PAGENO="0001" ORGANIZED CRIME IN SPORTS (RACING) -~ ~ ~ I ~ ~`bEPOS!TORY HEARINGS BEFORE THE SELECT COMMITTEE ON CRIME HOUSE OF REPRESENTATIVES NINETY-SECOND CONGRESS SECOND SESSION MAY 9-11, 15-18, 22-25, 30. 31; JUNE 1, 7, 13-15: JULY 18-20. 25-27, 1972 WASHINGTON, D.C. PART 3 OF 4 PARTS Printed for the use of the Select Committee on Crime (Created pursuant to H. lies. 115) U.S. GOVERNMENT PRINTING OFFICE 81-0680 WASHINGTON : 1973 For sale by the Superintendent of Documents. U.S. Government Printing Office. Washington, DC. 20402 - Price $2.35 domestic postpaid-or $2.00 GPO Bookstore Stock Number 5270-01700 PAGENO="0002" SELECT COMMITTEE ON CRIME CLAUDE PEPPER, Florida, Chairman JEROME R. WALDIE, California CHARLES E. WIGGINS, California FRANK J. BRASCO, New York SAM STEIGER, Arizona JAMES R. MANN, South Carolina LARRY WINN, JR., Kansas MORGAN F. MURPHY, Illinois CHARLES W. SANDMAN, JR., New Jersey CHARLES B. RANGEL, New York WILLIAM J. KEATING, Ohio JOSEPH A. PHILLIPS, Chief Counsel MICHAEL W. BL0MMER, Associate Chief Counsel CHRIS NOLDE, Associate Counsel ANDREW RADDING, Assistant Counsel (II) PAGENO="0003" CONTENTS DATES HEARINGS HELD 1972: Page May 9 1 May 10 113 May 11 153 May 15 - 217 May 16 317 May 17 437 May 18 519 May 22 551 May 23 639 May 24 731 May 25 771 May 30 817 May 31 877 June 1 961 June 7 1017 June 13 1083 June 14 1193 June 15 1259 July 18 1409 July 19 1475 July 20 1561 July 25 1613 July 26 1729 July 27 1805 STATEMENTS BY WITNESSES Angiulo, Gennaro, Nahant, Mass 1466 Balliro, J., counsel to Gennaro J. Angiulo 1466 Barboza, Joseph (the Baron), former organized crime enforcer 731 Baum, William, captain, intelligence division, New Jersey State Police_~__ 566 Bellanca, Peter, attorney for Zerilli interests in Frontier conspiracy 140 Berger, Norman M., counsel to Sammy Davis, Jr 552 Berube, Paul, special investigator, Thoroughbred Racing Protective Bu- reau (TRPB), Lake Success, N.Y 772 Bittman, William 0., counsel to: Jacobs, Jeremy 1304 Jacobs, Max 1225, 1259 Bolles, Donald, investigative reporter, the Arizona Republic 317 Bonner, Walter J., counsel to: Bellanca, Peter 140 Polizzi, Michael 137 Brower, Harvey, counsel to Raymond Patriarca 1475 Burr, Charles, vice president, Emprise Corp., Buffalo, N.Y 1158 Burton, Charles, counsel to David Funk 437 Byrne, Bobby, horseracing specialist and fixer of races 1083 Cahn, William, district attorney, Nassau County, N.Y 1017 Caldwell, Frank J., Manhasset, Long Island, N.Y., former horse ow'ner~~ 1770 Caplan, Sue, counsel to: Cole, Fred 1713 Manzi, Anthony 1684 Menzella, Toni 1613 Presti, Robert 1639 (III) PAGENO="0004" Iv Page Carson, Charles, former comptroller, Berkshire Downs Racetrack, Han- cock, Mass 1437 Castucci, Richard, organized crime figure, State of Massachusetts~~_ 817, 877 Cataldo, Joseph, inmate, Federal Penitentiary, Lewisburg, Pa 630 Coble, J. Kermit, counsel to John G. Masoni 851 Cole, Fred, Long Island, N.Y., former horse owner 1713 Craner, Mitchell B., counsel to Joseph "Whitey" Danzo 501 Danzo, Joseph "Whitey," New Jersey organized crime figure 501 Dario, B. A., Rhode Island racetrack owner 1565 Davis, Sammy, Jr., entertainer, Hollywood, Calif 552 Decof, Leonard, counsel to B. A. Dario 1565 Doherty, John, lieutenant colonel, chief of detectives, Metropolitan Police Department, St. Louis, Mo 154 Fitzgerald, Gerald F., member Illinois State Racing Board 1836 Fleming, Paul D., executive secretary, Ohio State Racing Commission 1805 Floss, Walter J., Jr., member, Erie County (N.Y.) Legislature 1140 Foundas, Nicholas, counsel to Richard Castucci 877 Friedman, Saul, former president, Berkshire Downs, Hancock, Mass 1505 Funk, Bradley J., secretary-treasurer, Funks' Greyhound Racing Circuit, Inc., Ariz Funk, David, owner of various horse and dog racing interests in Arizona 43.7 Garavaglia, Frank G., counsel to: Tocco, Jack W 119 Zerilli, Anthony 115 Giardano, Anthony, head, crime syndicate, St. Louis, Mo 184 Ginsberg, Charles, Jr., chairman, Ohio State Racing Commission_. 1805 Glick, Alvin M., ~ounsel to Charles Burr 1158 Gold, Morris, South Fallsburg, N.Y., former racetrack concessionaire_._ 724 Goldstein, David, attorney, New York, N.Y 613 Goodwin, Brian, Phoenix, Ariz., counsel representing Arizona racing in- terest jointly owned by Funk-Jacobs families 251, 299 Halpern, Ralph J., counsel to Ralph Wilson, Jr 1729 Halveland, Earl T., detective captain, commander, intelligence unit, Metro- politan Police Department, St. Louis, Mo 154 Hamma, Richard E., Holbrook, N.Y., owner of Punjab Stables 1797 Hanny, John R., III, member, Erie County (N.Y.) Legislature 1210 Hofmann, Lawrence N., captain, project director, Michigan Intelligence Network Teamim (MINT), Michigan Department of State Pollce~__ 63, 88 Hollman, Daniel P., former chief, New York Strike Force on Organized Crime, U.S. Department of Justice 639, 685 Inglis, James, former racing commissioner, State of Michigan 79, 88 Israel, Richard, attorney general, State of Rhode Island 1003 Jacobs, Jeremy, president, Emprise Corp., Buffalo, N.Y 1304 Jacobs, Max, executive vice president, Emprise Corp., Buffalo, N.Y_ 1225, 1259 Johnson, George Harry, Phoenix, Ariz., an individual who investigated a U.S. Congressman on behalf of Arizona racing interest 217, 287 Josefsberg, Robert C., council to Salvatore Rizzo 1497 Kohn, Aaron, managing director, Metropolitan Crime Commission of New Orleans 880, 915 Leacy, Robert P., former counsel, Emprise Corp., Buffalo, N.Y 185 Levin, Morris J.. counsel to Saul Friedman 1505 MacArthur, Alexander, chairman, Illinois Racing Board 519 Manzi, Anthony, Secaucus, N.J., former horse owner 1684 Marcello, Carlos, New- Orleans, La., organized crime figure 961 Masoni, John G., part owner and president, Jefferson Downs Racetrack, La 851 Masoni, Robert, former Jefferson Downs (La.) stockholder 830 Menzella, Toni, Union City, N.J., former horse owner 1613 Mooers, Donald L., Washington, D.C., counsel representing Funk family racing interest in Arizona 393. 445 Napolitano, Robert, counsel to Raymond Patriarca 1475 Nilon, James, sports concessionarie, Chester, Pa 702 Nilon, John, sports concessionaire, Chester, Pa 702 Norris, Kenneth, sergeant Organized Crime Section Louisiana State Police 880, 915 PAGENO="0005" V Page Osman, Ira, State Auditor General, State of Arizona 348 Patriarca, Raymond, Providence, RI., presently inmate, Atlanta (Ga.) Federal Penitentiary 1475 Piersante, Vincent, chief, Organized Crime Division, Attorney General's Office, Lansing, Mich 3, 88 Polizzi, Michael, director and stockholder, Hazel Park (Mich.) Racing Association 137 Presti, Robert, Fort Lee, N.J., former horse broker 1639, 1657 Price, Stewart, Governor's Council on Criminal Justice, State of Florida_ 113 Ray, Dr. Richard, chemist, Ohio State University 1805 Rizzo, Salvatore, Miami Lakes, Fla., former president, Berkshire Downs Racetrack, Hancock, Mass 1497 Rudin, Milton A., counsel to Frank Sinatra 1410 Salerno, Ralph, consultant, New York State Off-Track Betting Corp. (OTB) 1031 Samuels, Howard, chairman, New York State Off-Track Betting Corp. (OTB) 1031 Shirley, Leo, racing commissioner, State of Michigan 79, SS, 128 Sims, Alan S., counsel to Robert Masoni 839 Smith, Lester, minority stockholder, Hazel Park (Mich.) Racing Asso- ciation 121 Smith, T. George, detective sergeant. Racetrack Squad Intelligence Divi- sion, New Jersey State Police 566 Sinatra, Frank, entertainer, Hollywood, Calif 1410 Stavola, Michael J., Red Bank, N.J., horse owner 592 Stenatto, Joseph, assistant district attorney, Rackets Bureau, Office of District Attorney, Nasseau County, N.Y 1017 Tharp, Dr. Vernon, associate dean, school of veterinary medicine, Ohio State University 1805 Tiermian, I-Ion. Robert 0., a U.S. Representative from the State of Rhode Island 1003 Tocco, Jack W., executive vice president, Hazel Park (Micli. Racing Association 119 Ti~aynor Raymond, chief im-estigator, U.S. Trotting Association (T$TA). Columbus, Ohio $15, 833 Troy, Philip, representative of Eniprise Corp. 111 FF0111 icr t~misiir~icy _~ 141 Walder, Justin 1'., counsel to Michael 1. Stavola_. 592 Walker, J. Lloyd. engineer, Buffalo, N.Y 1193 Wmassermnan, Jack, counsel to Carlos Marcello 961 Wilson, Ralph, Jr., Buffalo, N.Y., horse owner 1729 Wolf, Norman J., member, Erie County (N.Y.) Legislature 1140 Zerilli, Anthony, president, Hazel Park (Mich.) Racing Association_. 115 MATERIAL RECEIVED FOR TIlE RECORD Bittman, William 0., counsel to Max and Jeremy Jacobs, mnenioranditni summarizing Los Angeles conspiracy trial involving Emprise Corp 1291 Brock, James E., president, Thoroughbre(l Racing Associations. Lake Suc- cess, N.Y., prepared statement $09 Drayton, Spencer J., president. Thoroughbred Racing Protective Bureau (TRPB), Lake Success, N.Y., prepared statement SOS Goldstein, David, attorney, New York, N.Y., letter to the chairman (un- dated), re Canandaigua Race Track Investigation 627 Hollman, Daniel P., former chief, New York Strike Force on Organized Crime, U.S. Department of Justice, prepared statement 673 Jacobs, Jeremy, president, Emprise Corp., Buffalo, N.Y.: Affidavit from Millington Lockwood, chief accountant, Emprise Corp__ 1362 Letter dated May 23, 1972, from Burke Security concerning investi- gations conducted on behalf of Emprise 1363 Letter dated February 13, 1964, from Berry Beaman, Michigan racing Association 1365 commissioner, to Governor George Romney, re Hazel Park Racing for corrective measures regarding parimutual wagering 1398 Letter dated July 24, 1972, to Chairman Pepper, recommendations Numerous letters commending Emnprise Corp 1317 PAGENO="0006" VI Page Jacobs, Max, executive vice president, Emprise Corp., Buffalo, N.Y.: Letter dated July 18, 1972, to Mr. Keating, Member, Select Commit- tee on Crime, re relationship between Emprise Corp. and River Downs Racetrack 1281 Memorandum dated June 24, 1970, by Brian Goodwin,, re June 23, 1970, meeting with George Harry Johnson 1298 Letter dated June 29, 1972, from Brian Goodwin, re George Harry Johnson meeting, with enclosures 1300 Stockholders list of Cincinnati Royals basketball team 1285 Kohn, Aaron M., managing director, Metropolitan Crime Commission of New Orleans, Inc., prepared statement 937 Leacy, Robert P., former counsel, Emprise Corp., Buffalo, N.Y., letter to chief counsel Joseph A. Phillips dated May 30, 1972, with enclosures_--__ 193 Masoni, John G., part owner and president, Jefferson Downs (La.) Race- track: Letter dated February 22, 1972, to L. A. Holland, chairman, Louisiana State Racing Commission, re stockholding of Robert J. Masoni_~~ 864 Letter dated March 2, 1972, to L. A. Holland, re stock holdings in Jef- ferson Downs Racetrack 863 Mooers, Donald L., Washington, D.C., counsel representing Funk family racing interest in Arizona: Excerpts from deposition of Bradley J. Funk given in the Superior Court of the State of Arizona in and for the County of Maricopa~ 449 Letter dated Jan. 19, 1973, to Chairman Pepper, re testimony of George Harry Johnson 1852 Memorandum No. 1, re statements filed for year ended December 31, 1964, Lewis Steiger Co.,, Inc 496 Memorandum No. 2, re liquor license issued by the State of Arizona on February 27, 1962 497 Memorandum No. 3, re signature of "Samuel Steiger" 498 Memorandum No. 4, re relationship of Steiger and John K. Goodman_ 498 Memorandum No. 5, re 1965 and 1966 statements of Lewis Steiger Co., Inc Memorandum No. 6, re misrepresentation by Sam Steiger of personal ownership of corporate owned assets 500 Novak, Ben, affidavit dated July 11, 1972, attesting to his sole ownership of the Fontainebleau Hotel, Miami Beach, Fla 1410 Osman, Ira, State Auditor General, State of Arizona: Copy of agreements affecting voting rights of Funk Stock 364 Report entitled "Arizona Parimutuel Race Facilities, Financial State- ments,, June 30, August 31, and December 31, 1970 370 Report entitled "Arizona State Legislature and Certain Regulatory Commissions Recommendations Concerning Parimutuel Facilities," dated March 6, 1970 386 Phillips, Joseph A., chief counsel, Select Committee on Crime: Memorandum dated May 30, 1972, re conversations between Raymond Patriarca and Henry Tamello overheard by electronic device-. 818 Memorandum dated July 17, 1972, re summary of conversations be- tween Raymond Patriarca and associates concerning various as- pects of Berkshire Downs Racetrack (obtained by electronic device) 1563 Piersante, Vincent, letter dated December 12, 1963, from Detroit Police Commissioner George Edwards to Berry Beaman, Michigan State Rac- ing Cominisioner. re H'izQI Pirk R~cing i~ssociat~~n (with ~~n&nsures) -- 14 Samuels, Howard, chairman, New York State Off-Track Betting Corp., memorandum re parimutuel wagering in interstate commerce, with at- tachments 1067 Steiger, Sam, a U.S. Representative from the State of Arizona and mem- ber, Select Committee on Crime, letters re Phoenix. Ariz., grand jury investigation of ah1e~red wiretappinr: Letter dated April 5, 1971, from Brian Goodwin to State Senator Delos Ellsworth, Phoenix, Ariz 279 Letter dated June 3, 1971, from Brian Goodwin to Joseph Corey, U.S. Department of Justice 280 Letter (undated) from Joseph Corey to Brian Goodwin 279 PAGENO="0007" ORGANIZED CRIME IN SPORTS (RACING) WEDNESDAY, JUNE 7, 1972 HOUSE OF REPRESENTATIVES, SELECT COMMITrEE ON CRIME, Was hingto'r&, D.C. The committee met, pursuant to notice, at 11 a.m., in room 345, Cannon House Office Building, the Honorable Claude Pepper (chair- man) presiding. Present: Representatives Pepper, Brasco, Mann, Murphy, Wiggins, Steiger, Winn, and Keating. Also present: Joseph A. Phillips, chief counsel; Michael W. Blommer, associate chief counsel; Chris Nolde, associate counsel; and Andrew Radding, assistant counsel. Chairman PEPPER. The committee will come to order, please. I am sorry we are tardy in beginning our session this morning. The committee first met in executive session. We had expected the appearance of Mr. Frank Sinatra as a witness before the committee tomorrow. We learned yesterday afternoon that Mr. Sinatra was in London and were told by his attorney that he would not be here tomorrow. The committee has authorized the issu- ance of a subpena to Mr. Sinatra to appear before the committee at 10 a.m., July 18, and ordered the taking of whatever steps might be neces- sary to extend the reach of the subpena abroad, as well as within the jurisdiction of the United States. Mr. Counsel, will you call the first witness. Mr. PHILLIPS. The first witness today, Mr. Chairman, is the dis- tinguished district attorney from Nassau County, N.Y., Mr. William Cahn. I have known Mr. Cahn for a number of years. Chairman PEPPER. Mr. Cahn, will you raise your right hand, please. STATEMENT OP WILLIAM CAHN, DISTRICT ATTORNEY FOR NASSAU COUNTY, N.Y., AND PRESIDENT, NATIONAL DISTRICT ATTOR- NEYS ASSOCIATION; ACCOMPANIED BY JOSEPH STENATTO, ASSISTANT DISTRICT ATTORNEY, RACKETS BUREAU (Having been duly sworn by the chairman) Chairman PEPPER. You may have a seat. Counsel, will you inquire. Mr. PHILLIPS. Mr. Chairman, Mr. Cahn is one of the outstanding prosecutors in New York State. He has a long history of credible ac- (1017) PAGENO="0008" 1018 complishments in the fight against organized crime. He is also presi- dent of the National District Attorneys Association and is a noted authority throughout the country on the subject we are inquiring into. I think, Mr. Cahn, you have a statement. Mr. CAHN. Yes; I do. Mr. PHILLIPs. Will you proceed. Chairman PEPPER. We are glad to have you, Mr. Cahn. Mr. CAHN. Thank you, sir. I am William Cahn, president of the National District Attorneys Association and for the past 10 years, district attorney of Nassau County, N.Y. I would like to present to the committee Mr. Joseph Stenatto, the assistant district attorney in charge of my rackets bureau. On behalf of our national association and, of course, on behalf of the people of Nassau County1 I wish to thank the committee for giving me the opportunity to testify before this body concerning the influence of organized crime into national professional and collegiate sports. Prior to my election as district attorney of Nassau County, I was assistant district attorney for 13 years, most of which was spent as the organizer and chief of the district attorney's rackets bureau which was responsible for the investigation and prosecution of all matters concerning syndicated organized crime. For those of you gentlemen who are not completely familiar with the Metropolitan New York Area, perhaps I should give some back- ground with respect to our county. Nassau County is a large, sprawling suburban area located on Long Island, just outside the limits of the city of New York. In the past 25 years, Nassau County, like many other suburban areas throughout the United States, experienced an un- precedented population explosion which brought the current census to approximately 1,500,000 people. While our county was traditionally known as the bedroom of the city of New York, it has, within the past 10 years, experienced a mas- sive commercial and light industrial expansion as well. During the 1~50's several top figures involved in syndicated organized crime re- sided in Nassau County, but for the most part conducted their illegal activities within the city of New York. However, with the coming of the 1960's, and the tremendous population and industrial growth to which I have already alluded, several of these organized crime figures turned their attention to what they now considered a lucrative market- place for their illicit enterprises. As a result, more and more members of the five major syndicated organized crime families of the metro- politan New York area began to take up residence within the county. Intelligence reports prepared by both the rackets bureau of my office and by the police department of the County of Nassau now show that there are approximately 175 members of syndicated organized crime now residing in our county. Gentlemen, based upon my 22 years in law enforcement as a prosecu- tor, I say to you without any hesitation or mental reservation whatso- ever, that the life's blood of syndicated organized crime is their spon- soring of and their involvement in illegal gambling. It comes as no surprise to anyone who has any experience whatsoever in law enforce- ment that syndicated organized crime realizes hundreds of millions of PAGENO="0009" 1019 