Richard Oulahan and William Lambert.

The Scandal in the Bahamas.

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

There was, for instance, the boon that was bestowed upon Daniel K. Ludwig, the enormously wealthy shipbuilder and international industrialist who came to Grand Bahama in 1955 to finance and dredge the deep-water harbor, and stayed on to build the King's Inn, an 800-room hotel surrounded by an 18-hole golf course. It was Ludwig's understanding that he could also build an adjacent casino and the International Bazaar. But after Ludwig had invested millions of dollars in the resort, Groves sadly informed him that he would have to take over the proposed casino project himself because his Bahamas Amusements, Ltd., holds the casino monopoly. And while the International Bazaar—an unholy mix of Chinese streets giving onto an English mews, a Copenhagen square and a soupçon of Montmartre—was under construction, Ludwig was informed that he had lost the franchise to do business there because he was insisting on bringing in his own shopkeepers and importing his own merchandise. The Bay Street Boys, who are, after all, primarily shopkeepers and merchants, had other ideas. As a sop for losing the casino and the bazaar, Ludwig got a barren tract of land which may (or may not) some day become a housing development. Nine of the International Bazaar's shops have already been turned over to Bay Street's Solomon brothers.

Even with his highhanded methods, Groves has induced an impressive number of big investors to help him bring about the remarkable transformation on Grand Bahama. Among them are U.S. Steel (a $50 million cement plant), Holiday Inns (a $5 million hotel, the company's biggest), the ubiquitous Mary Carter Paint Company (Queen's Cove, another large, desolate future housing tract) and Syntex Corp. (a $7 million pharmaceutical plant). From the biggest Freeport concessionaire down to the smallest shopkeeper, Groves exacts a tithe, usually from 1% to 10% of the profits.

Of course, none of this would have gone beyond the dreams of Wallace Groves if it had not been for his friend Sir Stafford Sands. By 1936, when Sir Stafford was a still-unknighted youngster reading the law in Nassau, Wall Streeter Groves had already set up two of the colony's earliest suitcase security firms, whose operations were eventually to send him to the penitentiary. Groves went to Sir Stafford some 20 years later with his visionary plan to turn Grand Bahama into an island industrial park cum resort. Sir Stafford obligingly popped on his parliamentary wig and drew up the Hawksbill Creek Act (so-called from a cove on Grand Bahama where the big, lazy hawksbill turtles are wont to gather). It was comparatively easy to ram the bill through the Assembly and get the governor to sign it. The Hawksbill Creek Act presented Wallace Groves with something not unlike the blank-check Hudson's Bay or East India Company charters: he was allowed to buy 211 square miles of Grand Bahama land, a principality 400 times the size of Monaco, most of it at the giveaway price of $2.80 an acre. (Nowadays Groves is reselling some of the choicer plots for $50,000 an acre.) And he was given special privileges, including exemption from virtually all taxes for up/ to 99 years. For his services to Groves, Sir Stafford, of course, received his usual fat fee.

To organize this empire, pay his bills and fulfill the development requirements of the Act, Groves set up over a period of years a series of interlocking private concerns: first, a parent firm, the Grand Bahama Port Authority Ltd., which Groves owns with a handful of rich New York and British investors; then a real estate organization, the Grand Bahama Development Company Ltd.; and later a number of other companies, including one to govern his gambling interests, Bahamas Amusements Ltd.

When their hopes for a great industrial development in Grand Bahama began to fade, Groves and Sir Stafford turned to the one thing that would draw the tourists like nothing else and make the resort turn a profit—big gambling.

Long before the gambling was authorized or even mentioned out loud, the blueprints for Freeport's Lucayan Beach Hotel depicted a large room specifically ordered at a Miami meeting attended by Groves's representatives, the architect and Meyer Lansky. On the plans, the 9,000-square-foot room was called a "handball court," but it was ultimately to become the Monte Carlo casino.

There is a reason for the camouflage: as it happens, gambling was and is specifically forbidden by law in the Bahamas, punishable by law by a maximum penalty of a £1,000 and two years in prison. Gambling has existed there nevertheless in a modest way for many years. The way to get around the official restriction is to persuade the governor's council to issue a Certificate of Exemption, which is simply a permit to ignore the law.

Some of the Bay Street Boys were opposed to the notion of big gambling on Grand Bahama, and the ground had to be painstakingly prepared to get a Certificate of Exemption for Freeport. In this, Groves and Sir Stafford were immeasurably helped by the arrival on the scene of one Louis Chesler, who showed up in 1960 with $12 million to invest and more than a casual interest in gambling.

A bigtime promoter from Canada, Chesler was the guiding force in several giant companies, including Canada's Lorado Uranium Mines Ltd.; General development Corporation, the huge Florida real estate operation; and Seven Arts Productions Ltd., the entertainment complex. He was a proved entrepreneur in housing promotion, the developer of Port St. Lucie and two other large, successful "retirement towns" in Florida. When Chesler, a cherubic, rollicking 300-pound man, moved in, he brought with him a retinue of jet-set friends and satraps, and a go-go attitude that was offensive to the prim conservatism that Wallace Groves affects. But Groves managed to tolerate it until 1964, when the $12 million was gone, the Lucayan Beach Hotel was open and Lou Chesler could be given the coup de grâce.

Meanwhile, Chesler had been put to use in another way. In September 1961, in a manner called "Operation Indoctrination," he and Groves were lavish hosts to a carefully selected group of key/ officials of the Bahamian government, first at Chesler's Port St. Lucie, and later in Miami Beach. The influential group included Premier Sir Roland Symonette, Attorney General Lionel Orr, Treasurer William Sweeting, their wives, and Colonial Secretary Kenneth Walmsley. The guests were brief on the realities of resort building in the Bahamas and the absolute necessity of admitting bigtime gambling in order to create the beautiful—and profitable—life it would bring.

