayed that acclaim into a full-time reporting job at the New York Times, where he quickly delivered another bombshell with the disclosure of the CIA's massive illegal domestic mail-opening scheme known as MH/ CHAOS. By 1976, Hersh had earned the enviable position of being able to name his assignment at the most prestigious paper in America. During a rare lull in his frenetic activity, Hersh began sounding out colleagues for ideas about how on earth he could top his own reputation with his next expose.
"I got to know Peter Adelman and Adam Walinsky because they were doing the same things for Bobby [Kennedy] that I did for McCarthy," Hersh said in a recent rare interview, "writing speeches and being a press guy. So I was looking for things to do and somehow I bumped into Adam and he said, 'If you want the great story of all time, I'll give it to you. Two words: Sidney Korshak.' 1
New Yorker Adam Walinsky, the same age as Hersh, was at the time an associate in the firm of Kronish, Lieb, Weiner & Hellman. In 1963 he had gone to the U.S. Department of Justice under Attorney General Robert F. Kennedy, where he worked on the drafting and passage of the Immigration Reform Act of 1965, the Civil Rights Act of 1964, the Economic Opportunity Act of 1964, and matters of crime and national security, later becoming Kennedy's legislative assistant.
"What I got to hear about Korshak was from Walter Sheridan," Walinsky remembered. "Sheridan was the guy who told me a lot of stuff about the rackets, and Korshak was obviously a really major figure. We talked about that and the information that had come out in the committee's investigations of organized crime. The one thing I said to Sy is that you don't want to import today's sensibility and bring it back thirty years, because to actually go after a guy like Korshak back in those days would be a much bigger deal than it would be today. He was a really serious player and he was a guy who could pick up the phone and call the publisher of the Times and all of that."2
Hersh said that Walinsky sent him to meet with Sheridan, who in turn gave him the background on the murky world of labor rackets, sweetheart deals, and Sid Korshak's central role in them. Sheridan advised Hersh to pay a visit to Berkeley, California, to learn more from freelance journalist Jeff Gerth, with whom Sheridan had floated an unsuccessful 1973 book proposal on the Korshak crowd. Gerth was currently defending himself in the largest libel lawsuit ever brought before a U.S. court, brought against him and others by a group headed by the Supermob's Moe Dalitz, Korshak's closest pal in Vegas. Just a year earlier, Gerth had teamed with fellow freelancer Lowell Bergman* in writing "La Costa: The Hundred-Million-Dollar Resort with Criminal Clientele," for the March 1975 edition of Penthouse. The piece exposed the resort, owned by Dalitz, Roen, Adelson, and Molasky, or DRAM, as a mob-friendly, upscale version of the Acapulco Towers right here in the United States. As Penthouse's lawyer Roy Grutman wrote, the allegations were hardly news, but nonetheless, this time DRAM fought back with a $630 million libel suit that would drag on for an astounding ten years.3
"I just liked him right away," Hersh said of Gerth, "and I said, 'Come work with me.' He said okay' " For the next six months, with Gerth credited as researcher, the duo would plumb sources from coast to coast in their attempt to unravel the Korshak mystery. It was a massive undertaking, one of the biggest ever for the Times, and certain to be a front-page multipart account.
Armed with a $30,000 budget, the new partners made an initial research trip to Reno, Nevada, where they learned what it meant to "dig up" a story. "We met this retired FBI guy in Reno," Hersh recalled, "and we went out to his cabin somewhere, and there he had this great document—later it was unfortunately stolen. It was about a 250-page FBI dossier on Korshak that was incredible. We published the gist of it; we leaned on it a lot. He gave us that document, but I remember we had to go out to his farm and dig it up, literally."
From there, the pair moved on to Jack Tobin, who gave them his LAPD sources. In Chicago, they read a clipping of how Korshak had sided with Joel Goldblatt's ex in a divorce proceeding. "We figured Goldblatt might be mad," said Hersh, "so we found him, remarried to a younger wife, living in the Near North on Lake Shore Drive." Another Goldblatt ex, MJ Goldblatt, remembered that Joel began receiving calls from Korshak friends before Hersh arrived in Chicago. "Don Maxwell of the Tribune warned Joel not to give the interview to Hersh, but he did it anyway," said MJ.4
When Hersh and Gerth arrived at the Goldblatt abode, they found a man bursting to talk. "He was very wealthy, and very angry," remembered Hersh. "He made us promise to protect him and he dumped everything on us."
Goldblatt told them, among other things, that he had seen Korshak's compromising photos of Estes Kefauver back in the early fifties. However, Goldblatt remained an unnamed source when the story ran.
The assignment was not without the occasional reminders of Sid Korshak's long reach. Near the top of the list is this one, as recounted by Hersh: "Best story I can tell you: I'm into the story about six months, or four months. I'm living in New York, my wife's in med school, when we get a call from the district attorney of L.A., John Van DeKamp. He says, 'Get to a pay phone.' 'What do you mean?' I say. 'Just get to a pay phone.' So I leave my kids—I'm making hamburgers for my kids, seven and five [years old]—and go down to the corner candy store, I call him collect. He says, 'Korshak has all of your phone records and all of your expense accounts from inside the Times.'" A former Times employee who wished to remain anonymous explained that L.A. District Attorney's Office investigator Frank Hronek later told the pair how Korshak had done it. "One of Hronek's sources said that Korshak got the records from one of Korshak's contacts in the Times payroll department," said the insider. "The Times later did an investigation and found him—it was a guy from Chicago, but they chose not to prosecute him.5 Thus alerted, the reporters began submitting phony expenses and proceeded onward.
