Central States, Southeast, Southwest Areas Pension Fund
Once nicknamed "the mob's bank," the Teamsters Union's Central States, Southeast, Southwest Areas Pension Fund, based in Chicago, played a major—and infamous—role in the rapid expansion of the Las Vegas hotel-casino industry following World War II. From 1958 to 1977, the pension fund's almost $250 million worth of low-interest loans to casino developers, many with ties to organized crime, brought unprecedented growth to the Las Vegas Strip and the city's downtown. In return, the crime groups reaped untold millions in secretly skimmed profits.
While he was vice president of the Teamsters Union in 1955, forty-two-year-old James Riddle "Jimmy" Hoffa met with businesses employing the union's truck drivers and warehouse workers from the Midwest and Southern regions. They negotiated the Teamsters' first centralized pension contract. The union assessed each employee a monthly fee of $2 for the pension fund, which raised $800,000 a month, or $10 million that first year. The fees were deposited into bank accounts meant to pay union retirees. At the time, Hoffa was using Chicago organized crime figure Paul "Red" Dorfman to help him create union locals with new members devoted to Hoffa. He considered the pension fund as a bank to be used to invest in real estate loans, often charging only six percent interest to his friends, allies, and mob associates. Hoffa charged kickbacks, usually a "finders fee" of ten percent of the loan amount.
Hoffa's first two loans in Las Vegas came in 1958, including one for $4 million to the Dunes Hotel, run by James "Jake" Gottlieb (a recipient of Teamster pension fund loans in Chicago) and Major A. Riddle. Another $250,000 went to Las Vegas Sun newspaper publisher Hank Greenspun to build the Paradise Valley Golf Course (now the Las Vegas National Golf Club). Greenspun later received a second loan of $250,000.
The next year, the fund lent Hoffa's old friend, Morris "Moe" Dalitz, $1 million to build Sunrise Hospital, a private medical center set up for hotel and other union workers. Dalitz was a former Cleveland mobster and bootlegger who had operated the Desert Inn hotel-casino since 1950. The fund soon backed loans to Dalitz for hotel-casinos he controlled: the Stardust ($6 million) in 1960 and Fremont ($4 million) in 1961.
Additional loans from the fund flowed to the Desert Inn and a list of new hotel-casino projects on or near the Las Vegas Strip: Caesars Palace, the Landmark, the Aladdin, Circus Circus, and the Four Queens in downtown Las Vegas. Other loans were approved for casinos in Lake Tahoe and Reno as well as a lakeside development in Overton, Nevada.
Underworld figures earned millions by arranging for conspirators inside the casinos to "skim," or remove, untraceable cash from gaming tables and slot machines, then use curriers to distribute the currency to hidden investors. Thus, these casinos underreported the actual income taken from gamblers in order to hide the extent of their profits from local, state, and federal governments, and to avoid paying taxes.
In 1963, the pension fund held assets worth $213 million, nearly two-thirds of it in real estate loans across the country, mainly in hotels, shopping centers, and commercial buildings. Hoffa personally made the arrangements for loans to Dalitz, and later to new Dunes hotel operator Morris Shenker, with input from labor racketeers Allen Dorfman in Chicago and Bill Presser from Cleveland.
The fund's largest casino loan in Las Vegas in the 1960s went to Caesars Palace operator Jay Sarno, who received $20.4 million from 1965 to 1972. Federal investigators alleged that Sarno–who opened Caesars Palace in 1966 and Circus Circus in 1968–served as the "front man" for organized crime leaders from the Midwest and Northeast who in 1965 conferred in Palm Springs, Calif., to decide how to divide the cash to be skimmed from Caesars.
As Hoffa was about to serve a prison sentence for jury tampering in 1967, he secretly assigned control of the Teamster fund to Allen Dorfman, who ran it with Teamster union official Roy Williams. By 1974, the fund had approved $1 billion worth of real estate loans, rivaling many American banks. Kansas City organized crime leader Nick Civella and Cleveland mob associate Milton Rockman had each gained influence with some of the fund's trustees who approved new loans.
By far the fattest loan to a Las Vegas hotel operator came in 1974, when Dorfman—at the behest of mob boss Frank Balistrieri of Milwaukee and Civella—endorsed thirty-one-year-old California investor Allen Glick's effort to borrow $62.7 million to buy the Stardust and Fremont hotels for Glick's Argent Corporation. Under pressure from the crime bosses, Glick installed Frank "Lefty" Rosenthal and Carl Thomas into management positions with the Argent casinos. Rosenthal and Thomas oversaw a covert cash skimming operation for the mob leaders.
In 1979, Nevada gaming control authorities found evidence that $7 million had been skimmed at the Stardust. The state fined Glick, who insisted that he knew nothing about the skimming. In 1983, a federal grand jury in Kansas City indicted fifteen organized crime figures on charges related to skimming at the Argent casinos, and in 1984, eleven of them received long prison terms.
While Hoffa was in prison from 1967 to 1971, Frank Fitzsimmons took over as Teamster union president. In 1971, President Richard Nixon pardoned Hoffa and ordered him released from prison. Hoffa disappeared in 1975, the suspected murder victim of rival underworld players.
By 1977, the Teamster pension fund started by Hoffa had lent $240 million to Las Vegas hotels, equal to nearly a quarter of its total loans. That year, amid charges of organized crime control, the U.S. government forced the union to cede oversight of the fund to outside regulators. The union would lend no more money to Nevada casinos. Nevertheless, the fund proved that a significant amount of the expansion and success of the Las Vegas casino industry in the 1950s, 1960s, and 1970s resulted from major financing provided by a source closely associated with organized crime.