dollars, perhaps billions, in income on a yearly basis as a result of illegal gambling. This vast financial enterprise enables those individ- uals who direct the syndicated organized crime structure to finance their various other illicit enterprises, such as trafficking in narcotics, corruption of police and other public officials, and, most recently, the infiltration into other legitimate businesses and professions. Illegal gambling has now beer coupled with another most successful moneymaking scheme, shylocking. This illegal enterprise has become as lucrative as the gambling operation itself. There are those who believe that if syndicated organized crime were deprived of the profits of illegal gambling the power of the organiza- tion and its influence could not long endure. This is a most logical assumption. Flow this can be accomplished is indeed a most perplexing problem. Many espouse the cause of establishing and extending the coverage of State-managed or licensed betting systems to include bets on numbers, and all professional and collegiate sports, as well as `horse- racing. it is claimed that: one, it will `contribute to the extirpation of orga- nized crime by drying up the revenue sources vital to its operation; two, it will prevent the police corruption and official malfeasance which has flourished under covert private systems of wagering; three, it will provide government with needed financial resources and lighten the tax burden and, since people will gamble in any event, society might as well obtain some benefit from it; and four, it will make bet- ting more accessible for those who enjoy it and thus add an element of pleasure and excitement to life; indeed it will give the economically depressed and downtrodden some hope of redemption from an exist- ence that would otherwise be intolerable in its sense of hopelessness and irreversible defeat and even if such redemption never comes, the possibility of it will alleviate the grimness of the underprivileged condition. I cannot subscribe to any of these spurious arguments. It is my be- lief, based upon my own experience, that the legalization of gambling on sporting events and the offtrack betting on horses will have little, if any, effect on syndicated organized crime. First, the large bettor and even the small bettor, to some extent, does not want government to know how much nor how often a bet is made. Further, there is no question that substantial winnings at a govern- ment-sponsored betting parlor could not be concealed from the tax authorities. The better, with the clandestine bookmaker, does not have to concern himself with either of these problems. Second, government could not possibly offer extra services and con- veniences which the illegal bookmaker offers to his customer. Credit- and by the way, even if credit were offered by the government, their method of collection could not possibly be as successful and efficient as the method of organized crime. Going on, however, high-odds parlays, combination parlays, back-to-back bets, roundrobins, personal serv- ice, and many more. In my opinion, there is no question that govern- ment could not compete with the illegal gambler. I do confess that a certain amount of revenue could be available to governments at all levels, but as I see it, this revenue would come as an oppressive tax against the poor who can least afford to gamble. Legalized gambling PAGENO="0010" 1020 makes it more available to those people whom government seeks to sup- port. I even doubt that the amount of revenue to be realized is well worth the effort on behalf of government. The argument that all efforts to solve this problem in the past have failed, in my judgment, is without merit. Vigorous law enforcement can contain and seriously weaken orga- nized crime as is evidenced by the success of the law enforcement agen- cies within my own county. I would like to bring to your attention some of those successes. I wish to stress that in most of our organized crime gambling investigations there are indications that by far the vast majority of bets are accepted on sporting events rather than on horseracing. In May of 1966 my office conducted a joint investigation along with the New York Police Department. After several months of investiga- tion by the use of court-authorized wiretaps, informant information, and by constant surveillance, indictments were returned against 18 individuals who were involved in a $40 million a year syndicated or- ganized crime bookmaking operation. The principal defendants in this case were important members of the organized crime family of the late Thomas Lucchese, also known as "Three Fingers Brown." The investigation showed an intricate net- work of bookmaking activity, which was first discovered by my office within the Nassau County limits, and from the use of court-authorized, court-controlled wiretaps was found to extend throughout the New York metropolitan area. This particular illegal gambling operation was almost exclusively involved in accepting bets and wagers on sport- ing events. As a matter of fact the entire investigation showed that the number of bets handled concerning offtrack bets on horseracing was negligible. The ring leader of this particular organized crime gam- bling syndicate was at the time perhaps the most important bookmaker within the New York metropolitan area, one Milton Wekar. Over the years Wekar was a close associate of top figures involved in syndicated organized crime and this particular investigation reaffirmed that close relationship. Gentlemen, the Nassau County syndicated organized crime-sports gambling investigation which most concerns this committee, in my opinion, involved an international bookmaking layoff operation, which totaled a minimum of $100 million a year, within our metropolitan area alone. This investigation involved, among others, individuals by the name of Gilbert Lee Beckley and another. Beckley, a long-time close associate of several top syndicated organized crime figures in this country, as many of you gentlemen are aware, has disappeared. It is the opinion of many law enforcement agencies, including rep- resentatives of the Federal Bureau of Investigation, that Beckley was done away with by the top echelon of syndicated organized crime because of indications that Beckley might be cooperating with law en- forcement agencies. Ironically, gentlemen, the Beckley investigation began when representatives of my office were made aware of certain rumors involving some members of a professional football team who were residing in an apartment house located within the confines of Nassau County. I want to emphasize that the rumors were later found to be baseless. PAGENO="0011" 1021 As a result of these rumors, surveillances were commenced of the apartment house in question, and from these surveillances it was deter- mined that at least two known bookmakers were operating out of one of the apartments located in this building. There was no connection with the members of the professional football team residing in the apartment hotel. The fact that they were both there, I want to em- phasize, was sheer coincidence. But based upon this information, my office obtained a court-authorized wiretap. After just a few days of the intercepting and recording of conversations had over this tele- phone located within Nassau County, we became aware that this par- ticular bookmaking operation had roots not only in the metropolitan New York area, but in such other places as New Orleans, Miami, Las Vegas, Canada, and the west coast. As I have already mentioned, the key fi~ure in this organized crime operation was Gilbert Lee Beckley. As the rnvestigation unfolded, both from court-authorized electronic surveillance, as well as informant in- formation, it was learned that Beckley operated in this following man- ner, among others. And I would like to refer the committee to a chart I prepared. Beckley had many, many clients who would give him money to bet for them, using his expertise and his knowledge. We had learned from our own investigation that there were at least 10 individuals who would give him approximately $25,000 per week to bet, and he would take a percentage of the winnings. But he had his own method of operation, simply on the basis of an intricate informational system that he had throughout the country, a system designed to give him information about the conditions, the physical conditions of the players, on the various professional or collegiate teams involved in the games. I point out later in my statement that the information could come from any source that was connected with professional or collegiate sports. It could be the janitor in the locker room, it could be a locker room attendant, it could even be a player himself. But Beckley would immediately get information, for which he paid handsomely, from these individuals about the conditions, the physical conditions, of cer- tain players. Now, let's for the sake of discussion say that football team A and football team B were playing on a particular Sunday. The Monday be- fore the game the betting line would come out. Team B was favored by three points. And this is a very important part of the wagering system in professional and collegiate sports, not so much who is going to win or lose, but who is going to win by how many points. Well, if team B is favored by three points, team B must win by at least four points if one bets on team B. Beckley would take the money that was given to him by his clients- let's for the sake of discussion say it is $250,000, $25,000 from each of 10 clients. At that time, Monday morning, he knows that a key player on team A, the underdog, is severely injured and will not play in the game on Sunday. He also knows that if this were public knowledge, and if this were known to the men who make the odds, the point spread between team A and team B would be much larger. Therefore, on Monday he informs his clients that he bet their money on team A with three points. He picked the underdog with the points. PAGENO="0012" 1022 Therefore, if team B loses, or wins by less than three points, Beckley's clients would win $250,000, the 10 of them, and Beckley would get a percentage of that bet for his service. However, he does not bet that money at that time. He only informs his clients that he bet the money at that time. By the end of the week the injury to the key player on team A becomes known, the odds im- mediately change; recognizing that the key player, whether it be a quarterback, a linebacker, or a guard, makes no difference, but the team now becomes more of a favorite. The point spread, for the sake of discussion, goes to 10 points. So if an individual bets on team B, in order for that individual to win his bet, team B must win by at least 11 points. That is when Beckley bets the $250,000. The game is played. Now, on Sunday, if team B loses, or wins by less than three points, Beckley's clients win their bet, and Beckley collects a percentage of those winnings for his service. If, however, team B wins by between four and nine points, if team B wins by four, five, six, seven, eight, or nine points, Beckley's clients lose their bet. But Beckley, having waited until the end of the week to actually place the bet, has 10 points. He wins $250,000 without risking one single penny of hi's own money. Beckley became, as a result of this kind of operation, an exception- ally wealthy man. I should point out here that this investigation commenced at the close of the professional football `session in 1966 and continued on throughout the football season of 1966-67, as well as the basketball season of 1966-67. The investigation resulted in several arrests in February of 1967. Ultimately, as a result of this investigation, 22 individuals were indicted by the grand jury of Nassau County. If I may digress for a moment, there has been severe criticism about the treatment of these individuals, once they are convicted. I must state that in many instances this criticism i's justified. I refer to the sentencing, I refer to the pleas that `are taken. But, gentlemen, we are in an era of legal change. Law enforcement does not know from one day to the next what power it has and what is going to be suppressed by the courts. Recognizing that there may be problems in many areas, there are time's when pleas are taken in order to have some hold over the defend- ants involved. The hold is possibly a plea to a lesser crime because we fear that some of the evidence that we received or some of the evidence we obtained will be suppressed. We in Nassau County found ourselves in that position, too. Al- though we felt that our methods of operation were legal and con- stitutional because of court decisions, we were concerned that the in- formation we obtained, in many of these cases as a result of wiretap- ping, would be suppressed. As a matter of fact, it was suppressed by a lower court and appellate court. As a resultS we were forced to take pleas which I believe we would not ordinarily take. But rather than lose the defendants entirely, those pleas were taken. I might say that thereafter our method was sustained by our State's highest court and the information that wa's previously suppressed PAGENO="0013" 1023 was later admitted into evidence, insofar as other cases are concerned, similar cases. I wish we had had that information a little earlier, but these are the problems with which law enforcement is faced today. Our evidence also disclosed that Beckley would not only bet money for his clients but in many instances, when his information was excep- tionally good, he would bet his own money along the same lines as I have outlined above, waiting, or betting immediately, if an immediate bet was appropriate. You might possibly ask: Well, what happens if something happens to a team member on team B, what would happen then? Beckley wouldn't have to worry, because in order to protect himself he would just bet the other way and he is covered. At no time would he be risking any substantial money. Every bookmaker must protect himself. Every bookmaker works on a percentage. I think you gentlemen could well understand what would happen if $500,000 were bet one way and that team won. It would completely ruin and wipe out a bookmaker for years and years to come. To protect himself, a bookmaker lays off these bets with other book-s makers throughout the country. In that way he works on a percentage. He is guaranteed his winnings, no matter who wins. The successful bookmaker operates in this particular manner. If individuals bet with Beckley, for example, totaling $500,000 in one certain way, Beckley would bet with other large bookmakers in a different way, which would insure Beckley winning a specific percentage of the money bet. Because of his own information about the condition of teams and team players, he has even greater insurance than one would ordinarily expect. No one single bookmaker can afford to accept bets totaling several hundred thousands of dollars per week and, therefore, bookmakers are contacted throughout the entire country and these bets are laid off- In order to cut down the risk of interstate detection, the well-known bookmaker would call a number within his own State and then the individual at that number would relay the call to other parts of the country. This was commonly referred to as a tie-in line. In a particu- lar operation of another top bookmaker-whose name I don't mention now because his case is still pending in our jurisdiction-one of the tie-in lines was located on the campus of Louisiana State University. The university had nothing to do with the operation. The agent would receive the call from the bookmaker at a publ~ phone booth on the campus at Louisiana State and would relay the call from another phone booth right next to it to Nassau County, or other areas through- out the country. The apartment located within Nassau County, to which I previ- ously referred, was the New York area location that Beckley would call. The bookmakers located within this apartment would record the bets and in turn would telephone several Metropolitan New York area bookmakers and further place Beckley bets with these bookmakers up to the amount that they could financially handle. When Gilbert Lee Beckley and the several other defendants were ultimately arrested as a result of our investigation, a code book of PAGENO="0014" 1024 Beckley's was found containing the names of some of the most famous entertaimnent figures in the country, as well as several other important citizens. I am certain that this committee realizes the importance of the information that Beckley and the other top bookmakers of the country received. It was a simple matter to convince those with knowledge who were approached that they were doing nothing wrong. They were con- vinced that there was no attempt whatsoever to influence the outcome of the game and, therefore, there was nothing illegal nor immoral about getting this kind of information. However, years ago we ex- perienced the corruption of college basketball players with the seem- ingly innocent argument that we do not want to effect the outcome of the game, we only want to win by so many points. I am afraid that if we were to condone an unprecedented gambling climate in this country, by legalizing gambling, many more collegiate sportsmen would be taken in by this very tactful approach. Therefore, gentlemen, if this House committee is concerned about organized crime infiltrating into sports, I applaud your concern. I urge you to continue this investigation. Gentlemen, at this time I should like to testify concerning our ex- periences with attempts by various organized crime figures to infiltrate the sport of harness racing. Nassau County has within its borders a harness racing track known as Roosevelt Raceway. In mid-1966, based upon several rumors concerning alleged fixed races at Roosevelt Race- way, my office initiated an investigation of the underworld's attempt to fix a particular harness race which was run at Roosevelt Raceway on January 22, 1966. Our investigation disclosed evidence which tended to show that several harness racing drivers were involved in a conspiracy which was to permit one Robert Shuttleworth, a harness driver, to win this particular race; namely, the fourth race on Jan- uary 