Before the story ran, Times executives began getting letters from the Wyman, Bautzer law firm, written by Greg Bautzer. "Your man's been going around saying terrible things about my client," said one. "You're calling him names, he's never been found guilty of anything." Hersh called them "standard, good lawyer letters."
Of course, Hersh attempted to speak with Korshak during the research phase, but was unsuccessful. Jan Amory, Del Coleman's ex-wife, remembered historian Arthur Schlesinger trying to broker an interview when all the parties were dining at the same New York restaurant. "I remember Schlesinger saying to me, 'Would you introduce Sidney to Seymour Hersh? I know you're having lunch with Sidney at the Grenouille, and Hersh is dying to meet him.' I said, 'You mean he's never met him?' And he said, 'No, and he just wants to come over to the table.' And I said, 'No, I'm not going to compromise Sidney like that, I'm not doing it.' I just thought it was too tacky."6
Although Hersh and Gerth wrote that Korshak declined to be interviewed for the piece, the true story was far more interesting, and sinister. "I called Korshak one day, and he took the call," Hersh vividly remembered. "This was late [in the process]. I was in West L.A. and called from a pay phone. I said, 'Mr. Korshak, I am here.' He said, 'I won't see you.' Then he said, 'Mr. Hersh, let me ask you a question'—I'll never forget it as long as I live—'What are you doing? You're an expert in mass murder, you write about crimes where people are dead and there are bodies all over. Why are you writing about me? You write about murder.' He kept on talking about murder. 'Blood running in the ditches, and murders.' He just kept saying, 'You write about mass murder. Why are you interested in me? I'm just a businessman, and you write all these terrible things. Go back to your mass murderers. Go back to the blood and the killings and gore, that's what you write about. Not about me.' It was very interesting what he did. He just kept talking about murders and blood. He never said a word that was threatening, but the whole context was 'murder, murder, blood, murder'—you couldn't finish the conversation without realizing that . . . it set me on edge, as it should've. It was pretty chilling. His whole message to me was very subliminal, or so I thought—maybe that's the way he talked to everybody. That was the extent of contact with him." Tom Zander, the Chicago-based crime investigator for the Labor Department, insisted that Korshak's veiled threat was not uncommon. "That's the way he talked," said Zander. "He was not beyond anything, believe me."7
Internally, the story proved a world-class headache for the Times and its publisher, Arthur Ochs "Punch" Sulzberger, who constantly rode Hersh's back for sourcing and accuracy. At least two top Times executives voted to scuttle the series altogether.8 With Ziffren and Bautzer making their presence known, Sulzberger enlisted an army of attorneys to vet the first draft. Later, Hersh learned of another reason for Sulzberger's sensitivity. "[Executive Editor] Abe Rosenthal told me that Korshak knew Punch," Hersh said. "They used to go to the movies together. Charlie Bluhdorn used to show private screenings at his house and Punch would go with Sidney once in a while."
Interestingly, on the eve of the series' scheduled May 1976 debut, a Teamsters strike hit the paper. Hersh wondered if Sidney was sending another subliminal message. When the front-page "above-the-fold" series finally opened, three hundred interviews later, on Sunday, June 27, Hersh noted that Korshak's hometown paper didn't even mention it. "The L.A. Times didn't touch it," said Hersh. (Apparently, Korshak's $25,000 contribution to the Los Angeles Times' Buff Chandler in 1969 still counted.) "But Pacifica [Radio] ran it twenty-four hours a day," Hersh added. "They read it aloud. They read it around the clock."
The opening salvo was entitled THE CONTRASTING LIVES OF SIDNEY R. KORSHAK: SUCCESSFUL CALIFORNIA LAWYER IS CALLED LINK BETWEEN CRIME AND BIG BUSINESS. The hard-hitting broadside included allegations of fixed judges, blackmailed senators, labor racketeering, Teamsters Pension Fund abuses, tax dodging, etc. Although many of the charges were unproven, the sheer extent of them made it seem as though the 1969 Los Angeles Times article had been circumspect in the extreme.
