Richard Oulahan and William Lambert.

The Scandal in the Bahamas.

Life 2/3/1967 pp. (58) 60 - 74.

The Parliament of the Bahamas will convene next week in Nassau's honey-colored Senate and Assembly buildings, and for the first time in history the members of the islands' traditional ruling class will be occupying the minority benches as Her Majesty's Loyal, if unhappy, Opposition. They were dumped from power in last month's elections, after a campaign smutched with charges of corruption on a grand scale. A thorough inquiry into the accusations has been promised both by Queen Elizabeth's figurehead governor, Sir Ralph Grey, and by the new premier, Lynden Oscar Pindling.

To the Bahamian Establishment—a rich and predominately white group whose political base is the United Bahamian Party—it came as a jolt to be overthrown by the Progressive Liberal party, an overwhelmingly Negro group representing the have-not majority of 85% of the islands' 140,000 people. The vote ended in a dead heat, with each party winning 18 seats in the colony's 38-seat House of Assembly, and two mavericks holding the balance of power. But Pindling, the young leader of the insurgents, managed to persuade one of them to back his party. Hen then neutralized the other by naming him Speaker of the Assembly, a job which has no vote except to break ties.

Pindling, a stocky, shrewd man of 36, had concentrated his campaign mainly on conflict of interest in government and on the use of the Bahamas as a lucrative center of international crime. As established independently by LIFE'S investigation, the pattern of corruption breaks down into four principle categories;

  • Brazen insurance frauds victimizing countless thousands of U.S. citizens. The frauds are perpetrated by swindlers who operate through some of the almost 500 "suitcase" companies which are incorporated under the lax laws.
  • Secret accounts in nearly a score of banks, where the American underworld figures and tax evaders can deposit profits from the narcotics trade, loan sharking, gambling and other criminal pursuits, with no fear of being investigated or taxed. Such hidden money, after it has been "laundered," usually gets back into the underworld economy in the U.S.
  • Fraudulent sales of worthless securities issued by companies that are nothing more than letter drops, and the promotion of these stocks my mail in the U.S.
  • Gambling traps set for American suckers, with a large share of the take going to a syndicate of American mobsters that includes/ Mafia members. The three casinos-two in Freeport and one in Nassau-are authorized by the lordly government dispensations called Certificates of Exemption and operate on an extravagant scale that begins to challenge Las Vegas.

The Bahamas are an archipelago of 700 islands and 2,000 rocks and cays strewn like confetti across the Gulf Stream from a point 60 miles east of Palm Beach almost to the eastern tip of Cuba. This year nearly 900,000 travelers, most of them from the U.S., will visit the islands--up from 32, 018 in 1949--and it is expected that there will be more than a million a year in 1969. Most of the tourists are drawn to New Providence Island, where the capital of Nassau is situated, and to Grand Bahama Island, 120 miles to the north. New resort are also blooming on the major "Out Islands"—Eleuthera, Andros, the Biminis, Cat Island, Abaco, Great Exuma./

Throughout the chain the beaches are superb, the weather balmy, the water the clearest in the world, the fishing out of this world.

There has always been a snug harbor for wickedness in the Bahamas—though never, surely, for such varied and intricate wickedness as exists there today. Scandal of such proportions could never have occurred without the tacit approval and active assistance of many members of the now disestablished Establishment, a tight kittle clique of old families who long dominated the colony's government on one hand even as it dominated its commerce on the other, with nary a thought of conflict of interest. Its members are known as the "Bay Street Boys," because most of their office and businesses are clustered on Nassau's main street bearing that name. Until the election they led the islands' appointive Senate and elective House of Assembly.

There are dozens of the Boys but they answer to a handful of leaders. Sir Roland Symonette, the former premier, and his sportsman son, Bobby, who was Speaker of the Assembly, are shipowners and leading builders. Sir Etienne Dupuch is publisher and editor of the Nassau Tribune; a onetime opponent of many U.B.P. policies, he is a comparative newcomer to the elite. The Solomon Brothers—Roy, Fane and Norman—are wealthy merchants and importers. C. Trevor Kelly, the Minister for Marine Affairs who lost his seat in the election, is a tycoon in ships, hardware and lumber.

But the Boy who held more power and influence than anyone else in the colony--more than either the royal governor or the premier--was the Minister of Finance and Tourism, a brilliant hulking man with a drifting blue glass eye, who looked as though he might have stepped out of the Maltese Falcon. He is Sir Stafford Sands, 53, multimillionaire lawyer, gourmet, collector of antique paperweights and of Yankee dol-/lars. In the halcyon pre-election days, nothing involving any substantial exchange of money was likely to take place in the Bahamas without the consent and support of Sir Stafford, who also often expected a whopping legal fee.

Bigtime gambling was conveyed to the islands in 1964 by Sir Stafford, and it has proved to be a bigger tourist attraction than all the sun and sea and French perfume and duty-free liquor put together.

In 1965, its first full year of operation, the Lucayan Beach Hotel casino on Grand Bahama spent $494,552 on chartered flights, just to bring in freeloading planeloads of "high-rollers"— big-spending gamblers with blue-chip credit ratings-who had been invited from all over the U.S. Another $935,268 was allocated to provide hotel and ship accommodations for such pampered guests.

Sir Stafford's name is not listed on the board of directors of Bahamas Amusements, Ltd., which controls the islands' big casinos, but neither are the names of Meyer Lansky and his confederates in the Mafia: Steve Maggadino, head of the Buffalo Cosa Nostra "family"; Angelo Bruno, director of the Philadelphia branch; Frank Costello of New York, Joe Adonis of New York and Italy; and Santo Trafficante, the boss in Tampa. Yet U.S. lawmen are convinced that they are getting a big cut out of the casinos' profits. Specifically, notorious frontmen for Meyer Lansky are raking in 30% of the net profits at the Lucayan Beach Hotel's Monte Carlo Room—a piece of the action that now runs to over $1 million a year--and a larger cut, 15% of the gross, from Nassau's Bahamian Club.

