Book Review: Sally Denton and Roger Morris, “The Money and the Power” 

Following the destruction of the Nord Stream pipelines, Diana Johnstone wrote about the still-whodunit sabotage:

Imperialist wars are waged to conquer lands, peoples, territories.  Gangster wars are waged to remove competitors.  In gangster wars you issue an obscure warning, then you smash the windows or burn the place down.

Gangster war is what you wage when you already are the boss and won’t let any outsider muscle in on your territory.  For the dons in Washington, the territory can be just about everywhere, but its core is occupied Europe.

That description seems apt – not just for the current omerta in place over the Nord Stream but for current US foreign policy in general. So as I was recently looking to glean a little more insight on the US gangster state I dusted off “The Money and the Power: The Making of Las Vegas and Its Hold on America.” This 2001 book not only tells the story of Las Vegas, but also of how organized crime fused with the state in the decades after World War Two.

Published at the beginning of 2001, there might not be a whole lot new here for readers familiar with the subject matter, but it does provide an overview of how the state and organized crime morphed into one the 1945-2001 period before the madness of the post-9/11 years. And at least from my perspective, being more familiar with the events of the post-9/11 years, this proved a valuable read. It helped explain what set the table for so much of the corporate and state gangsterism  – both domestically and abroad – of the past two decades.

The “Money and the Power” is authored by the husband and wife team of Sally Denton and Roger Morris.

Denton is a Nevada-based investigative journalist. She has a blurb from former Senate majority leader Harry Reid displayed prominently on her website, which is a bit concerning considering the book largely omits Reid despite his long rise in Nevada politics before becoming wealthy enough while in national office to make the Ritz-Carlton his DC residence and the fact he retired shortly after he was attacked by some exercise equipment.

Morris, with a doctorate in government from Harvard, started as a junior foreign service officer in 1966. He quickly rose onto the National Security Council staff under Lyndon Johnson and stayed on under Nixon until resigning after the start of the Cambodian Campaign.

Their argument is as follows:

Headquarters of a trillion-dollar industry commanding unparalleled influence, the end-of-century city is more than ever the wellspring of a corrupt, corrupting political economy, if not the seat of some postmodern Syndicate itself. In an America so widely dominated by corporate and individual wealth, the Strip’s once disreputable Mob ethic of exploitation and greed has become in large measure a national ethic. In a new millennium, radiant Las Vegas stands at the zenith of its power, in many ways an unacknowledged shadow capital…

The city has been the quintessential crossroads and end result of the now furtive, now open collusion of government, business, and criminal commerce that has become – on so much unpalatable but undeniable evidence – a governing force in the American system.”

Denton and Morris’ tale begins with Las Vegas as nothing more than a dusty intersection in the middle of the desert at a time when the state was still for the most part in opposition to runaway vice. In Vegas’ 1930s beginnings it was an organized crime outpost for money laundering and an escape for Hoover Dam construction workers. Local and state politics were largely in the pocket of organized crime, but still most contained to Nevada. While the US always has always had organized crime and corruption, it was for the most part local or regional and not in cahoots with the national state.

With World War Two, that begins to change.

The authors highlight the moment when US Naval Intelligence and the Office of Strategic Services (OSS) struck a deal with Meyer Lansky, the man who put the ‘organized’ in organized crime, to suppress leftist unions on New York docks during the war by any means necessary. It was aptly called Operation Underworld.

Now the government had been hiring thugs for a long time, but this collaboration would grow into something more to the point the two sides are one and the same. As Denton and Morris describe it, this was ‘the start of what would be a growing covert alliance with organized crime, beginning during the war and becoming all but institutionalized afterward, a “continuing mode of operation,” as one scholar called it later.’

The war-time measures against leftists did not end with the war. The CIA and FBI entered into an alliance with organized crime against Communists and Leftists:

The collaboration commonly gave the criminals de facto immunity from government prosecution in return for informing or, especially, for aid in suppressing leftists at home and abroad, and in supporting American corporate interests and friendly foreign regimes.