22, 1966. I would like to say that much of the information that we received that led our rackets bureau into this particular field came as a result of the great cooperation we received from the Kings County District Attorney's Office, under the then district attorney, Aaron Koota. Buddy Gilmour, who was also driving in this particular race, was supposed to go along with the others and permit Shuttleworth to win. Gilmour did not, in fact, go along with the others and won the race that Shuttleworth was supposed to win. When questioned about these incidents by both the New York State Harness Racing Commission and the Nassau County grand jury, which was conducting this investi- gation, these key drivers gave conflicting testimony, for which they were ultimately indicted for perjury by the Nassau County grand jury. As a result of Gilmour's winning the race, it was determined dur- ing the course of the investigation that he was physically assaulted by a known member of syndicated organized crime operating within the confines of Nassau County; namely, one John Malizia. As a result of this particular incident, Malizia was indicted for the assault on Gil- mour, and was convicted. If this investigation proved nothing else, it indicated that a con- spiracy to fix races among the drivers, themselves, would be impossible to prove without the testimony of the coconspirators. PAGENO="0015" 1025 I might also add that perhaps something could be accomplished in this particular area if the same system were adopted by the harness racing commission as is in effect in flat-track racing. That is, have a driver adviser, a trainer a trainer, and an owner an owner. This is true insofar as the flats are concerned. A driver cannot be an owner, an owner cannot be a trainer nor a driver, and so forth. But in harness racing, all three can be combined, and I think this gives strength to the possibility of fixing harness racing races, because the men involved are concerned on all levels; whereas if they weren't, and there was an attempt by the drivers to fix the race, sooner or later an owner or a trainer would become concerned. I don't offer this as a panacea, but I think this is one step in which this type of operation could be limited. Another investigation concerning attempts by members of syndi- cated organized crime to infiltrate the sport of harness racing can be illustrated by an investigation which came about as a result of a twin double racket, which was operating at Roosevelt Raceway. None other than Albert "the Blast" Gallo, now the sole surviving member of the infamous Gallo brothers, and one of his top lieutenants, "Butch" Musumeci, were arrested by members of the Nassau County Police Department assigned to my office for extorting protection money from petty criminals who were then operating the twin double racket. Our investigation disclosed that while these petty criminals were counter- feiting twin double rtickets and were successful in cashing these tickets, they could not operate without the approval of Gallo and without pay- ing a percentage of the money to the Gallo group. Because of our experiences we are now continuously alert to fur- ther attempts by organized crime figures to influence in one way or another the outcome of harness racing at Roosevelt Raceway. I would like to emphasize that during every phase of our investigation and at the present time, we have enjoyed the full and complete coopera- tion of the ownership and management of Roosevelt Raceway. They are as concerned as we are and stand ready to assist us in our every endeavor. These betting empires have now been combined with shylocking operations of equal magnitude. The moneys realized by syndicated organized crime from gambling operations are put back on the streets in the form of loans. Those unfortunate individuals who have bet on credit, and now need money to pay off those bets, the fact that the money may be bet at a legalized betting parlor is of no import, will borrow money in the hopes of regaining all that they lost. The shylock is there ready, willing, and able to help him fulfill these idle dreams. Let me indicate to you how organized crime con- ducts its Shylocking operations The boss, the head of the organized crime unit, will lend out his money to the underboss at, perhaps, 1 percent per week interest. The underboss lends that same money out to the lieutenants within the family at maybe 1½-2 percent per week. And the soldiers now lend the money to the borrowers, all along the streets, at whatever interest they can get, whatever the traffic will bear. They pay the soldier, the soldier pays the lieutenant, the lieutenant pays the underboss, and the underboss pays the boss. PAGENO="0016" 1026 This is a tremendous empire that has come about over the years and is a fantastic source of revenue for the members of organized crime. To give you an example of cases we specifically had in Nassau County. In one particular case, $1,000 was borrowed. It was to be paid back in 30 payments of $50 each-$1,500 on a thousand dollar loan. Now, in a second case, $350 was borrowed. This was to be paid back in 11 payments of $50 each, totaling $550 on a $350 loan. This indicates to you gentlemen that there was no rule of thumb insofar as the method of borrowing, the amount that was borrowed, or the interest that was charged. Loan 1: the amount borrowed was a thousand dollars, and the interest, or "vig" as it is called on the street, was $500. That was 50 percent; 50 percent interest. The interest rate was 1.67 percent per week. Therefore, 87 percent yearly; 87 percent a year on a thousand dollar loan. The second loan is even more incredible. The amount that was bor- rowed was $350. The interest, or the "vig," was $200. That is a 57-per- cent interest. The rate of interest, the 57 percent on 11 payments, amounted to 5.18 percent per week, which resulted in 269-percent in- terest on a yearly basis. Now, this money, as our evidence indicates and as our investigations indicated, in a major part of the time was loaned to bettors, bettors of all kinds. In this chart we show where a loan-sharking operation and a book- making operation were combined. They combined in using a pizza parlor as a front, a business front. Now, with the loan-sharking money and with the shylocking money, other crimes were financed-narcotics, prostitution. This is an actual case that existed in Nassau County. There were other stores involved, stores that were used for services. These or other stores provided places where betting could take place or shylocking operations could take place. In return they received certain moneys from the shylock. Or they had to pay the same kind of interest that the individual paid. But this one operation extended to every facet of community life. Its corruptive influence was felt severely in Nassau County. The combination of a bookmaking operation and a loan-sharking operation is quite the thing today, and from my own experience, I just do not believe that legalizing gambling is going to eradicate that from the scene. As a matter of fact, because of that shylocking opera- tion, even if there is any loss to organized crime in the amount of revenue that they get by legalizing gambling-and possibly there might be-I don't think it is going to affect them. You can take a cer- tain percentage of the profits away from General Motors, or any big business, and they are going to suffer because they have overhead to meet and they have certain obligations to meet. But this isn't quite so with organized crime. But even if it were, they would more than make it up by their shylocking operation. I recognize that the question of legalized gambling is a problem and is debatable today, and there are many, many who believe that this will be the answer. I cannot say that some of their arguments are not PAGENO="0017" 1027 without merit. I don't see it as a result of my own experience but, certainly, the fact that there is debate, that there is argunient, indi- cates the importance of this committee's work. Information must be obtained in order to come to an intelligent decision. I think a great deal more research is required and I don't think we should rush willy- nilly into legalizing this type of operation without a proper founda- tion, based upon intelligent information. Gentlemen, the experiences of law enforcement in Nassau County indicates that syndicated organized crime has exerted its corruptive influence in professional and collegiate sports. The extent of infiltra- tion depends on the acquiescence of the individuals involved in sports to the overtures of organized crime figures. The leaders of professional sports have recognized some of the problems and have done their utmost to correct weaknesses within their own systems which give benefit and comfort to syndicated crime figures. They have demanded that injuries be made public immedi- ately. They have established security systems within their own or- ganizations-I don't know how effective they are, I frankly doubt their effectiveness, because they could not afford the kind of security system that would be required, but at least they are trying-and have enacted strict rules of discipline where their persoimel is con- cerned. With all of this, I don't think it is safficient. Professional and collegiate sports are a way of life in this country. It can and does have a healthy influence oii your young men and women and provides wholesome entertainment for all of our citizens. Every- thing must be done to prevent the corrupting influence of crime to de- stroy it. Legalizing the most corruptive of all influences, in my judg- ment, is not the `answer. Implementing the rules and disciplines of the sporting world can help. Statutes requiring the publishing of injuries or sicknesses should be enacted. Immediate publishing. Statutes which prohibit the consorting with convicted bookmakers by anyone connected with the sporting world, directly or indirectly, should also be enacted. The Federal Government should also cooperate financially and with information and manpower, with local law en- forcement agencies since these agencies are in the best position to deal with local crime. Gentlemen, organized crime in the contemporary era has become a social problem of vast dimensions and overpowering urgency. It dial- lenges the very foundation of organized society and raises the profound question of whether free government is competent to preserve itself against the pervasive challenge of sinister private pow~~. With public support and with this committee's concern, law enforcement can suc- ceed. A short time ago, when the Federal Bureau of Investigation made public a wiretap conversation between Angelo "Gyp" De Carlo of New Jersey and one of his top lieutenants, it suggested opening gambling operations in Nassau County. De Carlo answered and I quote: "You guys are nuts. I would never go to Long Island for any amount of money. That's a bad county." With public concern, with a sincerity of purpose, and with total commitn'ient, we can make this entire country a "bad" country for all criminal elements which seek to infect our young, corrupt our citizens, and destroy our democracy. 81-068 0 - 73 - pt. 3 - 2 PAGENO="0018" 1028 Thank you very much. `Chairman PEPPER. Mr. Cahn, we thank you very much. You seem to us a very fine example of a vigorous law enforcer that is a very whole- some element in our country. Your position in the National District Attorneys Association sllows you have been recognized by your col- leagues as making a great contribution toward law enforcement. Mr. CAHN. Yes, sir. Chairman PEPPER. Mr. Phillips will inquire. Mr. PHILLIPS. One area I would like you to elaborate on, if you can, Mr. Cahn, is the area in which this information was funneled to Beckley. You say he paid off various people in various places. Could you tell us more about that? Mr. CAHN. Beckley had key men in the key cities involving football, baseball, basketball, and key cities involving the teams that were most concerned with the betting. Either a player, or a locker room attendant. To give one particular example, quite some years ago when Fran Tarkington was the quarterback of the Minnesota Vikings, the first time our evidence indicated one particular bettor, betting constantly, with or without the points, on Minnesota. Suddenly, at the beginning of the week there was a switch after many, many weeks of constantly betting on Minnesota with or without the points. I want to make it understood, neither Fran Tarkington nor the Minnesota Vikings had anything to do with this. But at the end of the week it was learned that Fran Tarkington was injured and wasn't going to play that week. And the bettor had made another bet; he bet on the other team for the very first time. We knew that he received that information right away. This is im- portant to a top bookmaker. The average $2 bettor, small bookmaker, is completely innocent and naive about these fine operations that the top men in the field recognize. Now, this information is transferred to bookmakers throughout the entire country who work for a particular top bookmaker. This is im- portant information and those in professional sports recognize it now, because they try to publish as quickly as possible information about the injuries to key players, as soon as it becomes known, to avoid the information going just to one particular source. And, of course, they try to educate all of their personnel, directly or indirectly involved with the sport itself, to keep away from this kind of particular situation. Chairman PEPPER. Mr. Brasco. Mr. BRASCO. Just a quick question, Mr. Cahn. I am sorry I was late. I just flew in from New York. But I listened with interest about your recommendation of legisla- tion that would prohibit sports figures to associate with someone who is a bookmaker. I understand exactly what you are driving at. I suspect that in and of itself might be difficult to accomplish, by virtue of legal implications, but do you think it would be helpful if we passed a na- tional statute which would prohibit anyone who is a participant in any sporting event in any way, from betting on that sporting event, or bet- ting, period? It seems to me the contacts begin when a sports figure starts to bet. Mr. CAHN. I think this is required by the sport, itself, now. PAGENO="0019" 1029 Mr. BnAsco. I don't believe it is a crime. I am talking about making it a crime. Mr. CAHN. Yes. I think any implementation in that regard might help. Let me say this: Because sports has that kind of position in our way of life here in this country, I think the players, themselves, must be like Ceasar's wife, above reproach. Even the suspicion of corruption might tend to destroy that sport and I think that would be a rather sad com- mentary in this country. I think sports play a major part in our way of life and I think it should continue. I think it is wholesome, healthy entertainment. The hero figures that come to the fore, insofar as our youngsters are concerned, also play an important part, and to have it destroyed by even the inference of criminality would be tragic. So your suggestion, in my judgment, has merit. Mr. BRASCO. Thank you. Chairman PEPPER. Mr. Murphy. Mr. MURPHY. Mr. Cahn, I was interested in your testimony regard- ing the reporting of injuries to key players. Is it not true that the trainer is the person who has sole responsibility to determine who plays on Sundays, as far as the team is concerned? Has the National Football League or American Football League taken any steps with regard to the issuance of these medical reports regarding key players? Mr. CAHN. I have been told by the commissioners that they require- and I don't know how they are implementing this, Congressman-but that they do require immediate publishing of injuries to their players. Mr. MURPHY. But the fact they publish an injury list does not deter- mine whether or not a player will be playing. That does not necessarily determine whether or not a player will be ready to play by Sunday. In my estimation, a trainer has the full responsibility in deciding whether or not a player will participate in a game. Do you agree with this posi- tion? Mr. CAHN. You may be correct, but I am certain that you have read in your daily newspapers a statement that so-and-so has been injured, he may or may not play this weekend. It is very difficult to tell at the end of one game whether an injured player is going to be able to play. Mr. MURPHY. That is right. This would be important as far as a bet is concerned. I suggest that there really are only three people who have that knowledge: The player, the trainer, and the head coach. I am wondering if there are any guidelines set down by the commis- sioner's office in these sports regarding the issuing of this information? Mr. CAHN. I don't know. Chairman PEPPER. Mr. Steiger. Mr. STEIGER. Yes. Mr. Chairman, thank you. I want to thank you, Mr. Cahn, for what I think is an excellent statement. One fast correction, at least as far as flat-racing nationally is con- cerned. Owner-trainer is a common practice in flat-racing. That does not mitigate the value of your statement, but I will just tell you that. Mr. CAHN. I will accept that correction, sir. I believe I am correct, however, insofar as the State of New York is concerned. I am not sure, now. PAGENO="0020" 1030 Mr. S~r1~mER. You are not, sir, but that is OK. Again, it doesn't mitigate the value of what you have to say. We have heard at least from one member of this committee, the apparently logical question asked several times-and I think you are competent to make a judgment on this 9uestion: Why isn't it better to have organized crime people involved in legitimate enterprises, even the ownership of racetracks? Why isn't that a better situation than having them out on the street, shylocking and conducting illegal gam- bling operations? I believe it was used as a rehabilitative type of thing. Would you care to comment on that? Mr. CAHN. Rehabilitation? Mr. STEIGER. Yes, sir. Mr. CAHN. How is that possible when they haven't been habilitated yet? Let me say this: I have seen the influence of organized crime in so- called legitimate business. One of the famous cases of it is "Three- Finger Brown's" interest in the dress business. He had, I think, six very successful dress