Sir Stafford admits he has met Lansky, long-time associate of the late Bugsy Siegal and Lucky Luciano. As Sir Stafford recalls it, the mobster, a specialist in casinos, came to call on him in his Bay Street offices in 1960 and offered him $1 million to his credit in a secret Swiss bank account in/ exchange for exclusive gambling rights on the islands. Sir Stafford says he indignantly turned the offer down. Yet, when bigtime gambling finally did come four years later, Lansky's henchmen were dealing the cards.

In a limp effort to hide the mob's role, the Bahamian government in 1963 barred any American from holding a directorship in Bahamas Amusements. Nonetheless, the man who to all intents and purposes bosses the corporation is an American. He is Wallace Groves, 65, onetime Wall Street financier, high-roller in stock manipulations and an ex-convict.

In 1937 Groves was named before a U.S. congressional committee as a tax dodger, and in the early 1940s spent part of a two-year sentence in the federal prison in Danbury, Conn. On a conviction of mail fraud involving securities. For some 35 years he has had a base in the Bahamas, and is Big Daddy of one island in particular—Grand Bahama, where he wields absolute authority over just everything that goes on in its brassy-bright new resort town of Freeport. Groves, whose lawyer is Sir Stafford, runs Bahamas Amusements very efficiently through two puppet stockholders: his Canadian wife, and a Briton, Keith Gonsalves, who is a former officer of Barclays Bank in the Bahamas. Groves's silent partner in all three gambling salons and spokesman for the Syndicate is Lansky, who also has a substantial interest in at least two of the gambling dens of Las Vegas and once held major Havana casino concessions. In 1959, after Fidel Castro shut Cuba down, Lansky looked around for other places where he might set up shop beyond the reach of U.S. law. The Bahamas were made to order.

Exactly how much the Syndicate is sluicing off in the counting rooms of Nassau and Freeport is carefully hidden; but in 1965, from just one casino, the Lucayan Beach Hotel's Monte Carlo Room, three Lansky lieutenants took a visible "bonus' totaling $490,511. In 1966, the "bonus" rose to $1 million.

As Groves explains it, these bonuses were a necessary "inducement" to guarantee the continued cooperation of the casino's man-/ agers. U.S. authorities know the bonus money is flowing back to the mob. The three lieutenants—Max Courtney (né Morris Schmertzler), Frank Ritter (sometimes Red Reed) and Charles Brudner (alias Charlie Brud)—also drew combined untaxed salaries of $109,200 a year, plus free housing and other emoluments, as managers of the Lucayan casino.

Courtney, Ritter and Brudner are all fugitives from U.S. justice, under indictment for violating the federal anti-racketeering statute as well as gambling-tax evasion and failure to buy the annual $50 gambling stamp. (They once operated the nation's largest bookie network, inherited from the late Frank Erickson.) But the Symonette government refused to deport them on the grounds that since neither an income tax nor a bookmakers' tax exists on the islands, no crime (Bahamian crime, that is) had been committed. Just three weeks ago—and only after the greatest pressure from the U.S. and Britain was exerted—were Courtney, Ritter and Brudner relieved of their titles as managers of the Lucayan casino. But even after that they were suffered in the Bahamas and were / never very far from the action. U.S. authorities are convinced that their "resignations" were meaningless.

Whatever the Pindling government decides to do about these gamblers, one of their colleagues has turned up in the midst of Pindling's party, he is Mike McLaney, who managed one of Havana's big casinos in the days when Lansky was top mobster in the Cuban capital. During the recent election campaign, McLaney showed up in the Out Islands, providing free airlifts for P.L.P candidates. The mob always tries to hedge its bets.

Gambling and gangsters are not the only problem afflicting the Bahamas in the current era of prosperity and expansion. The U.S. Justice and Post Office Departments, the Securities and Exchange Commission and the Internal Revenue Service are troubled over the flourishing insurance racket, secret bank accounts and bogus securities that have their origins in the islands. The insurance and securities frauds are being perpetrated by American and Canadian swindlers operating through hundreds of nonresident or "suitcase" companies incorporated in Nassau, many of them with the familiar address of 309 Bay Street, Sir Stafford's legal chambers. Bahamian law prohibits the suitcase companies, which operate only sporadically, from doing business in the sterling area. So U.S. mailing lists are used and U.S. citizens are bilked of millions of dollars annually.
In February 1964, for example, Medicare Life Insurance, Ltd., was incorporated in Sir Stafford's law office. Its total capitalization was exactly £5— $14. U.S. postal authorities soon spotted Medicare's fraud—a cruel and worthless medical and hospitalization policy offered for $12 a month to some 100,000 persons, mostly elderly, infirm people living in California. All mail for Medicare was received by Sir Stafford's office and forwarded to a post office box in Ensenada, Mexcio, where the promoters planned to pick up the proceeds. Instead, they themselves were picked up and were convicted on 33 counts of mail fraud.

Also in 1964, Francisco Garcia, an 83-year-old resident of San Antonio, Texas, was struck by a car and totally disabled. He hired an attorney and sued the driver, winning a default judgment of $7,500. But the judgment could not be collected because the insurance company turned out to be one of those shells that used Sir Stafford's office as a mail drop. Indeed, the promoters were in default of legal-fee payments to Sir Stafford himself, although they cleared at least $500,000 in their swindles.

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