In Chicago, on the very night part one hit the newsstands, the sixty-nine-year- old Korshak was rushed to Michael Reese Medical Center after a flare-up of diverticulitis, or inflammation of the colon caused by too much low-fiber food. He was reported in fair condition.9 Although one might conclude that stress from the Hersh affair had brought it on, it may have been just coincidental, since most internists now believe that stress plays no role in the illness. (Three years earlier, Korshak had spent four days in L.A.'s Cedars of Lebanon Hospital with a stomach inflammation that saw his white-blood-cell count soar to twenty thousand, over twice the norm, due to a bleeding ulcer. The incident left Korshak depressed and telling a friend that he "might as well be dead" if he couldn't eat and drink what he wanted.) "Sidney had a lot of stomach problems," said friend Leo Geffner. "He had to watch what he ate. He was very careful not to eat spicy or rich foods."10
Unbeknownst to Geffner and Korshak was that while Korshak recuperated at Michael Reese, the FBI watched all his phone records and attempted to monitor his visitors.11
The Fallout
As might be expected, the Times' Korshak series provoked reaction and fallout of all manner. Even before the series concluded, Greg Bautzer fired off a telegram to the Times complaining that he had been taken out of context in the first installment. Bautzer said that he never meant to imply that Sidney might have had early ties to the Outfit. "I never knew Mr. Korshak in Chicago," wrote Bautzer, who claimed that he told Hersh, "If he had represented these men, and it was conceivable that he did, I was unaware of it; that during all of my association with, knowledge and observation of Mr. Korshak while he has been residing in California, I found him to be a lawyer possessed of intelligence, integrity and loyalty."12
The series also drew the attention of Hersh's fellow journalists (except in Korshak's adopted hometown, where the Los Angeles Times did not even acknowledge the articles). Predictably, Korshak friends such as Irv Kupcinet and Joyce Haber excoriated the Pulitzer-winning writer, labeling his work nothing less than character assassination. Most surprising was the response of respected New York columnist Nat Hentoff, who wrote that Hersh had "set out to get Sidney Korshak . . . Tom Jefferson may not have had this mouthpiece [Korshak] precisely in mind when he envisioned the democratic populace two centuries hence, but he could not have excluded him even from the Bill of Rights." Hentoff, a respected civil libertarian, went so far as to call for the prosecution of federal officials who had leaked government documents to Hersh.13
Other peers, such as Denny Walsh of the Sacramento Bee, supported Hersh's work, even though it was long on inference and short on hard proof of Korshak criminal activity. "Men like Korshak deserve all the publicity they can get," Walsh told New West. "Sy Hersh did a public service by getting all the information on Korshak in print."14 Many seemed to think that Hersh was employing the same strategy that had led to his Pulitzer-winning My Lai revelations and his series on CIA abuses, which had begun with unfocused scattershot allegations that eventually prompted key witnesses to come forward with the complete stories. "This is exactly the strategy that paid off in Sy's CIA series," said Frank McCulloch. "I have the utmost respect for Sy and the Times. I hope he keeps on digging."15
Regarding the provocative Kefauver blackmail story, a number of Kefauver's senior staff, such as Organized Crime Committee counsel Downey Rice and investigator George Martin, wrote letters to Sulzberger, Hersh, and the U.S. Senate, protesting what they believed were gross inaccuracies in the Kefauver story. Senator Thomas Mclntyre (D-New Hampshire) inserted a scathing letter from Rice and Martin into the Congressional Record, which stated in part that Hersh's "sole objective seems to be to disparage, distort, denigrate, and defame."16 Historian William Howard Moore of the University of Wyoming was among those who seized on minor errors in the piece (such as the date and reasons for the Kefauver Committee's postponement of Chicago public hearings) to say that Hersh was therefore also wrong about Korshak's blackmailing of Kefauver.17 Six years later, Moore expounded on this in an article in the journal Public Historian.18 Most of the protesters assumed that Hersh's source for the allegation was an underworld type. They never learned that it was in fact Joel Goldblatt, one of the most respected businessmen in Chicago.
In response, Sulzberger not only wrote letters in defense of Hersh, but printed an editorial on July 1, in which he stated that the articles "clearly demonstrated" that there was "a great deal of evidence—much of it already in the hands of federal agencies—that would have warranted an indictment" of Korshak. Sulzberger ended by saying, "Mr. Korshak is surely one of the people who have been involved in building links between organized crime, labor unions and corporations. His career . . . strongly indicates that major reforms are needed in the administration of criminal justice and corporate law."19
Among the more suspicious of the postpublication occurrences was the discovery that all the voluminous work files compiled by Hersh and Gerth turned up missing from the Times storage facility—files that might have insulated them from potential legal actions. "We were all very upset at the time. There were huge files, they were excellent," said Hersh, who believed the files were accidentally lost during a Times storage relocation. "Jeff has his doubts, but they were really moving, and there were renovations, and they disappeared during the moving. I think it was just stupidity."
Hersh gained a rare glimpse into Korshak's personal moral code when he received a postpublication call from a young member of the Fixer's extended family. As best Hersh remembered it, this is what the relative related to him:
You missed the real story. Let me tell you about my uncle Sid: When I was about twelve or thirteen, we used to go to seders . . . Sidney would drive the kids. We'd all go for Passover seder and he would run the seder. Once, in the early sixties, I was in the backseat with one of Sidney's sons, who was about twelve or thirteen. I remember everyone was scared of Sidney. We were playing in the back of the Cadillac, and I went, "Eenie-meenie-miney-moe, catch a nigger by his toe." And Sidney stops the car and turns around and slapped me across the face. It's one of those things you never forget. Uncle Sidney said, "Don't ever talk about them that way. If you don't talk about them that way, they won't talk about us that way." So then, hours later, in the middle of the seder, there's a phone call, and Sidney's sister was very nervous because she was scared of Sidney. Uncle Sidney took the phone at the front of table and says, "Good. You got the goy, good."
Hersh later investigated the incident, learning that a sanitary-district official, a reformer in Stickney Township in Illinois, had been assassinated. Hersh concluded that Sidney had fingered him. "Couldn't get closer than that," Hersh said about the goy's murder. "After he had just given his niece a lesson in racial manners."
