Boardwalk Empire: The Birth, High Times And Corruption of Atlantic City (41 page)

Within a short time after his election, Matthews’ political ego burst its seams. He behaved as if there were no limits to his power. Never known for being gracious, Matthews rejected an offer from his opponent, James Usry, to pledge his cooperation publicly by participating in the mayoral inaugural. Matthews refused to share the limelight. The result was another bitter legal contest charging election fraud. Matthews won again, but the lengthy trial divided the community further. It generated daily headlines, but the trial made it impossible for him to work with city council, a majority of whom were Black.

Matthews relished the headlines generated by political infighting and cultivated his image as the maverick—a self-styled champion of the underdog. But beneath this veneer was a person too immature to compromise and so paranoid he was incapable of making a lasting alliance. There was no “inner circle” or continuum of personalities whom he relied on from one campaign to another. He remained aloof from the people who supported him. By the time he was elected mayor, Matthews had used up and discarded several valuable advisors who could have kept him out of trouble. Once in office, he followed his instincts, which led to his ruin.

As a former ally observed, “Mike Matthews was a creep. His
independence
was really paranoia. He never trusted anyone in politics and nearly everyone who trusted him got screwed sooner or later.” A supporter of social programs for senior citizens, Matthews had charmed thousands of aging voters. They were the mainstay in one election after another, with many of them showing up to work at his campaign headquarters. While the senior citizens licked stamps and made phone calls, he might be found in a back room receiving oral sex from a political groupie young enough to be his daughter.

As mayor, Matthews featured himself as a type of social lion in casino land. He identified with the celebrities who appeared at the casinos and sought them out to pose with him for photos he displayed in his office, and when they were willing, which wasn’t often, for a dinner date or a golf outing. He wanted to be the person everyone invited to the party. Had he been honest and kept to the duties of his job, Matthews had the ability to be a capable mayor. Instead, the number one thing on his agenda was his yearning to become a celebrity. People who knew him think that’s half the reason he fought so hard to become mayor. “Michael loved the glitter of the casinos and once gambling was legalized, he wanted to be top dog in casino city. He was like the firefly who couldn’t resist the flame.”

The affair honoring Tony Torcasio was just the type of gathering Matthews was sure to attend. Seated at the head table with the likes of Joe DiMaggio, Mickey Mantle, and Joe Theisman, throwing barbs back at Don Rickles, it was the sort of evening Matthews lived for. But the FBI disrupted the mayor’s plans that night. Before the Torcasio dinner was over, Mike Matthews was finished as a politician, having been written off by everyone in attendance. In the weeks that followed, the mayor gained notoriety on a scale to match his ego.

An FBI agent, who didn’t even look Italian, came to town posing as a Mafioso and wearing a wire. Within a few short weeks he worked his way into Matthews’ confidence and taped hours of incriminating testimony. The transcript reads like something out of a pulp fiction crime story. Never one for understatement, the mayor ran off at the mouth over dinner at a local Chinese restaurant, The Peking Duck, and gave the Feds all they needed. He buried himself when he accepted a $10,000 bribe in marked bills from the undercover agent. At the time of his indictment a full-length photo of the mayor with handcuffs and shackled ankles appeared in newspapers across the country. Mike Matthews had finally received the celebrity status he craved.

The record presented to the Court revealed an unscrupulous politician who all but put a “For Sale” sign on his office door. As Judge Harold Ackerman stated at the time of sentencing Matthews in December 1984, “You were on the take. Anyone with an eighth grade education could reach that conclusion.” Rather than gracefully resign as mayor, he was removed from office by a recall election. In little more than two years after taking office, Michael Matthews was on his way to federal prison. By Atlantic City’s standards, Michael Matthews’ biggest sin wasn’t that he stole, but that he was so clumsy at doing it. Matthews was worse than corrupt—he was inept.

Not everyone was as inept as Mike Matthews. After the adoption of gambling, the real Mafioso came to town, not just cops posing as them. Given the town’s history with gambling and the way things were in the past, there’s little wonder Atlantic City’s new casino industry attracted the mob and its friends. This time around the reception wasn’t so friendly. Brendan Byrne and leaders of the state legislature had meant what they said during the 1976 campaign. The mob wasn’t welcomed. Resorts International got a break, but would-be casino operators who followed them were scrutinized much closer. An example is the Perlmans.

