1958-1959

(Part I ran last week.)

The Nevada Tax Commission withdrew the gambling license of the New Star casino’s operators — Brent Mackie and Kenneth Henton — in July 1958 after investigators allegedly witnessed 21 dealers cheating customers in eight different ways at the Winnemucca casino.

Later that month, defense attorney Thomas Foley of Las Vegas, petitioned the district court to review the tax commission’s license revocation order on the grounds that it was “capricious and arbitrary” (Reno Evening Gazette, July 29, 1958). District Judge Merwyn H. Brown ordered the agency to defend its action.

Bias Alleged

However, Brown was automatically disqualified from hearing the case. This was due to Nevada Gaming Control Board (NGCB) member, William Sinnott, alleging via an affidavit that Brown, also of Winnemucca, possibly was biased against the tax commission as he’d ruled on the side of the Thunderbird Hotel in Las Vegas when its gambling license was in contention. 

The commission also was concerned Brown had become too close to Mackie and Henton when they’d owned the Mint Club casino in town previously.

“I’ve been booted off the case for an asinine reason,” Brown said (Reno Evening Gazette, July 30, 1958). “Frank Petersen [NGCB’s counsel] called and said he felt I was disqualified because a lady who has been my neighbor for 30 years owns a half interest in the building in which the New Star casino is located. I told Petersen that if that reason is valid, I can’t sit on any case because I have had friends here for 50 years.”

Legal Sparring Ensues

In August, District Judge John F. Sexton of Battle Mountain, Brown’s replacement, stated the license revocation was too strict, and as such, he lessened the penalty to closure of only the 21 game for 60 days and covering of the dice table for 30 days with time served taken into account. Mackie and Henton still could operate the slot machines.

Petersen, attorney for the gaming regulators, called the alteration “improper and prejudicial,” pointing out that Sexton must have determined cheating had taken place or he would’ve reversed the revocation (Nevada State Journal, Dec. 11, 1958).

“Sexton’s modification decision was another milestone in the evolution of Nevada’s thorny problem in policing the state’s multimillion-dollar legalized gambling industry,” noted the Nevada State Journal (Aug. 9, 1958).

Petersen appealed to the Nevada Supreme Court. In mid-August, that court sided with the tax commission, granted its motion to stay Sexton’s order, or in other words, reinstated the license revocation and casino closure.

One Last Tack

Mackie and Henton, however, continued to fight. Foley asked the high court to dismiss the tax commission’s appeal of the district court decision that eased the revocation order and, instead, to allow a motion for re-hearing of the testimony in the lower court.

That effort, too, was unsuccessful as the Nevada Supreme Court in September said it, not the district courts, was the final arbiter on appeals concerning state gambling regulation orders.

Foley again appealed to the higher court, the second time asking the revocation be overturned because evidence had been lacking and insufficient for the penalty to be imposed initially.

In court in December, the justices asked Petersen how the tax commission could function in a judicial capacity when there was a dispute over which witness to believe and the commission itself had not observed the witnesses. (Before 1955, the tax commission directly heard all hearing testimony but that duty was transferred to the NGCB when the legislature created the entity that year).

Petersen replied that the commission has the record of the gaming board hearing and determines the weight and credibility to be accorded to the various accounts.

Out Of Gas

In January 1959, the Nevada Supreme Court found that Sexton’s order to reduce the penalty was administrative rather than judicial. It also determined a reasonable cause for the revocation had existed. The final ruling was that Mackie and Henton’s gambling license for New Star would remain cancelled for the requisite year, and it was.

Gambling At New Star Revived

That didn’t mean a different party couldn’t obtain a license and run the gambling at New Star. In fact, that’s what happened.

In February, the tax commission granted a gambling license to Sumner and Doris Kirkby to operate 20 slot machines at the club. The next month, it approved Roland I. Benum of Las Vegas to run blackjack and dice games there, too, with a $25 table limit, a restriction that in July was removed.

In December 1960, Harold Larraguetta invested $40,729 in and assumed control of the entire casino operation, which he ran for four years.

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Photo from freeimages.com: by Steve Roberts

1957-1962

Perhaps it was a bird-brained idea; perhaps not.

In 1957, Dick Graves, the owner of the Nugget, in Sparks, Nevada, commissioned a handcrafted, solid gold rooster for display in one of his hotel-casino restaurants, the Golden Rooster Chicken House, then under construction.

The final product was 9 inches tall and embodied about $40,000 worth of 18-carat gold, a $339,000 value today.

After a year or so of the gold bird drawing attention in its burglar-proof coop, Graves found himself in legal trouble … over the fowl.

United States law prohibited citizens from owning more than 50 ounces of any precious metal unless it was a piece of art. Graves’ rooster weighed a whopping 255 ounces. The government, deeming the bird an advertising gimmick rather than an objet d’art, seized it in 1960 and sued its owner for violating the 1934 Gold Reserve Act.