Incredibly, there was no discernible effect from the Hersh charges on Korshak's thriving business practice, with the stories only giving a momentary pause to some clients. Hilton Hotels made a cursory investigation to determine if they should sever their relationship with Korshak. E. Timothy Applegate, Hilton's longtime general counsel and Korshak's liaison at the company, was the man in charge of such things. "I am very suspicious of second- and thirdhand information, and so much of that series was based on it," Applegate said recently. "A prosecutor would say that there was no case there. But I went to Frank Johnson, a former reporter for the Reno newspaper, who had been chairman of the Nevada Gaming Control Board; he was a very upstanding guy without a crooked bone in his body. Frank knew a lot of FBI people in Vegas and he made his inquiries on Korshak and came back to me and said, 'There's no basis for doing anything.' I also called another board chairman, Phil Hannifin, and asked if we should be concerned. He said no."20
Likewise, the bombastic series failed to generate any real law enforcement interest in Korshak's doings. Two former Justice Department organized crime specialists told the press that they had explained their inaction to Hersh. "We don't have a shred of evidence against Mr. Korshak," they claimed to have said. "Otherwise, we'd have prosecuted him."21 Another Justice official tried to explain the problem this way: "If you're going to take on the Sid Korshaks, you're going to have to commit one hell of a lot to it. Maybe if we committed the whole federal Strike Force to it, we might be able to nail the guy. But there are four or five guys who are equally as important [in organized crime], so what are you going to do?"22
Marvin Rudnick, at the time an assistant state's attorney in St. Petersburg, Florida, was among those who shook their heads in awe—but he had his own theory, one that he shared with Johnny Rosselli, and which jibes with what is now known about Korshak's secret meetings with Las Vegas sheriff Ralph Lamb. "After Hersh laid it all out, nothing happened," Rudnick recently said. "It's hard to believe that Korshak survived all those years of scrutiny without there having been some alternate explanation. So there were only two possibilities: either Korshak was paying somebody off, or he was an informant. I lean towards the latter, because it's hard to believe that the entire FBI was manipulated by corrupt people. Who would be a better informant than Korshak? If you're involved in crime at a high level, there's an FBI agent who's going to try to get you to turn and make his career."23 And, as noted, years earlier, Korshak had not only been "flipping" for Ralph Lamb, but had fingered Mickey Cohen to the feds,
For the most part, Korshak gave the impression that the Hersh series, which would have devastated most people, merely rolled off his back. Hollywood screenwriter Tom Mankiewicz, who saw Sidney in the aftermath, remembered, "One day in Beverly Hills when Seymour Hersh was doing these articles, I ran into Sidney and I said, 'Boy, they are really raking you over the coals in the Times, aren't they?' He said, 'If any of that were true, Tom, I'd be in jail, wouldn't I?' "24 He was similarly dismissive with Del Coleman's ex, Jan Amory, telling her, "Honey, I put that up on my bulletin board. He ain't got nothing on me." Amory recently elaborated on Korshak's unfazed demeanor. "He didn't get depressed then or ever," Amory recalled. "But he was unhappy to be attacked by this guy—and the lies—and he vowed to fight it the rest of his life. On the other hand, he never said anything that would lead me to believe that he was telling me the whole story or none of the story. "25
There were, however, occasions when Korshak's bravado faltered. Hilton Hotels president Barron Hilton, a longtime Korshak client and pal, later recalled how Korshak "was quite depressed with the adverse publicity he had received," and that Hilton subsequently wrote Korshak "a note of sympathy." 26 According to "Marty," a close friend of Marshall Korshak's, the Times series did indeed affect brother Sidney. "I used to enjoy stopping by to see Marshall in his law office," said the friend. "And one day while I was sitting there, Marshall was very upset because Seymour Hersh was doing his series about Sidney. I told Marshall, 'Don't worry. It doesn't mean anything. It will all be used to paper birdcages.' Marshall said, 'You got to tell Sidney' 'What?' 'You got to tell Sidney he's got nothing to worry about.' Now I can't believe this, but he dialed Sidney in Beverly Hills, or wherever he was hanging out, and said, 'Sidney, my friend Marty here knows everything there is to know about the media. And he says that you got nothing to worry about by the series in the New York Times.' Then he said to me, 'Sidney wants to talk to you.' Now I can't believe this—here is Sidney, who an outsider would think would be the most confident man in the world, never lacking in confidence, Sidney is going to talk to me to have his confidence built up. This gives you an insight to the psychology. I get on the phone—what the hell am I going to say? Run for the hills? So I told him, 'Sidney, you got nothing to worry about. It's a nothing. It's a nothing.' He said, 'Oh, God, Marty, I'm so happy to hear that. That's really reassuring.' "27
Marty added that the most devastating quote in the series was the infamous Willie Bioff testimony of 1943, reported by Velie in 1950, in which he referred to Korshak as "our man in Hollywood."