Clifford and Stuart Perlman were no strangers to Atlantic City. Natives of Philadelphia, they knew the resort wasn’t the “World’s Playground,” but rather the place where Philadelphians went to let it all hang out. The Perlmans got their first taste of business on the Boardwalk selling junk to visitors. A couple of decades later, they returned, lured by casino gambling. During the intervening years they had made a fortune in Las Vegas. Upon their return to Atlantic City they were hailed as marketing geniuses. They set the standard for a first-class casino resort, with Caesar’s Palace the best-known casino in the world. They were leaders in the casino industry and viewed as natural players in the new Atlantic City.

Shortly after the adoption of the ’76 referendum the Perlmans began looking seriously at Atlantic City. Before Resorts International opened its doors, Caesar’s signed a deal to lease the Howard Johnson’s Regency, a leading local hotel. That a glitzed-up chain motor lodge was one of the city’s better hotels was proof of how badly the resort needed casino gambling. The Perlmans let the world know the Boardwalk Regency was just the beginning—a project that would allow them to open as quickly as possible. After the Boardwalk Regency started raking in cash, the Perlmans planned to reproduce their Las Vegas magic and build a Caesar’s Palace in Atlantic City. Caesar’s and the Perlmans were the type of casino operators Atlantic City wanted. But they had another side, one that had snuggled up to the mob for years. It began with hot dogs.

In 1966, Clifford convinced Stuart to invest nearly every penny they had in a Las Vegas restaurant called Lum’s. Stuart hoped it would be a fancy place but found it was a small storefront. Unlike the nearby Forge Restaurant, which was one of Meyer Lansky’s favorite spots, Lum’s was a tiny place that specialized in hot dogs. These weren’t your average wieners though. They were boiled in beer and served with sherry-flavored sauerkraut. But Stuart didn’t share his brother’s taste. “We went and bought a couple of hot dogs and then we went outside because I didn’t want to eat in there.” The Perlmans would later claim they knew nothing of the Forge Restaurant’s infamous reputation and its notorious patron who held court there, but events convinced people otherwise.

In 1969, Clifford led his brother into another deal, more grand than hot dogs. It was a major turning point in their careers together. The Perlmans, through Lum’s, made an offer to buy Caesar’s Palace, one of the swankiest casinos in Las Vegas, but widely known to have been built and owned by the mob. When the Perlmans took over, all they changed was the locks, leaving most of the management team in place. Caesar’s managers had a strong reputation around town, and the Perlmans saw no need to check into their backgrounds. The Caesar’s team included Jerome Zarowitz as director of casino operations. The Perlmans knew Zarowitz had a criminal record and at some point learned he had participated in the so-called Little Appalachia meeting of mob figures in Palm Springs in 1965. While the Nevada gaming regulators were concerned about Zarowitz’s suitability to run a casino, they never required him to be licensed. The Perlmans kept Zarowitz on the payroll from September 1969 through the following April. Zarowitz’s name didn’t appear as an owner, but when the Perlmans bought Caesar’s Palace, $3.5 million of the $60 million purchase price went to him.

Shortly after the purchase of Caesar’s Palace, Alvin Malnik, who had ties to the mob, approached Melvin Chasens—then president of the new Caesar’s World, Inc., nee Lum’s—with an offer to sell Sky Lake North, a country club and condominium development in Dade County, Florida. The offer was rejected, but Malnik returned less than a year later. This time he made the deal too good to pass up: no money down, pay for the purchase from the sale of the condominiums, no payments on a second mortgage for three years, and interest only on a first mortgage for two years. During negotiations, Clifford Perlman and other Caesar’s officials learned more about Malnik and his partner, Samuel Cohen. A book about mob financier Meyer Lansky identified Malnik as a close associate. As for Cohen, he had a criminal record for violation of the Commodity Exchange Act. But that didn’t prevent Caesar’s from dealing with Malnik. The Perlmans wanted Sky Lake and were willing to go ahead despite Malnik’s and Cohen’s reputations.