Up To A Jury

During a trial two years later, jurors were tasked with deciding whether Graves had been using the rooster for artistic purposes or not. Three experts gave divergent testimony on that issue.

Graves’ attorney Paul Laxalt said he was “an innocent businessman caught in the web of complicated and confused government” (Reno Evening Gazette, March 29, 1962). “The holding of Dick Graves of this little rooster is not going to upset the international gold balance. It would be a terrific shame to have the rooster melted down.”

After struggling to decide, the jury ultimately ruled in Graves’ favor, concluding his rooster was exempt from the federal rule. The government returned the precious metal poultry to Graves, who promptly returned it to its casino roost. The prosecutor, though, filed an appeal.  

One and a half months later, the U.S. government abandoned the case for good. As for the rooster, it paraded its shiny plumage at the Nugget until July 2014, when it was sold for $234,000 at the Coeur d’Alene Art Auction. 

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1945-1955

In the late 1940s, three bookies — or commissioners, as they preferred to be called — operated on Sunset Strip in West Hollywood, California under the name, Golden News Service. Hy Goldbaum, George Capri and Edward Cooke, all in their late 40s or early 50s at the time, specialized in assuming large bets that solo bookies couldn’t carry, and covering or placing them nationally with other bookmakers, which earned them the moniker, the bookie’s bookies.

The trio left California in 1949 and went to Las Vegas, Nevada, where they could ply their trade legally. Goldbaum went on to work at the Flamingo and the Stardust.

Two years later, the men became ensnared in a federal crackdown on bookmakers and were charged with income tax evasion and conspiracy, resulting from their having filed fraudulent returns. The government claimed the men together had done $6 million in business in California (about $70 million today!), but had only claimed income of $289,000 ($3.3 million today). Goldbaum also was charged individually for under-reporting his income.

They were convicted on 11 of 13 counts of tax evasion and conspiracy and sentenced to three years per count to be served concurrently.

“I’m convinced that a general conspiracy existed to defraud the laws of the United States, of Nevada and of California,” said the judge (Reno Evening Gazette, Feb. 5, 1952), but he also noted he imposed a lenient punishment because the defendants had been cooperative.

The U.S., however, wasn’t done with Goldbaum. The government filed a $1.6 million tax lien against him for past personal taxes it claimed he owed.

Time Served

After two years and five months at the McNeil Island Corrections Center, the three “commissioners” were released on $10,000 ($89,000 today) bail each, pending the outcome of their appeal to the U.S. Supreme Court. In 1955, it looked like they might catch a break when the justices ordered the lower federal court to reconsider its ruling.

But the court of appeals in California affirmed its earlier decision, making the case overall a win for the federal government.

Photo from freeimages.com: “Graphic of Abacus” by Cyndi Papia

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Louis Tom Dragna

1960-1967

Los Angeles mobsters, Louis Tom Dragna and John “The Bat” Battaglia, conversed in a hotel-casino cocktail lounge on the Las Vegas Strip one day in February 1960. But their visit was cut short when Nevada Gaming Control Board (NGCB) agents appeared with local police who arrested the two.

They charged them with vagrancy and threatened to arrest them the next time they appeared in Sin City (they soon after dropped the vagrancy charge).

Gaming authorities didn’t want either man in any Nevada casino, which they formalized via the “Black Book” two months after the undesirables’ arrest. The black book, whose creation had been in progress prior to the Dragna/Battaglia incident, contained the names of individuals casino operators had to keep out of their facilities or lose their gambling license.

The NGCB strictly enforced it, having those on the list kicked out of gambling clubs. Repeat offender Johnny Marshall (aka Marshall Caifano), triggerman for the Chicago syndicate with 18 arrests on his record between 1929 and 1951, found himself booted out several times.

“I agree with any measures necessary to keep the hoodlums out of Nevada,” said Nevada Governor Grant Sawyer. “The operators have a great responsibility to cooperate. We might as well serve notice on underworld characters right now that they are not welcome in Nevada and we aren’t going to have them here” (Nevada State Journal, Nov. 2, 1960).

Hashed Out In The Courts

That year, Dragna tested the constitutionality of the black book in the courts. He sought a federal court injunction against it and the members of both state gaming agencies. He claimed they caused Las Vegas hotels to refuse him entry, depriving him of his rights as a U.S. citizen.

Marshall also sued each gaming regulator along with Governor Sawyer for ($100 apiece) and the Desert Inn (for $150,000), whose staff had kicked him out.

In 1961, a U.S. District Court judge dismissed Dragna and Marshall’s suits on the grounds that gambling isn’t a protected federal civil right and the matter was a state one.

Marshall Pursues The Cause

Within the following year, Dragna dropped his appeal upon being sentenced to five years in prison for extorting the manager of a boxing champion.

As for Marshall’s case, the appellate judges remanded it to federal district court for trial. One justice suggested that “Nevada has as much right to keep suspect persons out of its casinos as Texas ranchers have to ban cattle with hoof and mouth disease” (Nevada State Journal, May 13, 1962).