"That was the magic sentence," said Marty. "But for every person that turned away from Sidney for that quote, fifteen admired him. That quote is what made Sidney." Supermob patriarch Jake Arvey weighed in on this subject, telling the Chicago Sun-Times, "It was a lie in 1950 and it's a lie today. The article was written by a man who wanted to smear Sidney Korshak, who is a friend of mine, as was his father. We are social friends, and he has never controlled me, and I have never controlled him."28
In Beverly Hills, the Korshaks' friends rallied around the beleaguered couple, paying close attention to Bee, who seemed more upset about the Hersh articles than her husband. On July 3, just days after the series ran, Sid and Bee attended Lew and Edie Wasserman's fortieth wedding anniversary party, wherein Edie took Bee aside to ask, "How are you doing, honey?" As Wasserman friend and "surrogate daughter" Wendy Goldberg explained, "Edie will go to any length to protect her friends. She will fight for you to the end."29 Also at the gathering, Lew took Sidney aside and consoled his friend, making a point of being seen embracing Korshak as he got up to leave.30 Two months later, during a Democratic fund-raiser at the Wassermans' attended by the likes of U.S. senators Alan Cranston and John Tunney, billionaire Armand Hammer, producer Norman Lear, DNC national chairman Robert Strauss, Representative Andrew Young of Georgia, and studio honchos Barry Diller (Paramount) and David Begelman (Columbia), Lew personally introduced Sidney to presidential candidate Jimmy Carter. The Democratic front-runner later told W magazine that he had met Wasserman while still governor of Georgia, and that Wasserman's friends played a key role in his campaign. "When [Wasserman] let his friends know he had confidence in me, it was extremely helpful," Carter said.31
Korshak soon went back to business as usual: in 1976, the FBI received information that Korshak had made arrangements for excessive union featherbedding on the set of Paramount's recent production of The Great Gatsby, filmed in Newport, Rhode Island.32 While the investigation yielded no charges, one possible reason is that the Bureau was more focused on simultaneous allegations about Korshak on the West Coast.
In 1976, Korshak was believed to have been involved in labor racketeering regarding the luxury liner Queen Mary, berthed in Long Beach, California. After receiving a windfall from its share of the Tidelands Oil agreement with the State of California, Long Beach had purchased the ship from the Cunard Line in 1967 for $3.4 million for use as a tourist attraction. When the ship's renovation budget skyrocketed from a predicted $8 million to $80 million, a city audit disclosed numerous questionable expenditures, including huge fees to none other than the ubiquitous Sidney Korshak.
When the FBI joined the investigation, it developed "numerous sources" that cited corruption of appointed and elected Long Beach officials; the Bureau believed that State Lands Commission members were being "paid off in the form of political contributions to continue their support of the Queen Mary project."33 According to the FBI, Korshak had been paid $25,000 to $35,000 to help his and Reagan's friend Alfred Bloomingdale (president of Diners Club) secure a labor contract with the mob-infested Hotel and Restaurant Culinary Union, which would be cheaper, thanks to sweetheart contracts, than siding with the Marine Cooks and Stewards Union. In addition to Diners Club, long-standing Korshak client Hyatt, which was slated to operate a four-hundred-room hotel on board, was to join Diners as the principal commercial lessees of the Queen Mary.
According to an informant who participated in the Korshak dealings, meetings on the Queen Mary issue were held in Korshak's ABC Booking office, which one FBI witness described as "very elaborate, but poorly illuminated . . . Korshak's desk contained a pile of telephone messages which had obviously gone unanswered by Korshak for some period of time." Other meetings took place at the Chalon home, which the witness described as "very pretentious."34 One FBI report noted, "Payoffs were made by unidentified representatives of Diner's Inc. to Sidney R Korshak to insure labor peace and guarantee 'sweetheart' contracts."35 Sources reported that Korshak flew to Las Vegas, where he received his payment.36
Despite a two-year RICO investigation, Korshak emerged unscathed as usual.37
In St. Petersburg, Florida, new assistant state's attorney Marvin Rudnick clipped the Hersh series out of the paper and attached it to the side of his refrigerator, where it remained for over a decade, when the expose would become an inspiration for Rudnick's own investigation of the machinations of Korshak's pal at MCA, Lew Wasserman.38 Meanwhile in southern Florida, grislier business was afoot.
On August 7, 1976, Johnny Rosselli's chainsawed, decomposed corpse was found in a fifty-five-gallon oil drum floating in the Florida Keys. He had recently been testifying for the Senate about the Chicago mob's ties to the Castro assassination plots of the Kennedy administration. In Hollywood, insiders saw the triple murders of Giancana, Rosselli, and Hoffa as a watershed time for Korshak.
That Korshak's social circle and client base did not exactly rise up in faux disapprobation over the Hersh charges may well have been due to the fact that so many of them, also with tainted Chicago roots, dared not risk having their own dirty laundry be given a public airing. But that was not to be the case, as the Times quickly followed up with a business-section report on the Hyatt Hotel chain, owned by Korshak's former Supermob neighbors at 134 N. LaSalle Street the Pritzker family. On August 29, 1976, in an article entitled HYATT'S KINGDOM OF ROOMS, by Times L.A. Bureau chief Robert Lindsey, the paper described not only the sixty-five hotels controlled by the company, but also its "asset management" approach, and, most important, its dealings with the Teamsters Pension Fund and Sidney Korshak. In a sidebar entitled HYATT, KORSHAK, LAS VEGAS AND THE TEAMSTERS, Lindsey pointed out that Korshak had told the SEC in 1970 that he worked for the Pritzkers, drawing the inference that he likely arranged their Vegas Teamster loans.39
Two weeks later, the Times received a four-paragraph letter from Hyatt chairman Jay Pritzker that pointed out what he believed were sundry discrepancies, and closed with the following:
The brief accompanying article was unfair to Sidney Korshak and to Hyatt. The headline leads the reader to assume that there is some relationship among the four, while none exists in fact. Mr. Korshak was not involved in any way with Hyatt's acquisition of hotels in Nevada or in any other of the negotiations with the Teamsters Union or its pension fund.