What’s interesting is that these vignettes of Cold War cooperation are often told from the government perspective with the belief that the state is using organized crime as a necessary means to ends. But the flip side of that dynamic is what made Lansky, a driving force behind Las Vegas, so successful:

He did not, like most of his associates, merely bribe politicians or policemen, but worked a more subtle, lasting venality, bringing them in as partners.

“The Money and the Power” spends plenty of time on well-known figures like Lansky, Bugsy Siegel, Lucky Luciano, and Howard Hughes – who was simultaneously the perfect Vegas front man and its biggest mark:

When he died on an airplane flying between Acapulco and Houston in 1976, the once handsome rake and dashing pilot weighed 93 pounds, was covered with bedsores, had a bleeding tumor on his head, hypodermic needles broken off in his arms, and a lethal amount of codeine in his dehydrated body. At the time of his death he was earning $1.7 million a day from U.S. government contracts, mostly from the CIA, the majority of which were awarded without competitive bids, and this was only a fraction of the public money that in effect financed his many-faceted deliverance and patronage of organized crime and his other beneficiaries in Las Vegas.

The book, to its credit, spends equal time on the lesser known spooks at the nexus of crime, business and government who played roles in Vegas and were crucial to the melding of state and organized crime, such as:

• Edward Pierpont Morgan, “a former FBI agent who had been counsel to Senate committees, corporations, unions, and foreign governments. Though known for his advocacy of civil liberties, Morgan also had intimate, often covert, ties to law enforcement and intelligence agencies.”
• Robert Maheu, another former FBI agent. ‘Since the fifties, Maheu’s private “security” agency had served as a front, or “cut-out operation,” as Maheu called it, for some of the most repugnant covert actions by the CIA and multinational corporations. Maheu’s firm was involved in providing prostitutes for CIA clients and making pornographic films to embarrass the agency’s targets.’
• George White. the man who helped steer the direction of the Kefauver hearings and made sure it remained in the dark on the burgeoning relationship between the state and organized crime. He joined the OSS during WWII, was a ranking officer in Operation Underworld, took over the FBN Chicago office after the war and recruited several double agents, including Jack Ruby. He was soon in Rome organizing bribes for Italian politicians and planning and carrying out lethal operations. He was an enthusiastic backer of the CIA experimenting with drugs on unwitting participants, going so far as to provide the narcotics, hire prostitutes to lure the subjects, and watch through a two-way mirror. ‘“Where else could a red-blooded American boy lie, kill, cheat, steal, rape and pillage,” White later wrote to a writer’s question, “with the sanction and blessing of the All-Highest?”’

And so the state – whether through corruption or common interests – increasingly becomes indistinguishable from organized crime. They use similar tactics, pass through a revolving door, and exchange favors.

Was one of those favors helping to bring organized crime finances in from the cold?

Organized Crime Goes Mainstream

Despite assisting with dirty tasks for the government, organized crime and its outfits in Las Vegas were still facing barriers to legitimate financing. That changed after WWII.

According to Denton and Morris, the first bank to get in on the lucrative action in Las Vegas was Valley National Bank of Phoenix. It was ‘the principal bank of the mercantile and land development oligarchy of what came to be called “the Phoenix Forty,” including construction magnate Del Webb and especially the politically prominent Goldwater family…”

The bank loaned money to the Flamingo in 1946-47 – “the first significant capitalizing of the Syndicate by prominent American banks.”