Subsequently, Marshall lost in federal court and again appealed. In 1966, six years after gaming authorities distributed the black book, the U.S. Court of Appeals upheld its use. It noted that neither being put on the list nor being denied entry to casinos was unconstitutional.

The U.S. Supreme Court, in 1967, refused to hear the case, finally answering the civil rights question.

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Embassy Club interior

1936-Present

If it weren’t for gambler Ernest J. Primm’s nerve and fortitude, California’s nearly 90 card clubs wouldn’t exist today.

With a gambling license from the City of Gardena (in Los Angeles County), he opened a poker room there in 1936 — the Embassy Club. It was the first aboveground establishment of its kind since The Golden State’s anti-gambling legislation had been enacted in 1860.

Players, who competed against each other, not the house, each rented a seat for $1 ($17 today) and chips — which is how the business made money.

Primm viewed the enterprise as legal given the existing state and local gambling laws. California’s Anti-Gambling Act banned all banking* and percentage** games involving cards, dice or any other devices, along with 11 specific games. Non-banking poker wasn’t excluded.

Unlike Primm, law enforcement officials viewed even non-banking poker as illegal. Captain George “Ironman” Contreras, head of the Los Angeles County Sheriff’s vice squad, for instance, believed the commercialization of the game was wrong despite no regulations against it.

“I don’t object to draw poker in private homes, but I feel it is improper in clubs where the proprietors charge a fee for the tables,” he said (Los Angeles Times, Nov. 7, 1938).

Round One: Is Poker Legal?

A year after the Embassy Club debuted, four men — three players and one employee — were arrested, charged with illegal gambling and taken to trial. It resulted in California Attorney General Ulysses Webb, in 1938, reaffirming the Supreme Court decision from 41 years earlier that gambling doesn’t violate the state’s laws unless there’s a house percentage or banker for the games.

The judge acquitted all of the defendants due to insufficient evidence based on Webb’s ruling. Primm kept operating his establishment, and other similar clubs sprang up in the county.

Round Two: Another Test Case

Yet, despite his own ruling, Webb pursued closure of these poker palaces with the help of Southern California law enforcement groups.

“My opinion, right or wrong, doesn’t justify gambling,” Webb responded, reported the Los Angeles Times (Nov. 5, 1938.)

In November 1938, Webb ordered the shuttering of card rooms in Gardena, Hawthorne, Redondo Beach, Ocean Park and Long Beach — all in Los Angeles County. Many closed willingly. Sheriff’s squads stormed those that didn’t (Primm’s Embassy and two Hawthorne clubs), seized their equipment and padlocked the doors.

“Capt. Contreras said yesterday’s raids should result in a test case to determine if draw poker is legal in California. He said owners will have to seek Superior Court writs to regain their paraphernalia,” reported the Los Angeles Times (Nov. 7, 1938).

Another trial ensued, which involved Primm and other operators, who were victorious. The judge acquitted them and mandated their gambling equipment be returned.

Round Three: A Different Tack

Webb and his supporters, though, persisted in their anti-poker efforts. They next sought legal closure of the clubs for being public nuisances, targeting the Embassy Club for the precedent. Primm and his co-owners again were prohibited from conducting gambling on the property until the court ruling. At that hearing, the judge ruled on Webb’s side, determining the clubs met the definition of public nuisances and, thus, were subject to abatement proceedings.

“A house which is open to the public as a gaming house at which large numbers of persons congregate for the purpose of betting on a game is a public nuisance even though the game itself might be innocent and harmless,” he said (Los Angeles Times, Feb. 3, 1939).

He issued permanent injunctions against all of the poker parlors in Gardena and Hawthorne, forcing them to halt all activity. This remained in effect for two years.

Total Knockout: Poker Allowed

In the interim, Primm and his co-owners of Gardena’s Monterey Club filed an appeal, which the State District  Court of Appeals heard in 1941. The jurists determined that non-banking poker was legal!

“Neither playing draw poker or maintaining a place where it is played being an offense, it follows that the city of Gardena was authorized to license and regulate the operations of such pastime within its corporate limits,” Associate Justice Thomas P. White wrote in the opinion (Los Angeles Times, Nov. 29, 1941).

“Gambling is neither unlawful per se or a public nuisance per se in California. Playing at any game, even for money, is not in itself an offense at common law. The offense, if any, must be created by statute, and can only be punished as the statute directs,” White explained.

Finally allowed to operate hassle free, card clubs in Los Angeles County thrived for decades, particularly those in Gardena, which evolved into California’s mecca for such gambling between the 1940s and 1970s. At one point, more revenue from these clubs went to that city than any other in California, and its poker version called Gardena jackpots is named after the locale, where it was hugely popular during the same period.

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*Banking games = those in which bets are placed against a house, bank or dealer
**Percentage games = banking games with relatively disproportionate odds

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