/Signed/ Jay Pritzker40
The Pritzker Paper Trail
It wasn't just the Teamster connections that put fear into the hearts of those connected to Korshak. Like Parvin-Dohrmann, Bernie Cornfeld's IOS, and the Bluhdorn-Sindona nexus, many of their closeted skeletons involved tax evasion via offshore shelters. Many of those with creative tax strategies were, again, connected to Sid Korshak's clients and former LaSalle neighbors the Pritzkers.
By the midseventies, the Pritzker empire was awash in profit, the most recent success coming from Nevada casino investments. Between 1959 and 1975, the Pritzkers had obtained $54.4 million in Teamster loans for their hotels, undoubtedly (although impossible to prove) with the aid of Korshak. When they cast their sights on gambling lucre, they again turned to Korshak. As Korshak himself told the SEC back in 1970, "It is possible that Hyatt Hotels talked to me about the possibility of making an acquisition in Nevada." Thus, in 1972, under their Elsinore banner, the Pritzkers joined the Vegas party when they bought the Four Queens in "Glitter Gulch" and King's Castle with Teamsters Pension Fund loans (obtained at a 4 percent discount, saving Hyatt $8 million).41 In return, the Teamsters bought $30 million in Hyatt stock. Sources reported that Donald Pritzker had met with Korshak friend and client Moe Dalitz in Honolulu on May 14, 1972, to discuss the Four Queens loan.42
Castle Bank
It was around this time, the early seventies, that IRS agents like Andy Furfaro noticed that the Pritzkers' billion-dollar Hyatt chain was paying no taxes. It turned out that the Pritzkers were the largest depositors in one of the most notorious offshore tax havens ever devised, The Castle Bank of the Bahamas, which was nothing less than an intersection of the Supermob, known gangsters, pop stars, a U.S. president, and the covert branch of the CIA—all of whom had good reason to hide their money from Uncle Sam.
Bahamian and Cayman Islands banks have long been valued by those wishing to hide their money because those nations absolutely refuse to cooperate with U.S. law enforcement. Bank expert and author Penny Lernoux wrote of the main advantage of the Caribbean banks: "Relying on a strict code of banking secrecy that makes Swiss banks look like blabbermouths, hundreds of banks have set up operations in the Caribbean."43 To further guarantee its clients' anonymity, Castle had arranged for Miami National Bank, which was controlled by Lansky associates, to accept the deposits, then transfer the deposit list to Castle with no names attached—only code numbers.
Agent Furfaro was among those frustrated by the government's inability to follow the money trail. "The money was getting out of the country through Western Union," Furfaro recently said. "But we weren't allowed to follow it. And the foreign banks wouldn't let us in. We had reports that money was also being shipped in railroad cars and containers placed on ships. There was so much money that they would just weigh it instead of count it."44 A 1979 Ford Foundation study on offshore banking concluded that the "flow of criminal and tax evasion money" into the Bahamas alone was "up to $20 billion annually."45 Indeed, the statistics are incredible: one Caribbean bank for every six hundred residents.
Castle, merely a variation of Hollywood's Dutch Sandwich, was the brainchild of longtime CIA "front organization" mastermind Paul Helliwell, who had come up through the ranks to become a senior officer in the CIA's predecessor, the Office of Strategic Services (OSS). As the Cold War intensified, the CIA, in its zealous desire to defeat Communism, relied on people like Helliwell to set up "brass plate" operations that allowed the CIA to launder funds to be used for propping up heroin-dealing—but anticommunist—warlords and dictators.46
In 1964, Helliwell joined forces with Morris Kleinman of Moe Dalitz's Mayfield Road Gang, Pritzker Chicago tax attorney (and Hyatt board member) Burton Kanter, and Pritzker law firm partner (and Teamsters Pension Fund trustee) Stanford Clinton to establish the Castle Bank, where foreigners could set up trust accounts that were the key to both personal and commercial tax avoidance: since the trusts were, for U.S. tax purposes, foreign citizens, they owed no taxes to the U.S. government. The added beauty of the Castle setup was that the actual deposits never had to be delivered to the bank, which was a fake depository for money that the client could use anywhere in the world.