Also participating in that loan was Walter Cosgriff’s Salt Lake City-based Continental bank. Cosgriff became the yeoman behind “character loans,” a kind of 1950s-60s ESG-esque smokescreen used to sell lending to Las Vegas casinos and their backers. In the 50s there were only a handful of banks in Nevada and entry was tightly guarded. Walter Cosgriff had a connection, however, and saw the potential:

A new financial institution in booming Las Vegas could do on the spot what no other local bank had ever been bold enough to do: loan to the fastest-growing, most profitable industry in the West. It could discreetly funnel and screen money from other banks, companies, or interests that either had to or wanted to conceal their investments in Las Vegas, people who wanted the profit but not the publicity for financing the city and all it represented.

The Bank of Las Vegas opened in 1954 and a young Continental officer was surprisingly put in charge. The 34-year-old Edward Parry Thomas spent WWII in a mountain unit of ski paratroopers and spent time in intelligence interrogating “important” German prisoners. After the war he got a B.A. in banking and finance and immediately went to work for Continental bank in 1948. Six years later he was the point man for all the investors that wanted to capitalize on organized crime’s growth potential:

…it was a revolutionary moment. Though local banks gladly took the growing deposits from gambling just as from Boulder Dam, the magnesium plant, or any other boon, there had been no question of legitimate lending or finance for the city’s unsavory industry.

Just from a business standpoint, lending to organized crime seemed a risky venture. There was the absence of bankable collateral, it was impossible to know the true state of their books, and there was the possibility they might just refuse to pay and resort to violence. The Bank of Las Vegas pushed ahead, nonetheless:

 …Cosgriff, Thomas, and the forces behind them swept into the city with a radical new rationalization, treating gambling like any other western boom enterprise entitled to the expansive finance…

If there was a hidden force behind prominent finance extending its helping hand to organized crime, it remains unclear who exactly that was:

For years to come, in fact, several of the city’s insiders assumed there was some extraordinary unseen authority behind the Bank of Las Vegas, something not even the most notorious criminal gamblers would flout, ultimately ensuring repayment of hundreds of millions of dollars.

From there the floodgates opened. Major investments came from the Mormon church, the Teamsters, clandestine US intelligence fronts, and elsewhere. The results:

Legitimate money building up the Strip now enabled casino owners to fatten profits, including the constant skim and its state tax evasion. But they could also now reinvest more of that take, along with a greater share of the money from nationwide narcotics, prostitution, and other other exploitation, back into still more drug trafficking and corruption, as well as penetration of energy and food resources, entertainment, medical care, insurance, real estate, and full circle back to Las Vegas itself.

The authors spend a considerable amount of the mid-section on the Kennedys and their relations to organized crime. Suffice to say, JFK’s election marked organized crime’s arrival to the table of the nation’s ruling elite – at least that’s the way they viewed it even if JFK and RFK didn’t see it the same way.

Details begin to thin out afterwards with the authors jumping between various tales of shady figures in political campaigns, government, and business and connecting them back to Las Vegas and organized crime.

At the same time, the authors’ at times are confined by Las Vegas and Nevada, which might cause them to miss out on potentially interesting vignettes abroad. They only mention organized crime and the state’s cooperation abroad in passing. It would, for example, be interesting to map out the rise in foreign policy gangster tactics (assassinations, coups, etc.) to the state’s burgeoning relationship with organized crime. The same could be applied to Wall Street and the nation’s other economic institutions and sectors.

The authors are content to briefly examine the boost provided by Michael Milken, the Wall Street junk bond legend, who helped replace the largesse of the Teamsters raided pension fund. More exploration would be appreciated, but the conclusion seems sound:

‘As the founders of the city always understood, parties and personalities were minor compared to the stakes now shared among an ever-expanding group of profiteers. Corporate veils and Wall Street brokering had made thousands of stock-owning individuals and institutions, from the Harvard University endowment to the California State Employees Pension Fund, the successors to Costello, Luciano, Siegel, Giancana, and the others as capital funders of the gambling empire. … it was a form of the grand alliance of upperworld and underworld…’

And the damage wrought by that alliance would be immense.

“New American Hometown”

Long before Citizens United legalized political corruption, Denton and Morris detail how organized crime had a strong relationship with every president from JFK to Clinton. Reagan, in particular, became what they thought they had in JFK.