Sir Stafford was also present, but unobtrusive. His big scene came later, in 1963, when the governor's council met in great secrecy to discuss issuing the Certificate of Exemption for Freeport. The vote was 8-3 in favor of the gambling license. Sir Stafford got $1.1 million, including $515,900 in legal fees, plus a retainer of $10,000 a month, plus a "consultant's fee" of $50,000 a year for 10 years.

Some early dissidents—like Publisher Sir Etienne Dupuch, who had editorially campaigned with some eloquence against gambling-changed their minds after the vote and accepted "consultant's fees" from casino funds funneled through Groves's development company. Sir Etienne was appointed a "consultant" at $15,000 a year, but begged off, as a matter of conscience, after several months. Earlier Sir Stafford and Groves had tried to win Sir Etienne's favor by commanding every concessionaire in Grand Bahama to buy ads in the publisher's annual Bahamas Handbook. When the ads still did not produce the $50,000 they felt Sir Etienne deserved, Groves's Grand Bahama Development Company was required to buy enough copies to make up the difference. After a few months, all of the 10,000 undistributed copies were burned.

Premier Symonette's own "consultant's fee" was set at $16,800 a year for five years, and his son, Bobby, the Speaker of the House of Assembly, got $14,000, also for five years. Maritime Affairs Minister Trevor Kelly was awarded the charter to haul men and materials from Florida to Freeport on his freighter, Betty K, at $60,000 a year for three years. The Betty K proved to be unusable, so the charter was canceled after seven months. As consolation for the loss of the contract, Kelly got a compensatory payment—$100,000.

Not long after the gambling franchise for Freeport was secure, Groves and Chesler moved into open conflict, for it had become apparent that Grand Bahama was not big enough for the both of them. Chesler made the first move towards a showdown, offering to buy out Groves's 48% interest in the Grand Bahama Development Company for $17 million. Groves countered with an offer to buy enough of Chesler's stock to gain control of the company, and Chesler—bowing to the feudal lord of Freeport—meekly accepted.

By this time Groves's development company, financially shaky, began to change rapidly. The Lucayan Beach Hotel, which had been built under Chesler's aegis at the cost of $8.6 million—one of the costliest hotels in the world on a per-room basis—had been sold, at a loss of $1 million, to Allen Manus, a Canadian entrepreneur, (Sir Stafford got a fee of $125,000 for arranging the papers.) Manus had no better luck with the hotel: despite a subsidy of $500,00 a year from the Monte Carlo Room, the Lucayan Beach was in receivership after 18 months. It still is today.

Manus had secured his down payment on the hotel with loans of $2.5 million, mostly from Canada's Atlantic Acceptance Corporation, which invested $11 million in various Grand Bahama enterprises. Much of that investment in the island's development went sour, resulting in an upheaval of the giant holding company. Atlantic Acceptance collapsed in June 1965, defaulting on $104 million to creditors, most of the Americans, and causing an international financial scandal.

By the end of 1966, the last of Lou Chesler's holdings on Grand Bahamas had been sold off and his friends, relatives and hangers-on were gone. But Chesler had left his mark on the resort. He had introduced Meyer Lansky and the late Jim Norris, millionaire boxing promoter and friend of the mob to the Bahamas' gambling picture. Courtney, Ritter and Brudner, the three Lansky henchmen, all known by Chesler from their days in Havana and around the New York racetracks, had been installed as managers of the Monte Carlo Room, and the big gam-/ blers were flying in and the big money was flowing out to a Miami Beach bank as regularly as the tides. In Miami Beach, a platoon of Courtney's bookmakers was keeping a constant check on the credit ratings of high-rollers who showed up at Freeport. Everything was operating with machine-tooled efficiency—unlike the early days when Freeport's unreliable telephones failed, and Jim Norris obligingly allowed the radio aboard his yacht, Black Hawk, riding at anchor in Hawksbill Creek, to be used to relay credit information back and forth between Freeport and Florida.

From its opening night in January 1964, the Monte Carlo Room prospered, never had a losing night. At the end of five months it had made $1 million, and before the year was over it had repaid the $600,000 lent by the Lansky mob to quip the casino and provide the initial bankroll. By the end of 1966, the casino was grossing $8 million a year by available records. It is worth noting, however, that Peat, Marwick, Mitchell and Company, the international accounting firm which kept the casino's books, did not trust those available records and resigned last year.

In New York, meanwhile, U.S. Attorney Robert Morgenthau has been keeping a dogged pursuit of the fugitive Gotham mobsters. One of Groves's officials admits that all casino personnel have been warned not to go to the U.S. for fear of being caught by one of Morgenthau's subpoenas. The prosecutor has already obtained indictments against the Messrs. Courtney, Ritter, and Brudner. Another, more notorious Lansky lieutenant, Dino Cellini, and several lesser hoodlums have been declared non gratia and deported from Grand Bahama as a result of strong representations by U.S. governmental agencies.

Cellini went to London, where he operates a school—financed in part by Bahamas Amusements Ltd.—for British croupiers to learn the intricacies of American craps and blackjack. But among the replacements for Cellini and the others, all still working gainfully in Bahamas casinos, are Eddie, Bob and Guff Cellini-all of them Dino's kinfolk.

As log as the mob has a toe hold, it will keep sending replacements—"soldiers," as the Mafia calls them—whenever there is a vacancy to be filled. Of course, the mob has reason to be nervous, what with the heat from the U.S. and the changing political scene along Bay Street. One thing is obvious: they won't give up easily. Nor will the Bay Street Boys.

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