factories. Mr. STEIGER. He had a real feel for fabric, I understand? Mr. CAHN. It was rather strange that he was the only one able to buck perhaps the strongest union in the United States, the ILGWU. None of his factories were unionized. Do you know what kind of advantage that has, so far as the com- petition in the dress business is concerned? I am sure you do. What I am saying is this, Congressman: It is the nature of the beast. They corrupt everything they touch. Mr. STEIGER. No further questions. Chairman PEPPER. Any other questions? Mr. WINN. Yes. Just one question. I want to commend you, Mr. Cahn, on a very fine presentation, your statistical and factual information. We have had a lot of discussion about the possibility of a Federal czar for horseracing. What would your opinion be on that subject, please? Mr. CAHN. I haven't quite focused on that yet. As a local law en- forcement officer and speaking on behalf of the national association. in this regard, we would prefer to keep enforcement as much as pos- sible on the local level, seeking the assistance of the Federal Govern- ment. I do not wish to comment one way or the other, but I believe that a lot more thought should be given to that proposition before the step is taken. I would hesitate to give an endorsement to it. I would hesitate to withhold endorsement. I think that a Federal czar, or a national commissioner, has proved quite successful in the baseball, football, and basketball fields. Mr. WINN. Those are not Federal czars. Mr. CAHN. I understand. And putting Government in charge of those areas scares me a little bit at this particular time. Mr. WINN. Thank you. Chairman PEPPER. Mr. Wiggins. Mr. WIGGINS. Have you observed a decline in illegal gambling activ- ities in your county since offtrack betting became lawful? Mr. CAUN. Well, we do not have offtrack betting in Nassau County as yet. Frankly, from the information I have gathered from law PAGENO="0021" 1031 enforcement agencies throughout the metropolitan area, we have seen no effect on organized crime. Chairman PEPPER. Just one question, Mr. Cahn. Do you find at the present time, in your opinion, there is adequate cooperation in fighting organized crime among Federal, State, and local law enforcement agencies? Mr. CAHN. Congressman Pepper, let me speak just for my county. Our relationship with the Federal agencies is above reproach. I couldn't ask for better relationship, especially in the area of narcotics, and with the Federal Bureau of Investigation. I truthfully have heard complaints from other local law enforcement agencies about the kind of cooperation they receive, but mine is beyond criticism. I have had the greatest cooperation. Chairman PEPPER. Mr. Cahn, we thank you very much for coining here today. Mr. CAHN. Thank you, sir. Chairman PEPPER. Mr. Counsel, would you call the next witness. Mr. PHILLIPS. The next witness is Mr. Howard Samuels. We have a quorum call. Perhaps it might be appropriate, Mr. Sam- uels, rather than interrupt your presentation, if we recessed for a short time. Chairman PEPPER. Mr. Samuels, could you come back at 2 o'clock? Mr. SAMITELS. Yes; I can. Ohairman PEPPER. The committee will recess until 2 o'clock. (Thereupon, at 12: 10 p.m. the committee was recessed, to reconvene at 2 p.m. this same day.) AFTERNOON SESSION Chairman PEPPER. The committee will come to order, please. Mr. Counsel, will you call our first witness. Mr. PHILLIPS. The next witness, Mr. Chairman, is Howard Samuels, who had a distinguished career in government and government service after a long and successful career in business. Mr. Samuels is the first director of the Off-Track Betting Corp. of New York State, of which he is going to tell us about today. Mr. Samuels, welcome. Chairman PEPPER. Mr. Samuels, w-e have been swearing all of the witnesses. I am sure you won't mind. STATEMENT OP HOWARD SAMUELS, CHAIRMAN, NEW YORK STATE OFF-TRACK BETTING CORP. (OTB); ACCOMPANIED BY RALPH SALERNO, CONSULTANT (Having been duly sworn by the chairman) Chairman PEPPER. Mr. Samuels, we appreciate your coming. We are sorry to have delayed you. Counsel, will you now proceed. Mr. PHILLIPS. Mr. Samuels, I believe you have prepared a state- ment. Would you please proceed with it, sir. Mr. SAMUELS. Yes. PAGENO="0022" 1032 First, I am glad I saw District Attorney Cahn this morning, because I would have though this was special treatment, of the largest bookie in the United States, before the committee. I would like to make a couple of comments initially. Mr. PHILLIPS. Is it your testimony that you are not the largest bookie, that Mr. Beckley is? Mr. SAMUEL5. No. Even compared to Beckley, I think we still are now the largest bookie in the United States. I would like to make it very clear, though, that I am the legal bookie. I might say, it is particularly propitious for me to follow the district attorney from Nassau County's testimony, and I think you are going to hear, members of the committee, a businessman's approach to attacking the problem of organized crime, rather than the legalistic approach; I will cover the question of its morality that was presented by the district attorney from Nassau County. In listening to Mr. Calm I almost felt like I was hearing arguments against the repeal of prohibition. I would like to present in the testimony today a strong conviction for a need of major change in national policy toward gambling, to get rid of the hypocrisy that exists in our society toward this basic issue. It is my conviction that if we legalize what is already going on in our society-and when Mr. Cahn presented his chart and showed the profits of the bookmaker, he alluded to the fact that this all came from pomts in the newspaper. You wonder who lives in the real world, because in the real world, points in the newspaper are only odds in the newspaper. In New York we even have odds on the baseball game in the news- paper. They are put there because people need them to bet, and mass numbers of people are betting, and what we have done by our hypo- critical approach to sports betting is given an exclusive franchise to organized crime, to what is probably one of the fastest growing busi- nesses in the United States. So what we are going to present to you today are some experiences we have had at ofitrack betting, and pleas for a new policy with some specifics involved in the new policy, and a `conviction that if we legal- ize the gambling that is going on in this country, put it under gov- ermnent control and public corporations run like tough businesses, that we could do to organized crime's gambling business what the repeal of prohibition did to the `bootlegger. In addition to this, it is my conviction from the analysis we made and the success we had in New York, that this, in addition-and I think it is the second purpose for legalizing gambling that is going on-would provide revenue between $2 billion and $5 billion a year for State and local governments. Ironically, when I ran and sought the `Governorship in 1966, I op- posed offtrack betting. I thought it was wrong for government to en- courage and license gambling. I came to learn that I was wrong. In 1970 largely through the influence of Ralph Salerno, who is an associate of mine and on my staff at OTB, and who is one of the leading experts in this country on organized crime, I learned, as Mr. Cahn pointed out, the major income, 70 percent of organized crime's income, comes from illegal gambling. I learned that, despite our moral protestations, PAGENO="0023" 1033 most Americans gamble, will continue to do so, and that more laws, more police, more courts, will not change human nature. So I learned that if government is truly serious about combating organized crime, we must begin to compete. To do so, I concluded that government should legalize that gambling which is already being controlled by organized crime. I differentiate that from new gambling whicth i's solely created, like casinos and slot macJhines, purely for revenue purposes. I think the purpose of government operation in gambling must not be just for revenue `by itself. OTB is a governmental instrumentality of the State of New York, established pursuant to detailed provisions of State law to conduct, offtrack, `a system of parimutuel wagering on horseraces. OTB as a public benefit corporation is, of course, also a nonprofit corporation. OTB was established for two essential purposes. The first purpose is to increase State and local revenues from the conduct of State operated and licensed parimutuel wagering on horses, in that all of its revenues after expenses are earmarked for the use of State and local government. The second purpose was to help combat organized crime. I think probably the easiest way to visualize OTB is to understand it as an extension of the track. When OTB takes wagers on a horse- race at a track in New York State those wagers are transmitted by wire to the track where they are combined with the bets taken at the track on the particular rate to arrive at one final set of parimutuelly determined odds on the race. `OTB takes bets in two ways. We take bets either in person at one of our currently 79 branches-we opened our 80th `branch this morning, actually, We will have 130 branches in the city of New York, and I have photographs of the branches so the com- mittee might look at them. We also take telephone betting. With telephone betting you deposit money with us, get a card that has your number on it, you call up, the operator answers the phone, you give her the number. She puts it in the computer and out of her com- puter comes a record of how much money you have. You make the bet, it is deducted from your account, and at the end of the race, if you win, it is automatically put back into your account. We are not here to congratulate ourselves, but I do want to point out `a few facts about OTB's extraordinary business success to date. OTB is one of the fastest growing corporations in the United States. It is rapidly `becoming one of the largest corporations in the United States, now operating at an annual rate of approximately $500 million. We have been in active operation, starting from scrateh, since April 8, 1971. In the first full year of operation, our profit will be approxi- mately $15 million. In the next fiscal year, starting July 1, our profit should run somewhere between $50 and $58 million. Our handle for the next fiscal year of operation is budgeted at over $700 million. We pres- ently have an average daily handle of over $1.5 million derived from an average daily number of bets approximating 426,000. We presently do a daily telephone `betting business of more than $50,000. OTB now has an average of 125,000 customers each day. By the way, we `have only been in business 14 months. Fourteen months `ago we opened our first office. OTB's success in New York City PAGENO="0024" 1034 is particularly impressive, I think, when we consider that OTB was started without any capital. We opened for business, relying solely on a $4.8 million loan from the city of New York. In the first year of operation we repaid, out of our revenue, $2.8 million of the $4.8 millioii loan. In addition, we will have approxi- mately $15 million for dividends to the city and State by the end of this month. I might add we run OTB like a tough business. The leadership of OTB, which now has over 2,000 employees, generally comes from spe- cialties in American business, with experience, not only in the startup of businesses, but in tough business operations as well. Our initial projection for fiscal year 1973, is that our corporation will do a gross handle of $706 million, resulting in net revenues of $54 million. If we got the cooperation of the racing industry, which has been very slow and difficult t.o come by, we probably could do $800 million this year, and probably in another year would be operating at about $1 biliioii in volume. Now, with the betting we get today-and we are doing about a mil- lion-and-a-half dollars a day, which means we are handling in and out almost $3 million of cash today and 500,000 separate transactions- you can imagine the business problem and the computer problem of handling and keeping track, and the security problems, of keeping track of every single dollar. We have today somewhere between 125,000 and 150,000 customers in our offices every day in the city of New York. That is almost triple the attendance at both tracks that run in the city of New York today. Chairman PEPPER. How does the volume in dollars of the betting in the offtrack centers compare with that at the track? Mr. SAMIJELS. Well, ontrack volume in the city of New York, har- ness tracks and flat tracks, together, is $1.4 billion. So every month, as we open up our offices, we are beginning to gain on them. I would point out, Mr. Chairman, that they have lost some business. I would be glad to answer some specific questions about that as we go along. Our success, I think, is particularly interesting because we started this without any capital. We started this corporation with $4.8 million worth of borrowed capital, and for those of you who are used to return on invested capital, when you start with $4.8 million and make $15 million net profit the first year, and $50 million the second, it probably goes down in history as the biggest business success story of the year. OTB, just as the tracks in New York State, retains 17 percent out of each bet placed with it. The operating costs of the corporation are first paid out of this retained percentage. I had hoped they would be down a little less than they are now. Next year they are budgeted to be about 8 percent, and at a billion dollars they would be probably 6 or 61/2 percent. We operate within the personnel practices of the city of New York, which I don't have to point out to you are relatively expensive in terms of personuel costs. We emulated in OTB in New York the Australian system. When I took over OTB, I sent the few members of the staff we first hired around the world to study the French system you mentioned, Mr. Pepper, and also Australia, and what was done in Japan and other PAGENO="0025" 1035 places. Eighty percent of our profit goes to the city and 20 percent of the profit goes to the State. I can assure you that in our operation we have tried to incorporate the most modern business techniques avail- able. Much of what we have had to do in startup, particularly in the computer area, has called for know-how of the most advanced state of the art and sometimes beyond. We have a lot of things to learn. We have to learn an entirely new computer system, which has not always operated the way we hoped it would. We handle 500,000 transactions a day. It is probably one of the biggest online computer systems in the world, and we have hid very little time to debug it, and computer systems very often require debugging. Locations for OTB branch offices are selected almost entirely based on the consideration of their potential business value. New York City is very densely populated. in addition, during the week we get a great influx of commuter traffic. It is a complex problem to open offices in almost all areas of the city, but this is what we are doing. I might say we open an office 17 weeks from the day we sign the lease, `and do it within government procedures. Again trying to indi- cate to you that you can run a government corporation reasonably like a tough `business. As to our success in poorer areas, I can state that our few ghetto offices are at about breakeven or only slightly profitable. They clearly do not achieve the profitability level of our offices in higher income parts of the city. One customer study done for us by an independent marketing firm showed that OTB is primarily an `activity of middle- income groups. Gambling in poorer areas, as you probably are aware, is confined primarily to "numbers" activity. This type of gambling is tailored to these areas because to play the numbers requires bets which can `be as small as 10 cents for a quarter. At this time we have not developed a marketing strategy acceptable to the State offtrack betting commis- sion t'hat will allow us to compete with the numbers business. I think that is possible, but I would much rather see us legalize the numbers in a public corporation. OTB has instituted a far-reaching security operation, covering all aspects of its operation. I am amused when I hear that the commis- sioner of the National Football League spends a couple hundred thousand dollars for security all across the country. We spent a million dollars. That is our budget for security. You can't handle $3 million of cash every day, keep track of it, all in small increments, without a very tough security system. All employees hired for positions within the corporation which can in any way be thought of as sensitive are subject to an extensive personal background check. Every `branch office is equipped with protection devices, both night and day. Access to the protected back- office areas of a branch is governed through bullet-resistant, elec- tronically operated doors. In addition, we employ guards in some of our offices~ and a roving field security staff throughout the system. The central facilities of OTB are located at. 1501 Broadway, in Times Square. At this location are housed our main computer com- plex, our telephone betting center and almost all of OTB central PAGENO="0026" 1036 departments. These facilities ~re supported by a 24-hour guard service with special augmentation given to the computer area by smoke de- tectors, perimeter alarms, electronic doors, and other devices. In addition to the precautions taken against physical intrusion, the OTB computer system has been programed to prevent fraud in the course of wagering activities. A unique feature of our procedure is that every individual betting ticket receives a special code number designation. If the ticket is presented for validation as a winner, the computer will determine whether the specific code number corresponds to a winning bet, regardless of almost any attempt that can be made to forge a ticket. Even if a forger should successfully alter the winning ticket so that both the code number and the betting information are both changed to correspond to an actual winning ticket, the computer will reject the code number if the same code numbered