In the midseventies, as the result of a narcotics-trafficking prosecution, the IRS mounted Operation Tradewinds (later Project Haven), an all-out investigation of Castle, referring to the probe as potentially the single biggest tax-evasion case in U.S. history. Despite the inability to serve warrants in the Bahamas, wily IRS agent Richard Jaffe and detective Sybil Kennedy obtained a list of the bank's depositors,* which included the Pritzkers, Detroit land developer Arnold Aronoff, Playboy's Hugh Hefner, Penthouse's Robert Guccione, rock band Creedence Clearwater Revival, Korshak pal and actor Tony Curtis, and the Mayfield's Moe Dalitz, Morris Kleinman, and Sam Tucker. Other Castle memos included a list of Vegas racketeers such as the Stardust's Yale Cohen (an associate of the Outfit's Anthony Spilotro), Nicholas "Peanuts" Donolfo (a Giancana underling), and Jimmy "the Weasel" Fratianno, who were all doing business with Castle.47 It is not certain how many of these investors may have been directed to Castle by Sid Korshak, but one longtime friend of Hefner's recently stated that the Playboy sachem, for one, mentioned that Sidney had tipped him to the bank.48
Given all the Pritzker associates involved in the management of Castle, it came as no surprise when Pulitzer Prize-winning journalist Knut Royce determined in 1982 that the Pritzkers were in fact the bank's largest depositors. 49 A September 1972 IRS statement noted, "An informant [F. Eugene Poe, a former VP and director of Castle Bank] with access to the records of Castle Trust has stated that the Pritzker family of Chicago, through their Hyatt Corporation, received their initial backing from organized crime."50
Castle Bank was not the only shady partnership entered into by Kanter and the Pritzkers. In the 1970s, Kanter and Pritzker were also involved in a massive kickback scheme with two executives from the real estate wing of Prudential Insurance Company, which controlled $20 billion in properties across America.51 In a complex setup that took prosecutors over twenty years to unravel, Kanter and the Pritzkers devised a scheme wherein contractors paid them and the Prudential executives under the table in exchange for lucrative Prudential business.52
The Castle Bank saga was but a pointed reminder that while agents like Andy Furfaro were allowed to pursue the mob in Vegas, and years earlier the FBI had resorted to illegal wiretaps to learn about the mob's skim operation, the government tacitly declared the offshore tax dodges of the former residents of 134 N. LaSalle (Kanter, Pritzker, etc.) and the similar schemes by the likes of Korshak's friends at MCA to be off-limits. It is also worth noting that the tax losses sustained due to Supermob scams (estimated in the billions) dwarfed those of the regular mobsters, who, like Capone, were regularly carted off to prison.
The Presidential Offshore Pension Fund
Although it did not appear on the purloined master list obtained by Jaffe and Kennedy, one U.S. president's name had been observed on another Castle list by a Castle executive working undercover for the IRS. "One of the first names I saw," bank officer Norman Casper said in 1997, "was the name of Richard Nixon." Although Nixon's name was deleted from the master list, a Castle Bank transfer slip bore the name "N&R," who had transferred over $11 million to Cosmos Bank, a Zurich, Switzerland, Privatbank. Casper was told by a Castle source that the initials stood for "Nixon and Rebozo." (Millionaire businessman/banker Charles "Bebe" Rebozo was a longtime confidant and adviser of Nixon's; he was also the bagman for the Hughes cash transfers to Nixon.) A Swiss hotelier is on record as saying Nixon and Rebozo visited Zurich at least once a year.53
In separate investigations, both New York district attorney Robert Morgenthau and Herschel Clesner, chief counsel of the House Commerce and Monetary Affairs Subcommittee, concluded that Nixon had money in both the Castle and Cosmos banks. Lastly, Maurice Stans, Nixon's reelection finance chief, admitted in 1997 that Rebozo had in fact set up a trust fund for Nixon's family. He also donated $19 million to Nixon's presidential library.54
Unfortunate Sons
Kanter also offered his tax consulting services to Berkeley-based jazz label Fantasy Records, the recording home of such giants as Thelonious Monk, Miles Davis, John Coltrane, and Chet Baker, among others. Founded in 1949, Fantasy was purchased in 1967 by Saul Zaentz, a New Jerseyite of Russian-Polish extraction. When Zaentz expanded the company to include rock and roll, he hit the jackpot almost immediately with the signing of "swamp rock" kings Creedence Clearwater Revival (CCR), who went on to record eight successive gold singles, such as "Proud Mary," "Green River," and "Fortunate Son." Kanter and Zaentz convinced CCR that they had an airtight shelter for the band's millions: Castle Bank. Thus, for most of the seventies, CCR's royalties, some of which financed Zaentz's production of the 1975 Oscar-winning film One Flew Over the Cuckoo's Nest, made the circuitous Supermob journey before actually arriving in the band's bank accounts. *
In their book, The Cheating of America, Lewis and Allison described the scheme: "Kanter and his partners then designed a complex scheme that involved shifting income from the film through various foreign entities and trusts in twenty-six separate steps before it was repatriated to the United States. The money was funneled through companies with names like Zwaluw N.V, Leeuwirik N.V., Nellthrope Cayman, Campobello Panamanian, and Inversiones Mixtas. Payments back and forth were disguised as loans, investments in other films, or repayments of loans, until what was income for whom was thoroughly confused."55 During one year of the tax dodge, CCR paid not one cent in taxes on $2.5 million in income.