The washed up movie actor who had bombed during a two-week stand in Las Vegas a quarter century before becoming president helped usher in a new era for organized crime. Reagan, presiding over one of, if not the largest transfer of wealth in the nation’s history, was also a boon for organized crime.

‘Whatever the hoary compromises of the Washington regime, the face of the Syndicate was changing in the eighties as so much else in the country. By the natural attrition of aging feudal barons, by the periodic prosecution of crime lords in New York and elsewhere, the previously recognizable mob was fading. A new, educated, more refined, carefully groomed, and legalized postmodern Syndicate was already emerging. Financed and reinforced by the political economy created by the Reagan revolution, Las Vegas was no longer to be its outpost colony or clearinghouse, but its sparking capital.’

And as Reagan-era economic dogma still reigns, the long-present ills of organized crime’s capital has spread to every corner of the country.

Even at the end of the 1950s, ‘Nevada now had the highest crime and suicide rates in the nation, with Las Vegas employing three times as many police as any other city its size, and dealing with record-breaking crime rates in bad checks and burglary, as well as liquor consumption more than 200 percent above the national average.’

…‘“To be a vagrant in Las Vegas,” one visitor noted of a town crowded with homeless decades before they were even recognized as a national social problem, “is to invite a jail sentence.”’

Unaware of the foreboding, in 1994 Time declared that Las Vegas was an “all-American city” and representative of the “new American hometown.” In retrospect, Time was right, albeit not in the way it intended.

Social issues that had unsurprisingly plagued a city built by organized crime became national problems: crime and attempts to make economic problems disappear with more police, low wages, lack of healthcare, homelessness, and deaths of despair. Organized crime and the casinos were also always at the vanguard of attacks on organized labor – resorting to violence when corruption was off the table.

Nowadays, labor has been so thoroughly weakened that in many cases it (and daily life in general) more closely resembles a trip to the casino where the house always wins. As Hamilton Nolan writes about Uber:

Interviews with drivers reveal that the sheer unpredictability of this wage system transforms work into something more akin to gambling. Like slot machine players always wondering if the next spin will be the lucky one, workers are put in a position of being incentivized to constantly stay available, in the event that the fluctuating wage level happens to rise at any given moment.

National politics, too, mirror the longstanding practice in Vegas: “the regime runs nicely, politics confined to minor differences of personality or method on the margins of power.”

As Denton and Morris write about the gambling industry, which is true of Wall Street, Silicon Valley and the military-industrial complex, “Now it’s an open orgy of power. If politicians don’t give back what they want, they run them out.”

Maybe the following passage, which describes organized crime fear in Vegas’ early days that a crackdown would come, best shows how the attitude in Vegas became today’s national business creed and political standard:

“It was always part of their greed,” a lawyer for the casinos thought afterward. “They were grabbing everything they could get their hands on because there was still the fear, justified or not, that it could end any time, that it was all too good to be true.”

A 2001 New York Times review of “The Money and the Power” focuses almost exclusively on the more lurid aspects of Sin City and admonishes Denton and Morris for looking down their noses at how “ordinary people come [to Las Vegas] to feel, for a weekend, like big shots.” It also ignores the book’s argument that state and organized crime had become indistinguishable from one another, noting mockingly that “for Denton and Morris, even to wear tailored clothes indicates crooked venality.”

I would take the opposite view: Denton and Morris should have focused less on the more sensational aspects of Las Vegas and more on the state-organized crime fusion and its tentacles into every corner of the economy and foreign policy (maybe readers have recommendations on books that deal more completely with the latter?)

Nonetheless, if you need a refresher or a first-time peek, the book provides a summary of the interwovenness of the state and organized crime throughout the second half of the 20th century. No doubt an updated version nearly a quarter-century after the original was published would have plenty more evidence to work with.