Nelson Johnson - Boardwalk Empire - The Birth, High Times, and Corruption of Atlantic City

It was necessary to create several new companies, and Stafford Sands was retained as the partnership’s lawyer. For his services, Sands was paid $250,000 by Mary Carter Paint. The arrangement engineered by Stafford Sands called for Mary Carter Paint to purchase a 75 percent interest in Paradise Island for the sum of $12.5 million. The remaining 25 percent would be retained by Hartford. As for the all-important casino, it would be operated by Groves who would own four-ninths of the business, with Crosby’s company controlling the rest. Mary Carter Paint was in the gambling business.

The machinations with Mary Carter, Groves, and Hartford didn’t go unnoticed by the United States Department of Justice. The federal government had dispatched a team of investigators to the Bahamas looking for investments in casino gambling by American organized crime families. Justice Department attorney Robert Peloquin—who later joined forces with Intertel, a security firm owned by Resorts International—reported to the government on the casino operation in which Mary Carter Paint was involved. In a memorandum that would later prove embarrassing, Peloquin detailed the arrangements made between the parties and concluded, “The atmosphere seems ripe for a Lansky skim.”

The Mary Carter Paint-Wallace Groves partnership didn’t last long. In early 1967 articles published in the Saturday Evening Post and Life Magazine exposed the corruption in the Bahamas casino licensing procedures. The articles focused on the criminal associations of people involved in the Bahamian casino industry, in particular Wallace Groves. Crosby was worried by the publicity and immediately obtained approval from the Bahamian government to purchase Grove’s interest. While Groves was gone, the casino staff he had hired, several with links to Meyer Lansky, remained in place running things.

As the paint business continued to dwindle and the gambling casino on Paradise Island prospered, Crosby finally left Mary Carter Paint behind. In 1968 the entire paint operation was sold and Resorts International was born. It wasn’t long before Crosby began looking elsewhere to establish new resort hotels and to expand his gambling operation. Inquiries were made around the world without success, and for the next several years Resorts International was confined to the Bahamas. But when the second gambling referendum allowing private investors surfaced in New Jersey, Crosby took a look at Atlantic City.

The city that Jim Crosby found waiting for him in the winter of 1976 was a bleak place, but the locals still knew how to roll out the carpet. When Crosby and his key associates toured Atlantic City for the first time, they were welcomed like conquering heroes. Arrangements were made for the contingent from the Bahamas to ride in a caravan of limousines escorted by local police. No one was sure why the locals were making such a fuss. What mattered was that the resort had an out-of-towner with money.

The squalor and desolation that greeted Crosby was a sobering experience. Within sight of the famed Boardwalk, there were entire city blocks that had been leveled with no signs of rebuilding—acres and acres of trash and rubble. There were hundreds of burned-out buildings and scores of rundown boardinghouses, occupied by poor, frightened old people. The Boardwalk hotels, which were of prime interest to Crosby, resembled huge abandoned caverns. None of them had turned a profit in years. For most of them, there wasn’t even enough money to knock them down. A person had to be either a visionary or a fool to see an investment prospect in Atlantic City. Crosby may have been a little of each. He decided Atlantic City would be the place for Resorts’ first expansion. Mary Carter Paint was coming back to New Jersey.

Characteristic of moves he made in the past, Crosby didn’t dabble when it came to sinking down roots in Atlantic City. He jumped in feet first. Within a short time, Resorts International signed a contract to purchase the Chalfonte-Haddon Hall, an aging, but still salvageable, 1,000-room hotel on the Boardwalk. Crosby’s company took title to the property prior to the gambling referendum and paid a purchase price of approximately $7 million. They also took an option on a 55-acre Boardwalk-front tract that had been condemned by the city. More important than its investments was Resorts International’s role in the 1976 campaign; C.R.A.C. would never have gotten off the ground but for upfront money contributed by Crosby’s firm.

Immediately following the referendum victory, Resorts International moved to secure its position in Trenton. Crosby hired the right people to guarantee he would be plugged into the state house as it began working on the legislation to regulate gambling. Three of the attorneys representing his interests in Trenton were Patrick McGahn, brother of State Senator Joseph McGahn; Marvin Perskie, uncle of Assemblyman Steven Perskie; and Joel Sterns, chief legal counsel to former Governor Richard Hughes and counsel to “Democrats for Byrne” in Brendan Byrne’s successful gubernatorial campaign.

By the time the legislature had finished its work, Crosby had little to complain about. Worries over tight controls on casino credit, complimentary liquor, hours, and minimum bets never became a reality. Each of these points was important to casino operators. They understood the psychology of gambling and feared tight controls would hurt the house’s take. When the Casino Control Act became law in June 1977, credit for gamblers was easy, drinks for players were permitted free of charge, casinos could operate 18 hours per day on weekdays and 20 hours on weekends, and minimum bets would be dealt with by the newly created Casino Control Commission through regulations that would benefit the casino industry.

There were also proposals talked about in the legislature, which Resorts International fought from becoming law. One early suggestion was that no casino should be permitted to open until a minimum of three casinos were ready for operation. Crosby’s lobbyists made sure this never saw the light of day. However short-lived its monopoly might be, Resorts International wanted to reap the profits from being the first casino to open in Atlantic City. Another provision originally discussed, but left out of the Casino Control Act, was language intended to prevent an Atlantic City casino from maintaining another operation outside of New Jersey. Resorts was permitted to continue with its Paradise Island casino, despite its questionable associations in the Bahamas.

A final issue vital to Resorts International was permission to use an existing hotel, the Chalfonte-Haddon Hall, as the site for a casino, rather than being required to construct a new facility. There were still those who believed the purpose of legalizing gambling was to spur the construction of new hotel facilities, not the renovation of old ones. But in the end, no one, not the legislature, the governor, nor the critics of casino gambling could overlook Resorts’ willingness to gamble on Atlantic City prior to the ’76 referendum. Resorts International would be open long before anyone else. But what Jim Crosby hadn’t bargained for was New Jersey’s bureaucracy.

The investigative agency, the Division of Gaming Enforcement, was created to screen casino applicants and report to the regulatory agency, the Casino Control Commission. From its inception, the Division was handicapped by internal disputes, questions about the competence of its staff, and friction between the Division and the Commission. Most of the investigators hired by the Division were former state troopers who didn’t have the background needed to pursue the questions raised by Crosby and Resorts’ financial practices. The skills needed weren’t those of a police officer, but rather the experience of an FBI or IRS agent. Working with these police officers was a collection of accountants, lawyers, and administrative personnel all equally inexperienced in the intricacies of a gambling operation. As the months wore on and the Division’s bureaucrats sank their teeth into the application process, it seemed their review would go on forever.