At the Perlmans’ prompting, Caesar’s directors approved the Sky Lake deal in July 1971 without being told that Cohen had been indicted four months earlier in a massive skimming operation at the Flamingo Casino. The Flamingo was directly across the street from Caesar’s Palace and the case drew intense publicity. The Perlmans knew Cohen was under indictment but never told Caesar’s directors, nor did they tell them that a co-defendant with Cohen was none other than Meyer Lansky. “Had this fact been disclosed at the meeting, it might well have brought the Lansky connection into sharper focus. The media allegations about Mr. Malnik and Mr. Cohen, then thought to be baseless, might not have been so readily dismissed.” Suggestions by Caesar’s legal counsel to seek advice from the U.S. Justice Department before dealing with Malnik and Cohen were also rejected. With the purchase of Sky Lake, Clifford and Stuart became increasingly involved with the mob. They already were in debt to the Teamsters Pension Fund—notoriously corrupt and controlled by the mob—from Lum’s purchase of Caesar’s. When they bought Sky Lake, they went further into debt with the same pension fund that had held the underlying mortgage for Malnik and Cohen.

The Perlmans were warned by Nevada regulators about dealing with Malnik and Cohen following a 1972 deal with Malnik and two of Cohen’s sons for a Florida condominium project. A second warning came in 1975, prior to a deal with sons of the two men. This time, in order to raise cash, the Perlmans sold their honeymoon resorts in Pennsylvania’s Pocono Mountains to Malnik and Samuel Cohen’s sons and then leased the property back from the pair. In addition to warnings from Nevada gaming regulators, the company’s security chief told the Perlmans that Malnik was tied to the mob. He also expressed concern that a number of Teamsters Union officials with ties to the mob had received free memberships at the Sky Lake Country Club.

This was the résumé the Perlmans brought with them when they came to Atlantic City. It proved to be fatal. At the time Caesar’s received its temporary license, the Division of Gaming forced the Perlmans to take a leave of absence pending a hearing before the Casino Control Commission. In a report to the commission, the Division concluded, “As long as it maintains a relationship with Alvin Malnik and Samuel Cohen, we do not consider Caesar’s World suitable for licensure.” When the Boardwalk Regency opened its doors in June 1979, Caesar’s agreed to “make its best efforts to terminate all of its existing relationships with Alvin I. Malnik, Samuel E. Cohen, or members of their existing families.” But it wasn’t until 16 months later, October 1980, after the commission had completed its hearing on the firm’s application, that Caesar’s finally distanced itself from Malnik and Cohen.

Unable to buy out Malnik and Cohen, Caesar’s agreed to establish trusts to take over the firm’s leases in the Pocono Mountains honeymoon resorts and its Florida country club. The trusts purchased bonds to generate cash to make the lease payments. Then there would be no direct dealings between Caesar’s and Malnik and the Cohens. The company also agreed to prepay the balance of a $4.8 million mortgage it owed to Malnik and Cohen. But it was too little, too late. Less than a week later, the commission ruled the Perlman brothers were unfit to be licensed. The commissioners said their repeated dealings with Malnik and Cohen made them fear “these dealings may not have been isolated transactions.” The commission found that “while it may be true that Mr. Malnik and Mr. Cohen were not literally in control of the casino, their financial arrangements provided them with an obvious opportunity to exercise economic leverage against Caesar’s World … Thus, Mr. (Clifford) Perlman in a very real sense delivered his company into the hands of Mr. Malnik, Samuel Cohen, and Mr. Cohen’s sons.”

Both Perlmans were denied licenses and forced to leave the company. Their appeal to the State Supreme Court was unsuccessful despite representation by Irving Younger, one of America’s finest legal minds. While they were relicensed in Nevada and obtained a federal license to run an airline, Clifford and Stuart regretted their return to Atlantic City. After all the publicity surrounding their license denial, they could never escape the stigma attached from their dealings with the mob. And they weren’t alone. The same fate befell William T. O’Donnell, president and chairman of Bally Manufacturing Corporation.

The Division of Gaming believed O’Donnell, like the Perlmans, had too many ties to the mob. But this time, the ties led to New Jersey. Bally Manufacturing Corporation was a giant in the slot machine, pinball, and jukebox business. It dominated the slot market, having a stranglehold on a number of Nevada casinos. While the slot machine business was profitable, O’Donnell tired of making machines for others. He wanted slot machines of his own and decided Atlantic City was the place to be. He entered the market by acquiring a long-term lease for an aging hotel on the Boardwalk.