ticket had previously been presented for cashing. We actually have better protection against forging tickets than at the tracks, themselves. If somebody did forge a ticket and the ticket had been paid off, they can only get that one number paid off. If it was paid off before, the computer would reject it. We could get forged on one particular ticket, and that is all. The foregoing is but the briefest description of our business opera- tion. In the materials we have given you, you will find far more detail on the points covered. Now I would like to briefly go into the history of why OTB was created by the New York Legislature. OTB was created as a remedy to decades of experience of treating gambling as a crime. Ironically, about the only thing the traditional penal law approach to gambling has served to accomplish has been not to extinguish gambling, but to channel it underground into the hands of organized crime syndicates. Organized crime has grown like a cancer in the last few decades, primarily because of the penal law approach to gambling. And I think probably the two greatest areas of organized crime's growth today are narcotics and sports betting. In both areas I think new policies are required. As of 1967, when the President's Commission on Law Enforcement and Administration of justice issued its "Task Force Report on Or- ganized Crime," gambling income was though to constitute about 70 percent of organized crime's total income. The task force report esti- mated that organized crime's annual gross revenue from gambling ran somewhere between $20 and $50 billion, with profits to organized crime of approximately $7 billion a year. Just think what $7 billion a year in profits from gambling does to corrupt our police force, corrupt our politicians, provide capital for our narcotics, and now beginning to corrupt regular businesses. There is no reason to believe that such illegal gambling revenues to or~ranized crime have not substantially increased since 1967. Today, in 1972, it is very probable that organized crime's income from the illegal sale of drugs is increasing more rapidly than its in- come from illegal gambling operations. As I said i-o Mr. Phillips, I am on the mayor's narcotics council in the city of New York, and think, hopefully, sometime there will be some new national leadership in approaching drugs, as drugs are a PAGENO="0027" 1037 sickness and we must develop treatments for drugs. I would like some- time to present some ideas to the committee on this. I think it is very reasonable to assume, although unfortunately none of us can document the activities and income of organized crime, that the tremendous and growing revenues of organized crime in the gam- bling field have enabled it to fund and stimulate its income in the drug area. This thought is borne out in the "Task Force Report on Orga- nized Crime," where it is concluded that undoubtedly its illegal gam- bling income has enabled organized crime to fund its more insidious activities, such as drug peddling and loan sharking. That is the difference of opinion I have with the district attorney for Nassau County, that you just can't let organized crime's income continue to grow the way it has because of its other effects on society. The preceding discussion leads me to a fundamental inquiry, which I am certain is in your minds, as to the morality of gambling. I will begin by stating quite categorically that I do not consider gambling to be immoral. Gambling is one of the timeless pastimes of man. And to many it is a sport. The question of what is gambling and what is a sport is always very difficult to differentiate. We gamble in bingo. We gamble on horses. We gamble on poker. We gamble on the stockmarket. This is not to say that gambling does not lend itself to abuses. Of course it does. There have always been, and probably will always be, a small percentage of the population who will be unable to refrain from gambling to excess-many of whom are presently gambling illegal channels. It is the same kind of philosophy we faced with the repeal of pro- hibition. I am sure that when we repealed prohibition the same kinds of problems related and the question in reality is whether society can set these moral standards for the individual or not. We must always bear in mind, however, that this is an imperfect world, a world composed of individuals of wide-ranging faults. Today in the United States the simple facts are that people are gambling pro- lifically, because of the myopic attitude of Government they are doing it illegally, and they are doing it in the face of what are really rigid penal laws. And those penal laws are on the books of almost every State in the United States. In addition, many Americans are increasingly traveling to foreign countries to spend their tourist dollars gambling. You just have to go to any country outside of America today and find that this has been a major attraction for the American tourist dollar. People today do not view gambling as a matter of moral concern and I think you can understand that. Why should it be all right to bet at the track, play bingo at the church, buy a lottery ticket, and not be all right to gamble on the street corner? The whole moral hypocrisy of this question is no longer one that is really accepted by the public. They regard it primarily as a source of entertainment. The people of New York City, in a referendum in 1963, voted 3 to 1 in favor of offtrack betting. Perhaps one of the reasons why New Yorkers, and probably the great majority of Americans today, view gambling as an entertainment is because of increasing affluence in this country. In past time, when the standard of living was considerably lower, there was obviously more justification for being concerned about how PAGENO="0028" 1038 the average individual spent his money. In the past, it is true, that far fewer people could afford the luxury of gambling. In fact, almost all entertainment in the past was a luxury. Today this is no longer so. I would illustrate this point by noting that a customer survey-and by the way, we are doing another one now-one done by the firm of Daniel Yankelovich, Inc., in September 1971, showed that wagering with OTB was largely a middle-income. activity and that the people wagering with OTB were quite selective. and moderate in their wagering. Mr. PrnLLIPs. Could I interrupt? You stated there are approxi- mately 150,000 people coming in a day to bet; you also stated that in 1963, the New York City voters voted, three-to-one, in favor of legal- ized offtrack betting. From that, is shown that only a small portion of the people who voted for legalized offtrack betting are betting with you. Is that true? Mr. SAMUELS. But I think those people recognized they had no right to dictate morality to other people. Mr. PHILLIPS. You think it might have been selfishness on their part, to .get some tax revenue? Mr. SAMUELS. I think that is certainly part of what their ideas were. I think, by the way, our 150,000 will probably go to 250,000 when all of the offices are open. And if we had television, and could approach numbers betting, where somebody could bet a dollar and see the race on television at night., it would be much higher. And since we only take 17 cents out of a. dollar, it is relatively cheap entertainment. We might have half a million betting with us. The people betting with us are betting about $10 a dayS so that if we take 17 cents out of a dollar, they are losing, on the average, $1.70 a day. What is entertainment and what is gambling? It is about the price of a drink today in the city of New York. That, again, doesn't point out the fact that some people are going to be involved in excess gambling because of OTB, just as the repeal of prohibition meant that some people drank too much. The results of the Yankelovich survey are consistent with an inde- pendent study prepared by another well-known organization, Cresap, McCormack, Paget, during the summer of 1971, indicating the poor aren't gambling with us. They are not gambling with OTB, they are playing the numbers business. Based on both the Yanke.lovich study and the Cresap study, as well as on OTB's own operating data and experience, and its own surveys, OTB's real estate department selected further offtrack betting offices in central business districts, middle-income residential communities, and commercial areas. From my view of the facts of gambling in the United States today, I would say that in those States where the traditional penal statutes against gambling remain on the books, that gambling in such States can only be classified as a victimless crime. Victimless because the vast preponderance of people wagering in such States can well afford to do so, and are doing so without harming themselves or their families in any way. Additionally, the moral argument against wagering has been re- solved for quite some time by legislators acting with the mandate of PAGENO="0029" 1039 the people who elect them to office. More than 30 States, embracing more than 80 percent of the population of the United States, now allow local parimutuel wagering on horseraces; more than $5 billion per year are now being wagered in legal fashion by a constituency made up of millions of Americans. Recognizing the basic fact that the people of this country intend to, and are intent upon, gambling, even in violation of the law and even with the consequence of aiding organized crime, we cannot be so fool- hardy as to continue to make illegal something which people no longer consider to be immoral and illegal. I believe it is more moral for Government to legalize gambling than it is to force people to gamble in the unregulated and ruthless domain of organized crime. What we should do, and what OTB is attempting to do in New York, is to recognize the dangers inherent in gambling and to attempt to bring gambling within the control of legalized gov- ernmental wagering systems where it can be carefully regulated and where the wagered dollar will ultimately be returned to the people, either in the profits of OTB or in winnings. When you really look at the facts, our operating costs will be about 7 cents on the dollar. This is not to say that I don't expect the moral convictions of those who view gambling as an evil; I would be the last one to cast any as- persions upon such a time-honored belief. However, I believe legalized gambling is the lesser of the two evils. I would also stress that the movement of the law from a prohibitory to a regulatory approach to gambling would in no way violate the firmly held beliefs of those who think that gambling is immoral. Such people would in no way be forced to gamble in violation of their prin- ciples. But such a movement of the law would do justice to the prin- ciples and freedom of those who are in favor of partaking of govern- mentally regulated systems of gambling. Traditional law enforcement of the penal law-s on gambling is result- ing in increased waste of public funds and corruption in this country. To illustrate: in New York City alone in 1970 it cost in excess of $7 million in police manpower costs-not counting the costs of equip- ment, court processing, and prosecution-to investigate gambling offenses. I might have said, if Congressman Waldie was here, that in Chicago last year there were 5,000 gambling arrests and one person went to jail. In the State of New York in 1965 and 1966 we arested 10,000 people for felonies in gambling-10,000 people in those 2 years-and one person went to State prison. The New York City Police Department categorized the results of this enforcement effort as "picayune," in as much as it was able to obtain from this effort only a few gambling convictions, and even fewer fines. The department said that these results were looked upon by the illegal gambling fraternity as a "minor license to engage in gambling." Those New York City figures are probably a fair reflection of gambling law enforcement costs on a nationwide basis. On top of this, special hearings conducted in New York City last year by the Knapp commission revealed that bribery arising out of illegal gambling is one of the major causes of police corruption in New York. I have no doubt that this is probably true of most other jurisdictions in the United States as well. PAGENO="0030" 1040 I would like to touch on two other points. The first is the question of what effect OTB is having on organized crime. Before telling you what our research has shown on this question, allow me to put the question in a little better perspective. The sport of horseracing constitutes, on the basis of the best police information we have available to us, only a minimal fraction of the bookmaking operations of the average bookmaker in New York; only about 10 to 15 percent of such business. Therefore, no matter how effective our present OTB operation is, there is no way that we will, alone, be able to drive the bookie out of business. This is why we recommended, and in fact, the New York State Legislature adopted, a resolution this year which could in 2 years' time result in amending the New York constitution to allow the establishment of governmental wagering institutions to handle wager- ing on all sports and numbers. Sports and numbers are `by far the largest income, from any studies that we can see, of organized crime's gambling business. In addition, at the present time in the limited area of horseracing, where we can compete with the bookmakers, the bookie has two sig- nificant advantages over us. The first is that the bookie extends credit which we currently do not. It is my personal feeling that this is not a major disadvantage. The `bookmaker doesn't take your credit very long. The second is, and I will go into this again in a minute, that the illegal, clandestine operation of the boOkie allows the customer who bets with him to avoid his Federal income tax obligations. Despite these current handicaps, however, the limited information we have been able to gather reveals that we are hurting the bookie in the horseracing area. The September 1971 customer study done for us by Daniel Yankelovich, Inc., revealed that those customers now play- nig with OTB who prior to OTB had bet with bookies-approximately 40 percent of our customers-still continue to play with the bookie but have greatly reduced this activity from an average of 20 plays a month to 12 plays a month. This was done when our system was not very effective and we had long lines in our offices. As I mentioned, we are doing this study again. Also, certain confidential information we have received has indi- cated that are hurting the bookmaker in the horseracing area of his business. This does not support what the district attorney from Nassau suggested today. For example, these confidential sources indicate that we have cut into the street corner bookmakers business and have caused to close down many small bookmakers in New York City who were doing the bulk of their business on horses. Additionally, although police officials are very reticent to go on public record on this question, many of them have indicated to me and my staff in private conversations that they think we are hurting the bookie very much in the area of horseracing. New York City Chief of Detectives Albert Seedman recently testi- fied that OTB was hurting the bookmakers. I would like to report that in Australia, where offtrack betting is very effectively and efficiently operated, after 8 years, the Australians say there is almost no illegal horse bookmaking going on. PAGENO="0031" 1041 We can also use commonsense in helping us to come to the conclu- sion that we are hurting the horseracing business of illegal bookmakers. I assume that the vast majority of people in New York and the rest of the country want to be law abiding. Therefore, I assume that when we make legalized gambling institutions available to them they will use them and do less and less wagering, illegally, with bookies. Like offtrack betting, running numbers and running sports, they would much rather bet legally. This has been the experience abroad. Further, I doubt that most reasonable men will want to run the risk of par- ticipating in a crime, even if a few dollars could be saved by their so doing, which is doubtful. Ask yourselves what you would do and what those people you know would do. Additionally, when people play with legalized institutions they know they are going to get paid when they win and they know they will not be put in personal jeopardy if they lose. The same truths do not apply to playing with a bookie. I think what I am really saying is the antithesis again of what the district attorney said today, but the district attorney doesn't realize you can run this like a business, with modern computer techniques, modern marketing, modern customer service techniques, and you just get the customer away from the bookmaker by providing this service in a better way and a legal way than the bookmaker does. I would now briefly like to outline for you two proposals for amend- ing Federal law which OTB is urging to help it complete more effec- tively with organized crime and to help it promote the sport of horse- racing, which we would like to feel we are part of and have some major responsibility for its growing strength in this country. The first of these is our proposal to amend the Internal Revenue Code to exclude from the gross income of taxpayers wagering gains made with governmental parimutuel wagering institutions, thus elimi- nating one of the two major advantages that bookies presently have over legal systems. We already tax them. We take 17 cents out of a dollar. The proposal will have almost no effect on Federal income tax reve- nues, inasmuch as the Federal Government presently obtains but nominal revenues from wagering income sources. Such revenue is al- most exclusively from taxpayers who have won in legalized pari- mutuel areas such as OTB and the tracks. The obvious reason for this is that OTB and the tracks report to the IRS taxpayer winnings of more than 299 to 1. * Illegal bookmakers make no attempt to report, and so gain a tre- mendous competitive advantage over legal institutions. And what the Federal Government is really doing, then, is giving the competitive advantage, no advantage really to the Federal Government, to illegal operations