1961

It was hot inside and outside Harolds Club in Reno, Nevada on a Wednesday afternoon in the early summer of 1961.

Indoors, people gathered around to watch high-roller Lonnie Joe Chadwick on a winning streak. In his two-day spree playing 21, he already had cashed in about $30,000 to $50,000 ($239,000 to $398,000 today) and still had numerous $100 chips in front of him. He continued to bet the $500 limit at each of the gaming table’s seven spots.

Suddenly, Internal Revenue Service (IRS) agents appeared, interrupted Chadwick’s gambling rush and confiscated his more than $18,000 in chips!

Previously, they’d informed him that the federal government had “closed out his taxable year as of that time and the chips on the table were under levy for payment of taxes for the period” (Nevada State Journal, June 10, 1961) and had given him three-and-a-half months to file a return — which he hadn’t done.

“I’ll sue,” Chadwick said.

Although unusual, IRS representatives had made this move in the past in a Las Vegas casino, which was legal. A federal law allowed the Treasury department to declare the end to a person’s tax year when it appears they may not pay their income taxes otherwise. The agency rarely invoked the law and only in special cases. It’s unclear why it had done so with Chadwick; the law banned agents from disclosing reasons to the public. The IRS, however, had notified Chadwick beforehand of the assessment against him.

Business Repercussions?

The incident sparked some casino owners to wonder:

• Can the IRS truly legally take such action?

• Do we have to honor the chips the IRS seizes?

• Could this IRS practice negatively affect my business?

• Will the high rollers gamble underground as a result?

• Will it reduce the amount in gambling taxes going to the city, state and federal governments?

“We want to allay any fears of the clubs that this is any sort of harassment,” said Dalmon Davis, the IRS director for Nevada (Nevada State Journal, June 10, 1961). “This is an isolated incident, but there is no assurance it will not occur again if the situation warrants.”

The IRS gave Chadwick another three months to file a return, which he did only minutes before the deadline.

Sources

Illustration from pond5.com: “Uncle Sam and the USA Flag” by Batareykin

1955-1956

At 9:15 a.m. on Friday, November 11, 1955, eight U.S. IRS agents entered the Club Cal-Neva in Reno, Nevada, demanding payment of $65,000 (about $600,000 today) in overdue withholding and excise taxes. When the money couldn’t be proffered, the feds wired shut the casino doors and emptied all of the tables, cashier cages and slot machines of their money. They collected about $50,000 ($463,000 today), which they applied toward the debt.

The week before, the Internal Revenue Service had seized about $23,000 ($213,000) from Club Cal-Neva Inc.’s bank accounts to satisfy a total tax burden of $88,500 ($818,000). Subsequently, the corporation filed for bankruptcy.

The entity consisted of front man Sanford Adler,* Louis Mayberg, Morris Brodsky and Charles Resnick, who’d purchased the former Club Fortune (Fordonia Building) in 1947 from James “Jim” McKay and Jack Sullivan for $250,000 ($2.8 million) and then had spent $500,000 ($5.5 million) on renovating it. They’d opened it on Nov. 20, 1948 as the Club Cal-Neva, where they’d offered 21, craps, roulette, keno and slot machines.

Following the Chapter 11 filing, James “Jim” Contratto and five other men acquired the building, physical assets and lease from Club Cal-Neva Inc. Contratto previously had owned a gambling license for the Colony and Palace Clubs in Reno. His new partners were Robert I. Franks and Al Rogell of Beverly Hills, California; Sam Levy of Douglas, Arizona; John Callas of Huntington, Park, California; and Caspar Van Citter of Reno, Nevada. The group reopened the gambling house, keeping the name Club Cal-Neva, on December 2, 1955. The casino boasted four 21 games, one craps game, one roulette wheel and one keno game along with 150 slot machines.

Replay Down South

Just over a year later, on Friday, November 30, 1956, at 8:30 a.m., 10 federal revenue agents entered the Silver Palace in Las Vegas. One announced over the loudspeaker that the 20 or so customers should leave as the casino’s assets were about to be seized. The crew padlocked the doors and confiscated all of the cash from the premises, as the gambling club owners were roughly $77,000 ($638,000) in arrears on payroll taxes.

The Spinning Wheel Corporation had invested $1.5 million ($13.7 million today) into the Silver Palace and had opened it only six months earlier, with 160 slot machines, two 21 games, two craps games and a roulette wheel. Earl Snyder, a Monterey Park, California contractor, held the majority interest. Marion B. Hicks, Joe Wells and Clifford Jones each had a gambling license for the casino.

In January 1957, IRS agents auctioned off the Silver Palace’s assets, proceeds of which reduced the casino’s tax debt to $38,500 ($340,000). The $87,700 worth of furnishings only brought in $8,745. The Westerner bought the liquor for $6,100. The Saddle Club purchased the office equipment for $1,925.

Subsequently, the Spinning Wheel Corp. put up the building for lease.

*In addition to the Club Cal-Neva, Sanford Adler owned/co-owned several casinos at various times, including the Flamingo in Las Vegas and the Tahoe Biltmore in Crystal Bay at Lake Tahoe.

Sources