After CCR disbanded in October 1972, they attempted in vain throughout the 1970s to have their Castle Bank trusts converted into individual accounts elsewhere. After Castle broke up in 1977, the IRS went after CCR for unpaid taxes, and the band turned right around and sued Kanter for malpractice, claiming that Kanter not only lied about the airtight tax shelter, but also misappropriated millions of the band's money?56 Filed by CCR founder and songwriter John Fogerty, the original suit was against Burt Kanter; Edward J. Arnold, an Oakland accountant; and Barrie D. Engel, an Oakland attorney. They were charged with professional malpractice, fraud, and breach of fiduciary duty. The suit asked for $10 million in damages. In 1983 a jury in San Francisco Superior Court ruled in favor of Fogerty and his band. John Fogerty was awarded $4.1 million, and the rest of his band-mates received approximately $1.5 million each.57
The bad publicity surrounding Castle resulted in its losing its Bahamian license before moving to Panama, where it finally dissolved in 1977.58 Kanter, Helliwell, Pritzker, and the other bank officers, in no small thanks to IRS commissioner Donald Alexander (appointed by President Nixon) and the CIA, escaped indictments. That the Cincinnati law firm of Dinsmore, Shohl, Coates, and Deupree was among those making deposits in Castle when Commissioner Alexander was a senior partner was not lost on observers of the ill-fated probe?59 Alexander often made his opposition to offshore investigations known: he removed the question about foreign bank investments from IRS Form 1040 and canceled Operation Tradewinds, even though it had reclaimed some $52.5 million in tax penalties.
When Kanter was eventually investigated, Alexander's IRS gave 90 percent of its Castle Bank file to Kanter and his defense team; one congressman said that the file "provided those under investigation with a blueprint on how to elude prosecution."60 Incredibly, Kanter was given the material after filing a routine request under the Freedom of Information Act, prompting an embarrassed IRS official to term the mistake a "royal screwup." Furthermore, a federal judge in Cleveland ruled that the Castle account-holder list had been illegally obtained and couldn't be used as evidence in criminal cases.61 Lastly, the CIA's general counsel John J. Greaney intervened and demanded that the Department of Justice and IRS end the probe—it seemed that the CIA had also used Castle Bank to launder money in furtherance of its clandestine operations, and it feared that an investigation would jeopardize national security, not to mention its own congressional free ride.62
Using seed money from Chicago investors including the Pritzkers and Hugh Hefner, Kanter next became the legal adviser to Charles Dolan's nascent Cablevision System, which went on to become the largest privately held cable television company in the United States.* Saul Zaentz was charged by the IRS with sending all the profits from Cuckoo's Nest offshore (at least $38 million), only to have them returned as phony, untaxable loans.63 It is believed he settled with the IRS in 1990 by paying the government $14 or $15 million.64 Donald Alexander quit as IRS commissioner and went into private practice, where he was an expert on offshore tax havens.65
As will be seen, however, the federal government was far from finished with both Kanter and the Pritzkers.
Bill Allison of the Center for Public Integrity noted that the IRS conservatively estimates that tax avoidance and evasion will cost the Treasury nearly $2 trillion over the next decade, much of it due to the offshore tax dodges of banks and entertainment conglomerates. Citicorp alone deposits $1.3 billion overseas annually, helping it avoid some $399 million in taxes. Thanks to federal tax lawyers recruited from the staff of the House Ways and Means Committee, Supermob associates lobbied for arcane tax loopholes that allowed them to make inexpensive sham overseas investments, such as in a sewer system in Germany, in order to claim massive tax write-offs. One of the most favored foreign schemes is the "lease in, lease out," or LILO option, * which has been a boon for U.S. banks such as Wachovia. In 2004, Bob Mclntyre, the director of the Institute on Taxation and Economic Policy, told Frontline correspondent Hedrick Smith how Wachovia used the LILO gambit: "Well, Wachovia, amazingly, in 2002, even though it reported four billion dollars in profits, reported that it didn't pay any taxes and, in fact, got a tax rebate from the government of about one hundred and sixty million dollars . . . they saved three billion dollars in taxes over the last three years from leasing."66
In addition, according to the IRS's most recent statistics, there were 101 returns filed by millionaires who paid absolutely nothing in federal income taxes.67
*By just 1976, Hersh had amassed the following accolades: The George Polk Award, Worth Bingham Prize, Sigma Delta Chi Distinguished Service Award, and Pulitzer Prize for international reporting, all 1970, all for stories on the My Lai massacre; My Lai Four was named one of the best nonfiction books of the year by Time, 1970; Front Page Award, Scripps-Howard Service Award, and George Polk Award, all 1973, all for stories on bombing in Cambodia; Sidney Hillman Award and George Polk Award, both 1974, both for stories on CIA domestic spying; John Peter Zenger Freedom of the Press Award and Drew Pearson Prize, both 1975, for stories on CIA involvement in Chile.
*Bergman would go on to become one of the country's top investigative journalists, immortalized in the 1999 film The Insider, in which Bergman was portrayed by Al Pacino. The story recounted Bergman's attempts to have CBS's 60 Minutes air his report on tobacco executive Jeffrey Wigand, portrayed in the film by Russell Crowe. The film garnered seven Academy Award nominations and won numerous other accolades.
*The story of how they obtained the precious document is a drama in and of itself, best described in Alan Block's Masters of Paradise and Penny Lernoux's In Banks We Trust.
*Zaentz later produced films such as Amadeus (1984) and The English Patient (1996).
*Dolan also founded the short-lived satellite HDTV service VOOM, which folded in April 2005 after sustaining losses of over $661 million.
*Simply stated, LILO is a tax-dodging loophole that allows corporations to make minuscule overseas leasings in exchange for massive domestic tax credits.