in competition with us, and that is something I think has to be corrected. While the proposed change will cause no damage to Federal reve- nues, on the other hand, it will serve to greatly increase State and local parimutuel revenues at the expense of organized crime. Greater State and local revenues resulting from this change might well be viewed as an additional form of Federal revenue sharing and would certainly reduce the likelihood of increased State and local taxation. Again, I want to point out to the committee that if the estimate of $7 billion of net profit that organized crime makes on gambling is PAGENO="0032" 1042 right-and I don't think, whether it is $5, $7, or $9 billion, obviously, we will ever know-it is not illogical if these were run by businesses, in a business way by government, that we could also make $5, $7, or $9 billion, and instead of that money going to corrupt our society, it would go to relieve State and local governments. OTB's second proposal is to amend 18 tT.S.C. 1084 to allow govern- mental offtrack betting organizations to transmit bets and wagers in interstate commerce for the purpose of establishing combined pools with out-of-State tracks. I view such an amendment to section 1084 as a mere teclmical amend- ment as it is consistent with, and, in fact, supplementary to the ex- pressed legislative purpose of section 1084, which is to combat illegal gambling operations. OTB was not in existence when section 1084 was originally enacted. If it had been, there is no doubt in my mind that the proposed exception to the prohibition of the section would have been allowed. The passage of this amendment to section 1084 will allow us to com- bine the bets OTB takes on out-of-State races with the bets taken at the out-of-State track involved. A combined pool means that all the bets taken offtrack are added to the bets taken ontrack on a particular race and go through the track totalizer to arrive at one payoff price. This is what OTB now does with tracks in New York State. In places like the Kentucky Derby, to place it in one pooi would give us all a chance by Federal legislation to pay the tracks and the horsemen who put the show on in the area and strengthen the sport itself and the relationship between OTB and the sport itself. Because section 1084 prohibits the transmission of bets in interstate commerce, OTB cannot presently combine its bets with those of an out- of-State track, transmitting them to the out-of-State track over inter- state wires. This results in OTB having to make its ow-n, separate pan- inutuel pools when it takes bets on out-of-State races. This, in turn, means that there is inevitably some differential in final OTB odds and payoff prices on the race and the final track odds and prices. This odds differential is not usually of significant magnitude, but it would be preferable to eliminate it through an interface with the track. Additionally, if section 1084 were amended to allow the OTB and out-of-State track to interface, it would mean that OTB could properly compensate the out-of-State tracks for the services the track would perform in connection with the interface. From this compensa- tion would also come revenue for the out-of-State horsemen and for the State or local treasuries of the other State. This is a brief summary of our current Federal legislative proposals. In the materials we furnished you, you will find a more detailed ex- planation of the proposals along with a suggested draft of the tech- nical legal amendments necessary to accomplish them. (See material received for the record at the end of Mr. Samuels testimony.) Mr. SAMUELS. I would like to answer specific questions that Mr. Phil- lips has given to me that he thought the committee would be interested in. I would like to make brief comments on several more specific ques- tions that we are often asked and that I thought would be of particular interest to this committee. PAGENO="0033" 1043 I just can't believe that th~ people who are fighting this want to live in the real world. I mean, the real world is a world in which, particu- larly with television, there has been a tremendous increase in betting on sports events. Mr. Pmr4LIrs. You are aware, I take it, that the commissioners of major league baseball and the National Football League, and apparent- ly other leagues, have strenuously opposed any expansion of legalized gambling on their sport? I think we have invited some of them to testify and we will hear from them later in our hearings. As I under- stand, their position is that betting on their particular sport would tend to ruin or corrupt that sport. Mr. SAMUELS. Very simple. If they want to live in an unreal world where there is no betting going on, that is fine. But they have to ex- plain to me why there are points and odds in newspapers. They just don't want to face the reality of what is going on. I point out in my testimony that there is much greater chance for betting to corrupt sports in the hands of organized crime than there would be if it was in the hands of government. You take a look at the examples that the district attorney had on his charts: Where a bookmaker has a chance to make $250,000 one way and zero the other he has got $250,000 to corrupt that game. What we want to do is to take that influence out and the way to do it is to let government, in a businesslike way, regulate that industry. Mr. KEATING. Mr. Chairman. Chairman PEPPER. Yes. Mr. hEATING. I wonder if I could make just a brief comment? Chairman PEPPER. Yes. Mr. I(EATING. I am rather new to horseracing, this investigation of crime, and offtrack betting. But I guess I would have to say that from Mr. Samuels' statement-and I know that he has worked very hard at this and very conscientiously__that I see a degree of rationalization that really bothers me. I should say at the outset, I couldn't disagree with him more. If you followed the rationalization, he has, then why not legalize all drugs, prostitution, homosexuality? It just really bothers me, the societal aspect, the real world com- ments, because we do have problems in our society and there is no question about it. But then, why not legalize all these things? This, to me, goes to the heart of the problems that we have in society today, when we talk about "Let's live in the real world" and let's rationalize this and rationalize that. Then we will be legalizing everything. Going into the legalization of gambling and the offtrack betting, and so on, I didn't have a fixed position, but I would like to say you persuaded me to the contrary so far. I yield back the balance of my time, Mr. Chairman. I just felt con- strained to make that comment. Mr. SAMUELS. Congressman, could I answer that comment? First of all, there is a very basic disagreement, Congressman, be- tween you and myself, obviously, on the morality of leadership and government and what is moral and what is immoral. I am smoking a cigarette right now. The question of society dictating morality has 81-068-73-pt. 3-3 PAGENO="0034" 1044 really led to a point where our police department spends most of its time attempting to enforce our morality and no time to enforce its laws. I am certainly not for the legalization of drugs. I am on the mayor's narcotic council, but the attitude of this country toward drugs has done nothing but increase crime in our streets because we refuse to treat the drug addict as a sick individual. That does not mean you legalize it,. but it does mean you take a different attitude toward the individual in terms of how you approach the problem. If you think, Congressman, that society has a right-and maybe it does-to dictate that there be no gambling in this country then you have to go all of the way. You have to stop all of the gambling. If that is the right and morality of government, and I question that, you have to get rid of parimutuels, all kinds of gambling in the conntry. But if you take the position one kind is moral and the other kind is immoral, it is the kind of hypocrisy which exists in society which the public doesn't accept. Mr. KEATING. I don't wish to engage in a debate on the subject, but I would say we are talking about a fundamental difference in the out- look of what government should do and should not do between us. And on the legalization of gambling, I can take it on a purely objective basis, but the societal aspect which you talk about, the rationalization really shakes me somewhat. I am sure that our outlook on all of these topics are quite distinct and quite varied. I think we are getting off the subject, but I felt very compelled to make that comment, because I can see the natural and consequential extension of what we are talking about. Mr. SAMTTELS. Congressman, isn't it also the same kind of decision we had to make in the repeal of prohibition? Is it more moral for gov- ernment to have a law that it cannot enforce and which people do not accept as basically moral, or should government have a law which a few people think is moral and dictate it to the rest of society? We made that decision. There is always a battle. There are always losers. You can't deal with the frailties of the human being. I think government has the moral leadership responsibility but it doesn't have responsibility to dictate morals to society. Mr. KEATING. How do you prevent that natural extension into the area of drugs, which you do, and are you making that distinction which you abhor? Mr. SAMIJELS. My feelings on drugs were not much different at one time than the President's report, which the President, himself, has negated. But, I serve where I've learned much. To treat addiction as we do, as a criminal question, actually forces crime on tile addict in- stead of dealing with his basic problem by providing rehabilitation. I am not, obviously, for legalizing heroin. I am not for legalizing any of those kinds of drugs, but I am for putting every drug addict under medical care aiid that is the approach I think society has to take, and begin to look at the causes that move people into it, whether it is smoking or whether it is drug addiction, and try to deal with those social causes. But if you try to dictate it in tile vacuum, you end up as we do in the city of New York~ with 70 percent of our crime caused by drug addicts who are basically sick and whom we force into a life of crime by refusing to recognize the need to rehabilitate. PAGENO="0035" 1045 You can't put your head in the sand on this, Congressman.. Mr. I(EATING. I don't think we have, and this committee has done a good job in the area of drugs, and several other committees that we are working with. We are talking about rehabilitation and medical treatment in a lot of areas, but there is obviously a very fundamental difference in approach to problems that you and I have. We would coincide in some areas on the treatment of addicts, and so on, which I feel very strongly about. Rehabilitation of prisoners, which I feel very strongly about. But I am convinced that there is a fundamental difference, which I think is raised clearly by your statement. I don't think this debate will serve any useful purpose, but I can at least point it out, and then get back on the topic. If you want to pursue it, I would be happy to, but I felt compelled to make the corn- ment I did. Mr. SAMUELS. Let me just finish the statement which answers, at least, my views to the Congressman. Our current penal laws and tax laws are making little dent in the profitability of these operations. The only way we are going to reduce and eliminate this illegal gambling activity on such great American sports as baseball, football, basketball, and hockey, is to establish governmental wagering institutions to handle and regulate betting on them. If you want to take for granted it is not going on, then you had better regulate points in newspapers and odds in newspapers. You can't have both. You can't have a whole industry which is promoting a good part of it and encouraging betting, and let the exclusive fran- chise for that betting sit with organized crime. It seems to me that if we can successfully compete with and drive organized crime out of these areas of gambling, we can concern our- selves less with the possibility of these sports being infiltrated by organized crime. if organized crime is making little money on the outcome of these sporting events, why should they be at all interested in affecting the. outcome of them? In my opinion, legalized gambling on sports will, at worst, only create another n'iinor pressure which the participants in these. events will grow to ignore. WTe should recognize the fact that the participonts in sporting events today know that people throughout the country are presently betting heavily on the outcome of the games in which they are playing. From my observance of these sports spectaculars, I have not seen that this knowledge on the part of the players has in any way affected their performance. I would call attention, for example, to the jockey in the sport of horseracing. All the jockeys know, before the race is about to start, what people attending the race think of their chances of winning. Up-to-the-minute parimutuel odds are constantly flashed before the eyes of every person present at the racetrack. With all this vigorous and out-in-tue-open wagering I do not think that the performance of the jockeys has been seriously affected. Could the jockey's performance conceivably be better if the only betting on the race was done illegally? I think we are talking about a fundamental, and I have to say, Congressman, if that is the view of the Cong. ress and the President of the United States, then you can't have it both ways. We have to PAGENO="0036" 1046 rigorously enforce the whole odds question, the whole points question: But what you are doing today? You are encouraging all of it on one hand, and leaving organized crime as the only means through which people can bet. I have been to dinner parties with distinguished members of business and other communities, where they have gotten up to see the football game in the evening, the results of the football game, and I am not at all sure their interest was not based on the fact they were betting on that sport, and the only place they could have bet was with or- .ganized crime. Mr. WINN. Mr. Chairman, may I ask a question there? ~Chairman PEPPER. Yes. Mr. WINN. I am a former sports announcer, Mr. Sarnuels, and I disagree with you on that point. I think a. lot of people get up~ in the middle of dinner to see the results of games. You know, there are still a lot of people that enjoy sport just for the sport. I don't believe that anywhere I recall in your testimony-we haven't let you finish yet-the fact that you have run any surveys to show how many people ~in this country like to watch sports just for the sport of it and have no intention of betting, whatsoever. Mr. SAMUELS. I think that is perfectly true. Mr. WINN. Do you have any facts? Mr. SAM'UELS. The only fact I can give you, Congressman, if you study the gambling reports in the city of New York- Mr. Wii~. I know, but New York is not the entire world. Mr. SAMUELS. I don't know- Mr. WINN. Some of you may think so, but it isn't. Mr. SAMUELS. Congressman Brasco, you want to answer that? Mr. WINN. I will take care of him later. Mr. SAMUELS. What goes on in all of our cities-and I have to say, the police enforcement people tell us, and this is a national committee, and if you had Mr. Carl Loch down th talk to you, he would again indicate data they have from all over the country, indicating a great proliferation of sports betting. I don't care if it is New York, Chicago, or my own little home town of Canandaigua, N.Y. I think this is growing, I think government task forces show it is growing, and I don't think we have any way of stopping it from grow- ing. I therefore, feel, unless there are going to be other regulatory approaches government is going to have on sports-i still think the sport is better off and society is better off by regulating it and putting it under government control. Mr. WINN. What concerns me is that if we went along with your philosophy this committee might as well give up the 4 or 5 weeks we have already held hearings and let all of the bars down, let anybody do what they want to do. Mr. SAMUELS. No; you just take the leadership and change it. Mr. WINN. That is what we are trying to do. Mr. SAMUELS. I suggest to you, if you take the profits out of gam- bling and take the profits out of narcotics, not by legalizing it but by treating it medically, you would probaibly take 80 or 90 percent of its crime way. Maybe that is the businessman's approach. PAGENO="0037" 1047 Mr. WINN. We are not talking about narcotics. I don't know why we keep getting off on that, except there is a tie with the underworld, and I understand that. We are talking about organized sports and I think you are completely off base when you `don't realize the high percentage of people in this Nation-and I happen to be one-that can sit and look at the odds and the idea of betting never enters their minds. Mr. SAMUELS. I perfectly accept that, but I also point out the grow- ing number of people that look for the enjoyment of betting on that game. I think you have been at a dinner party, and I have, too, where we have all made little bets among ourselves on the outcome of the basketball game. Some people like to do it. Some people like to stay, wi'th Mayor Lindsay, and watch the stockmarket all day, buy and sell. And that is a form of investment, but also a form of gambling. I think it is as American as apple pie. Mr. WINN. You think gan~biing is ~? Mr. SAMUELS. We play cards at night. When I go out and play poker, it m'ay be for only $4 or $5, but it is part of the fun. There is a difference between what is gambling and what is entertainment. We treat the words synonymously. A lot of people look at this as entertainment. Mr. WINN. I think there is a great deal of entertainment in sports and I think that is a good reason why we are getting more and more sports coverage on TV, `but not for the betting. And that is why I completely disagree. Mr. SAMUELS. I think, again, Congressman, I say if the reality is that `betting is growing, I mean the task force reports, themselves, whether it is $20 billion or $50 billion, shown a growth of betting in illegal gambling that is going on in this country. You can just forget it and let it go away. Mr. WINN. We are not trying to let it go away. You have said that several `times. We have been sitting here for 5 weeks, trying to not let it get away from us. Mr. SAMUELS. What II am trying to suggest to you and one thing I would hope you would be openminded in looking at and I under- stand it is a major departure in this country in policy, is the question of legalizing it. You only have two ways. Fight what is going on now-and I really think tha't is almost impossible to do, based on the reality of society-or you legalize what is going on. And I hate to go back to prohibition, but it is part of the same philosophy and the same moral argument this country took on the repeal of prohibition. We decided we couldn't enforce prohibition, people liked to drink socially, they like to gamble socially. Mr. WINN. Yes, and they like to do a lot of things socially, too. I agree with the gentleman from Ohio, that I don't think this Nation, nor very many members of this panel, want to just let down all of the bars and legalize it, because some people think that is good for all of us and we ought to change the morals of this Nation. I disagree. We should let him finish `his statement. Mr. SAMUELS. I just think, Congressman, I am not trying to change the morals of the Nation, I am trying to realize the morals- Mr. WINN. It looks like one and the same to me. PAGENO="0038" 1048 Mr. BRASCO. Would the gentleman yield? Mr. WIWN. Certainly. Mr. BRASCO. We are talking about morality in betting? Mr. WINN. We were. Mr. BRASCO. But I don't really think that the betting itself is im- moral. it i~ when the contest, by virtue of the fact there is no adequate control over criminal influence, is not a fair contest that iimnorality enters the picture. This has been the dilemma of this entire hearing, what do we do about gambling, which is apparently an opportunity for organized crime to make profits. Do we recommend a greater measure of control or do we let it go uncontrolled with the full realization that people do bet and will bet or do we attempt to stop gambling everywhere, even at the tracks, in an effort to protect the public? Mr. WINN. I have yet to hear Mr. Samuels' testimony, and as I say, we haven't allowed him to finish. Anything that would take away from the points as far as offtrack betting, of controlling jockeys throwing races, or doping of horses, any of the things we have been talking about for 5 weeks. Mr. SAMUELS. Let me finish and then we can get back to the discussion, I wouldn't deny, however, that the further establishment of legal gambling institutions, institutions which will achieve their initial business success by taking business away from illegal gambling opera- tors, might serve to stimulate to some extent the activity of wagering. There is probably little doubt but that the total consumption of alcohol in this country has increased since the demise of prohibition. That, however, does not prove that the end of prohibition was a bad thin~'. Tiie thought to keep in mind, I think, when considering the further legalization of gambling is how it will affect the majority of people in this country. As I indicated before, such further legalization will be beneficial to the people because it will enable them to do legally what they are now doing illegally. It will end one hypocrisy. It will hurt organized crime. It will generate new revenues. It will reduce corrup- tion. And further, our market studies have shown that the vast ma- jority of people who do wager with OTS do so for entertainment, quite moderately, and certainly without the result of depleting themselves or their families. I think that really contains the philosophy which is a major difference, Mr. Pepper, between myself and some members of your committee. Third, it is charged by some persons within the racing industry that OTB is a "parasite" living off the work of others. I would say that not only is OTB not a parasite living off the work of others, but that, to the contrary, the expansion of governmental offtraek betting institu- tions will in the long run serve to promote the sport of horseracing and to enrich both the tracks and horsemen of the country. In New York OTB has been operable for oniy a little more than a year, and only in New York City. And don't forget, we have the only OTB operation in the country. Obviously, with any new institution, there arise a number of prob- lems. Our first year of operation indicated that the New York tracks PAGENO="0039" 1049 and horsemen with whom we were doing business were not being ade- quately compensated. Therefore, we immediately worked for a bill in conjunction with the tracks and horsemen, which was adopted by the New York Legislature, which substantially increased the compensation which we will pay to the tracks and the horsemen. And I want you to know-I think you do, Congressman-we tried to do even more than the bill that finally came out. Moreover, when more local communities in New York State have established offtrack betting systems, it is undoubtable that the combined ontrack, offtrack parimutuel revenues in New York will far exceed the parimutuel revenues of the tracks alone before the establishment of offtrack betting. The members of the committee may be aware of certain hostilities that the tracks and horsemen have expressed during the birth pains of OTB. Let me express to the committee my belief that much of this hostility *is often unfounded and has often been based on either ignorance or an erroneous concept of OTB. O'TB was not created to impinge on the profitability of the tracks and the horsemen, but to time contrary, to increase such profitability. Moreover, OTB was established for the broader purpose of corn- batting organized crime and increasing State and local revenues from parimutuel revenues. OTB cannot exist at the expense of the tracks and the horsemen. It is implicit in the very name of our corporation that we must work co- `operatively with the tracks and the horsemen. Without them, there could be no offtrack betting. OTB is a nonprofit public benefit corpora- tion. We are not in competition with the tracks. If we have in the initial year of our operation, or if we should in the future, unintention- `ally do temporary harm to the tracks or horsemen, we stand ready, as we have already done, to make it up to them with increased compen- sation. When I mentioned earlier we have 125,000 people betting $10 a day, you indicated that we either have some new customers or customers that are being taken away from the bookmaker himself. I am confident, however, that our operation will, in t'he long run, serve to generate increased interest in the sport of horseracing. In fact, in order to help immediately increase public interest in horse- racing, OT'B is trying to reach agreement with the tracks in New York `to televise some of their races. I think television can do for horseracing what it has done for baseball, football, basketball, and hockey in in- creasing public interest in these sports. But to do it for the sport, it has to be tied in with offtrack bettsing. Consider the fact that the majority of our population works full time, 5 days a week, thereby preventing them from attending the tracks. If these people are now and increasingly in the future able to wager at local offtraek betting offices or via telephone betting, isn't it fair to assume that wagering in legal wagering institutions can do `nothing but go up? In total effect, then, I think that the growth of offtraek betting in conjunction with the televising of races, and with increased compensa- `tion to the tracks and horsemen, should silence any contentions that OTB is a parasite or is no't cooperating with the tracks and horsemen. As to the question of whether OTB is hurting and/or failing to cooperate with out-of-State tracks. I would make the following re- PAGENO="0040" 1050 marks: First of all, the only out-of-State tracks on whose races w& have accepted bets on a regular basis have been the great tracks of Laurel, Bowie, and Pimlico all in Maryland. We took wagers on the races at those tracks with their full cooperation and we compensated them for the services they rendered us in connection with OTB wager- ing on their races. Of course, it would have been easier for us to take' bets on t'hese out-of-State races if section 1084, 18 U.S.C., discussed previously, was not on the books in a manner preventing us from combining our wagering pools with the ontrack pools at these Mary- land tracks; we could have tied this into their computers and paid off' at the same odds paid off at t;he tracks. As to OTB's taking bets on special racing events such as the Ken- tucky Derby at Churchill Downs, we have often offered consideration' in these situations in return for cooperation from the. track in question, but the response from the tracks has, for the most part, been less than `positive. In addition, these special racing events are usually ones of national importance and generally are held at tracks distant from New York. Because of their importance and status. there is no way our' taking `bets on them will in any way diminish their profitability. To the contrary, our taking bets on these races will only enhance the great- ness of their tradition and their importance in people's eyes. We took bets on the Kentucky Derby this year and the attendance at the track was over 103,000, the largest crowd in history. `On top of this,' there was national television coverage of the event. A fourth question I thought the committee might want me to address is who should run legalized gambling. My own preference in this re- gard would be to see such new forms of gambling conducted through a government-controlled public benefit corporation such as OTB. This form of operation provides the maximum amount of public scrutiny and control to an activity which has long been susceptible to grave abuses. Additionally, I don't see any reason for private individuals or' groups to profit from the operations Of a new gambling activity. I don't want to see us do nationally what has happened in Las Vegas and in England. I think that any revenues derived from this activity' should ultimately be returned to the people. In addition, government- controlled public benefit corporations reduce the risk of infiltration' by organized crime. Another question that your committee is obviously concerned with is' whether there should be Federal supervision of racing, or at least the licensing of it. I, frankly, do not know e'nough about other States, but it is my judgment that in New York State there is an extensive system which, i,f properly utilized, is sufficient to' provide safeguards for the' sport of racing. Recently the Governor, and I think judiciously, has decided this all has to be looked at again and is appointing a commission to review the whole coordination between racing and offtrack betting. New York tracks as well as OTB are carefully reeulated in New' York and employ rigid security measures to prevent illegal influences' on their activities. I am not suggesting those could not be improved, but certainly there has been a concerted effort in the State of New York to do this. In the materials I have given you, you will find a short summary of some of the security measures OTB employs to prevent infiltration by PAGENO="0041" 1051 organized crime and to prevent frauds against it generally by its customers and employees. Also included in the materials I have furnished you are copies of the New York enabling legislation which established and governs the conduct of offtrack betting in our State. It should also be remembered that institutions are really only as good as the people who run them. No degree of complex legal regulation and no amount of the most up-to-date security measures can insure that some individual or individuals responsible for the operation of such institutions will not be bought off or otherwise succumb to human frailty. Even the most perfect security cannot totally eliminate every possible attempt to fix a race, recognizing the ingenuity of sophisticated `criminals. Lastly, I would like to touch on what OTB can mean to other States of the Union. Just as in New York, I think that the adoption of off- `track betting by other States will help these States combat their oragnized crime problem; will result in greatly increased revenues to these States from parimutuel wagering; and will, in the process, greatly promote the sport of horseracing throughout the country. The States that will in time adopt offtrack betting will have the benefit of learning from the mistakes that we in New York made in our first year of operation. And we have made them. You can't start a half-billion-dollar corporation in 14 months without making some mistakes. Just as in New York, where OTB must harmonize with and complement the New York ontrack program, so the racing programs of the various States, ontrack and offtrack, will have to harmonize with each other in order to achieve the national purposes of increasing the revenues of the States and of starting to move organized crime out of the horseracing business. I would also like to point out and emphasize here that the ability of local and State OTB's to take bets on out-of-State races pursuant to cooperative agreement with out-of-State tracks is essential to the success of offtrack betting in the United States. Along those lines, I certainly would suggest this is a job for national standards and for some national kind of procedures. I am not talking about the Federal Government running these programs, but setting some procedures upon which States would work and cooperate with each other. Off- track betting in New York, as in any other State which will adopt it, must be a year-round business in order to accomplish its purposes of increasing State and local revenues and of combating organized crime. Bookmakers operate on a year-round basis and take bets on tracks all over the country. This is a fact of life. This is what we are up against. I would like to take this opportunity to thank the members of the House Select Committee on Crime for inviting me to testify today. I would also like to once again urge this committee and the Congress to take the handcuffs off, to change the Federal laws to allow Govern- ment to effectively compete with organized crime. This Nation must consider legalizing that gambling now monopolized by organized crime. We must change our gambling tax laws. The most effective way to strike a blow at or~anized crime is to allow Government to compete by legalizing that gambling which currently exists. I understand there is a philosophical question i~ere. I have changed `my views, as I mentioned earlier, since 19G6. I think I would have PAGENO="0042" 1052 agreed in 1966 with some of the comments that were made by some of the Congressman here. I now have said the reality is that it is going on, and the most businesslike, cost-effective approacth is to recognize that this hypocrisy only maintains organized crime in business. I think in a businesslike way we can take it away from them. Thank you very much. Chairman PEPPER. Mr. Samuels, we certainly are grateful to you for a very able and thoroughly prepared statement. Mr. Steiger? Mr. STEIGER. Yes. Thank you, Mr. Chairman. Mr. Samuels, I think one disadvantage you have is that you try to distill in one statement what obviously has been a position arrived at over a long period of time involving, I am sure, some factors you were unable to compress in this time. But on the broad question of legalizing all sports gambling, I would assume that it is your belief that in the event that occurred, that a portion of this $20 to $50 billion would accrue to the governments who were running these sports,~ would throw influence there. There would be a great deal of money bet legally on sports. Is that correct? Mr. SAMUELS. That is correct. Mr. STEIGER. Then, where you lose me, Mr. Samuels, is not in the morality of it, but in the very pragmatic situation in which it is now profitable for some people to fix the outcome of a sports event because they are betting on it. In fact you, yourself, referred to the *basic human frailties. No matter how rigorously we structure a piece of legislation or law there will be people who will attempt to break it. Mr. SAML1~LS. I think that is right. Mr. STEIGER. Good. We cannot now control the tampering with the outcome of sporting events, all sporting events, racing as well as team events. Now, if you will, that the pot is even bigger and the demands. of operation are not incumbent upon the gambler and the fixer now only has to go bet his money legally, which, of course, endows him with a new status, why wouldn't he have even greater incentive to fix the outcome of the sporting events? Mr. SAMUELS. District Attorney Cahn's charts explained it better than I can ever explain it to you, but the fixing of a sport is less a prob- 1cm of the person who is gambling on the sport then the person who takes the bets and puts the odds together and has the kind of profit- ability potential that District Attorney Calm projected. Don't forget, we in Government would run this on a parimutuel basis. We would have no incentive to fix the sport. The fixing of sports is more a risk by the person who is taking the massive number of bets and who holds the bag and who can see a huge profit because of the way bets have come in, than it is the individual bettor himself. We are going to take him out of the business because we in Govern- ment are going to do the business. I contend there is less of a risk of corrupting sports under Government regulations and with Govern- ment being the banker than the present method upon which organized crime is the major banker. Mr. STEIGER. Of courseS you really don't mean that the bookmaker is going to profit out of fixing the game, because he is only going to PAGENO="0043" 1053 profit if he knows to what extent he is likely to know more about the outcome, whether it be through a fix or some special knowledge. Mr. SAMIJELS. Can I explain that to you? Let's take a game between the Jets and the Colts. Let's take for granted that the points are even, but the bookmaker sits and he has gotten $250,000 on one team, and he has only got $100,000 on another team. He has got a tremendous profit potential in fixing the sport. He has maybe $150,000. Mr. STEIGER. Now, Mr. Samuels, right there: What you are saying is the guy who is booking this action, the guy whose whole life has been mixed up with sports betting, and we know we are now in our third generation of that kind of person, we are going to put him out of busi- ness with legalized gambling. You don't think he is going to continue to gamble, even legally? You don't think he is going to continue to bet that kind of money on sporting events, and you don't think he is going to have the same knowledge to bet? Mr. SAMUELS. Don't forget, he has to be a bettor. lIe bets with us. We take a percentage out of that. Mr. STEIGER. Excuse me, sir. Right there is where I line up very solidly with Mr. Keat.ing and Mr. Winn. Right there you see what we are saying-and we say this now in States already, I might add-is that it would be a terrible thing if somebody fixed a game to wii~ a bet, but as long as the State gets a piece of the action it is better than letting organized crime run off with all of the gravy. I have heard this if you will pardon me, Mr. Samuels-not in New York, but I have heard this with respect to many States with inade- quate parimutuel laws, in which they say, "Well, we really don't care what happens at the races as long as the State gets a piece of the action." It is that posture that scares me. Mr. SAMUELS. I really haven't explained this very well, then, Con- gressman, because the profitability of the bettor who is betting $500 or $1,000 on a game- Mr. STEIGER. I am not talking about him. I am talking about the guy who is going to continue to bet $100,000 on the game if he thinks he has enough edge. You know those kinds of people. Mr. SAMUELS. First of all, part of what is done at tracks now, and part would have been done by us, we would know all of the people that bet that kind of money in the game. Mr. STErnER. Mr. Samuels; come on now, Mr. SamiTels. Mr. SAMUELS. If somebody came up with a hundred thousand dollars? Mr. Si'i~IGEn. Nobody is going to come in with a hundred thousand dollars. Fifty guys are going to come in with $2,000. Mr. SA~ruELs. First of all, not a lot of people are going to come into legalized gambling with that kind of money. They are going to have to explain where they got the ~100~000. The second thing, that isn~t where the majority of the money comes from. Don't forget, he has $150,000 on one team and $100,000 on another. It is a combination of $500, or $1,000, or $2M00 bettors. It isn't his $250,000 or $100,000. So in reality, I don't think it is the individual gambler who is a real threat to sports. The threat to sports is the guy who is booking. Mr. STEIGER. Who handles the action? PAGENO="0044" 1054 Mr. SAMUELS. Who handles the action. Mr. STErnER. I agree, under the present structure. You are saying if we modify that structure we do away with the guy who handles the action. You say you don't really think he is not going to continue to play. He is going to play under the new rules and what Mr. Brasco pointed out, very properly, the thing we are really concerned about, is they are going to tamper with the outcome of the game. That fear is still going to be a valid fear. Mr. SAMUELS. But you see- Mr. STEIGER. I will say only one thing, if I may, because your time is valuable. I think your thinking on this matter is probably very advanced, and with all due respect to the political realities, at least outside of the con- fines of Manhattan Island, the political realities are that nobody is going to support legalized gambling, at least to my way of thinking, in the near future. But I would like to .get back to an extension of that, as far as off- track betting is concerned, in which your very responsible approach to plugging the racetracks into any action that is handled, and to per- mitting them to participate in the pool, is very practical and very sound, and one that might in some way tend to compensate for the recognized loss of attendance at the track. You recognize `the fear of the horsemen is that if offtraek betting becomes as successful as you envision it, on a national basis, we are going to need -four racetracks in the country and 800 `head of horses, and we can handle the whole thing. I don't happen to share the horse- men's fear at this point, only because I cannot imagine this country, coordinating on anything in that efficient a manner. But I will tell' you that the experience that you have had with the horsemen and racetrack owners of this country, not only with New York but those you try to deal with, unfortunately, is a typical reac- tion of this very unique industry. We haven't seen it in the reaction of those people who are responsible for the security of racing. There is a willingness to be blinded to the realities of life as it is; there is a feel- ing that any criticism of racing reflects on the image of racing and the image of racing must be preserved, even if it is lousy. That is their kind of posture. Now, the almost paranoid fear of offtrack betting that you met when you tried to deal with the horsemen, I suspect, has at last in part been overcome. Is that true? Mr. SAMUELS. I think, generally, there is a new view permeating the horse industry that OTB properly run, with proper compensation to the tracks and horsemen, can be the salvation of the growth of the industry, rather than a negative. I think this is becoming more and more evident throughout the country. But just recently I offered Churchill Downs money for taking the Kentucky Derby. They were televising the race, we were going to take the bets anyway, I would have liked to be able to provide some funds for the pension funds, or something, and gotten some cooperation from the Kentucky Derby people themselves. They wouldn't even talk to me. So they ran the race and instead of getting some money for pension funds, or the horsemen, or something else, which we think they deserve, PAGENO="0045" 1055 they didn't get anything at all and we made a lot of money on the Ken- tucky Derby. Mr. STEIGER. What did you handle on the Kentucky Derby this year? Mr. SAMDELS. About $21/2 million. Mr. STEIGER. What if that had been run at Aqueduct, what would the takeout have been? Mr. SAMUELS. They would have gotten, under the old law, 1½ percent. So they would have gotten $30,000 or $40,000. Under the new law it will go up to 2 percent. They would have gotten $48,000. Mr. STEIGER. I gather, in your view, since you made mention in your statement, the legislature was not as generous with the tracks as you were. I gather you have met some legislative resistance to the view that the tracks and horsemen must be properly compensated? Mr. SAMtJELS. I think so. I think there is a lack of understanding, particularly in legislative bodies, across the country of the dire plight of horsemen in this country, and the fact that the industry-I can't say this about all of the tracks, because I saw the Yonkers track with a net worth of $17 million sold for $45 million. So I don't feel so sorry for some of the track owners. But I do feel, in my study-and I am sure, Congressman, yours is the same-the plight of the horsemen in this country is a very bad one and there must he some way of increasing compensation to horsemen. I think the OTB office has potential. Mr. STEIGER. You are aware, of course, in France, with the publicly owned racetracks, and more generous participation by those tracks in their offtrack betting, they have been able to develop what at least to the objective viewer, I guess you would have to say, is not only very good racing, not only of the largest pots in racing, larger average pots than we have, larger average purses than we have, but also much cleaner racing than we have. Mr. SAMmTELS. I think, Congressman, two things could be analyzed. You know, in Australia, the tracks are publicly owned. I would not be against the consideration whether tracks should be publicly owned or whether they should be privately owned. I think there is great advan- tage to public ownership if public ownership can be run in a business- like way. And sometimes I worry about that, the way we have run some public things in this country. But on the other hand, I do think that if in the next couple of years, with cooperation. between us and the industry and a little cooperation from the legislature, we can greatly increase the purses to horsemen, mainly through the benefit of OTB. Mr. STETGER. I have another question, and I think Mr. Salerno is competent to respond to it. Mr. SAMIJELS. Can I just answer one thing I don't think I answered very well for you? The difference, really, between that bookmaker who has $250,000 and $100,000 is he has other people's money to pay off and to scourge the sport with. That is different from a bettor's money. It is much more massive than a bettor's money and has much more massive potential of profit. I again tell you my strong conviction is that the greatest threat PAGENO="0046" 1056 to sports in this country-and I agree with Mr. Winn, that it is a great thing that has happened to sports in this country through television, and the great interest in sports it has aroused-the greatest threats to professional sports are scandals. The greatest potential of scandals, I think, comes from letting orga- nized crime book the great growth of betting. And instead of Mr. Ro- zelle and Mr. Cahn attacking our program and putting it under the rug, without proper regulation of the industry and security of the industry, which iust is not present, I don't even know if it is possible, I think they should be supporting this as a way to keep sports cleaner and to insure there will be-you can't ever be totally insured-less scandal potential; ~because government and government control will be the bookie and ~:bookmaker, not organized crime. Mr. STEIGER. Again, it is very difficult for inc not to conceive of these same people, even using their own money-in fact, when they do use their own money that would compound the problem because then they would have to know the outcome of the game and they are capable of betting vast amounts of money and they are capable of attempting a vast fix, IMr. SAMUELS. Still arc capable. Don't forget, they won't have other people's moneys to do it with. Mr .STEIGER. Sure. They have other people's money in the sliylocking and narcotics. Mr. SAMUELS. Still possible. Mr. STEIGER. Do yon want to swear Mr. Salerno, Mr. Chairman? Mr. Salerno, I know I have told you privately, but I have never told you on the record, that it was the reading of your book that got me very interested in the whole picture or organized crime and its invasion into legitimate business. I would ask if, in your continued interest in this matter of organized crime, you have been able to make a judgment as to whether one of the newer industries which has invited the invasion of organized crime is the ownership of racetracks and teams? By "teams," I am talking about a11 professional teams. Mr. SALERNO. Well, I think, actually, with regard to racetracks, it has existed for some time, and I think we have of late been surfacing those hidden interests. I think we have found that people who do not appear on stockholders' lists, who do not appear as corporate officers, have in fact held proprietary interest in racetracks, and this has existed for quite some time, although we may not have been as aware of it as we have become lately. Mr. STEIGER. How about teams? Mr. SALERNO. I have not seen that with sports teams as much as I have seen it with racetracks. Mr. STEIGER. I gather you share Mr. Sarnuels' enthusiasm for the potential of offtrack betting nationally? Mr. SALERNO. Yes, sir; I do. And I think I would like to respect- fully point out to Mr. Winn and to Mr. Keating, too, that most forms of legalized gambling which have taken place, particularly those in the most recent 5 years, State lotteries, offtrack betting in New York, and so on, from the point of view of what should tell the public or what the public should have, most of these have been subjected to public ref ei'endum. PAGENO="0047" 1057 So that what does come about is an expression directly by the people on a specific issue., as well as the fact the. legislative action which is taken to submit this to the people is the legislative leaders responding to the electorate that they represent. So I think we have in both of those forms, legislative action required and more paiticularly, when a referendum on a specific issue is placed before the people then we have a test of what it is the people want and what their moral position might be. For example, in New Hampshire, when New Hampshire became the first State to try a State lottery, that was put to the people in a referendum. It was suggested that it should be reviewed after it had be.en in existence for some time, and that was built into the enabling legislation. The original vote in New Hampshire was approved by the people in that Stat.e by a vote of 3 to 1. When it was reviewed 2 years later, after experience to test and look at the referendum, it was approved by 5 to 1. When they did it 2 years later, the people in New Hampshire ap- proved by a vote of 7 to 1. It was felt at that time it would not be necessary to have another referendum unless someone specifically wanted to call it in the future. I think that is the test of what the people in a given community or State would like to have. Mr. `STErnER. You are aware, as Mr. Winn points out, there are States, for one reason or another, who have rejected parimutuel wagering even with great consist.ency. Usually, at the behest of the bookies, I might add, who fund the program to defeat the program of pari- mutuels. Mr. SAI~ERNo. I think you do find some rather strange people on the same side of the position. Some are very sincere in this opposition, and this might he a church group. `Mr. STEIGER. One point: In light of your interest in legislation, do you feel because we have come to sort of `a general unspecified con- sensus that there has not been a good job done in the policing of racing in this country on a national basis? Obviously, there are some excep- tions. One of the things we have discussed here on the committee is the possibility of a full disclosure of the ownership of racetracks requirement. Do you feel that would he useful as far as the States are concerned in at least keeping out undesirable owners? Mr. SALERNO. Yes. I think the strongest regulation that could be made for disclosure should be employed. I think I have suggested before this committee and other committees of the Congress that the Federal Government might do that in other areas directly under its control. Organized crime task forces of the Department of Justice have gone to different parts of the community to study organized crime and in many places they find the peopJe they are expected to get evidence about and convict are contractors of the Governrneiit in one form or `another. One gentleman in New York was at the same time listed `by the Department of ,Justice as an important figure in organized crime and a contra.ctor with the U.S. Post Office Department, where he had bribed an official so he could submit bills for 35 trucks when he never owned more than. 22. PAGENO="0048" 1058 At the same time that gentleman was the beneficiary of a Small Business Administration loan. So I think a full disclosure and comparison of the disclosures between agencies of government could be very helpful. Mr. Sa~IGER. How about full disclosure in the area at least of the antitrust exempt sports: football and baseball? Do you feel a full disclosure of the ownership of those teams is a valid Federal involvement? Mr. SALERNO. Yes, I think it is. I think it would not impose any difficulty on the operation of the sport. I think they might welcome the increased confidence that certainly would come from such a regulation. Mr. S~EIGER. Then, the one other amendment that Mr. Samuels' refers to is a simple one, and I suspect mechanically it would be: the amendment which would permit interstate wagering on offtrack betting. If protection is to be genuine, it would `almost have to include the participation in the track pool of the moneys wagered; would it not? I am not worried about the benefits to the horsemen or the track. I am worried about manipulation by a horse paying 40 to 1 in New York, who is running in California at track odds of 8 to 5, or something. Mr. SALERNO. That is specifically what Mr. Samuels hopes to achieve by allowing bets to be placed across State lines. You would have a single pool with a single payoff price on that particular bet. Mr. STEIGER. Mr. Sarnuels, have you drafted any proposed specific language for that particular amendment? Mr. SAMUELS. It is in your package: (See material received for the record at the end of Mr. Samuels' testimony.) Mr. STEIGER. Good. Fine. I have no further questions. Chairman PEPPER. Mr. Winn. Mr. WINN. Thank you, Mr. Chairman. I have three questions. One is on the subiect of tax exemptions. Under public pressures, Congress and the Ways and Means Com- mittee's desire to close the tax loopholes we ham at the present time, I don't think that on are going to get much in the way of tax exemp- tions for legalized gambling, as far as credits. Would you explain your thinking on that? Mr. `SAMUELS. Let me explain the thinking on it. At the present time, it is my understanding of the Federal tax laws that you are supposed to report at the end of the year what your winnings are and your losses are from gambling and if you have more winnings than losses, you are supposed to include it in your income. This is just not done. The only revenues the internal Revenue De- partment really gets are the revenues that come from wagers made at the track and offtrack betting, and we do fill out a tax form when the winnings on a $2 bet are $600 or more. The reality is there is no major income to the Federal Government in this, but as we already tax at the local level, when you do that, what you do is encourage someone to bet wit'h the illegal bookmaker because if he wins he knows he doesn't have to pay a tax. PAGENO="0049" 1059 If he wins a big bet with us, he knows he is going to be investigated~ by Internal Revenue. So the suggestion I have--this is really not a tax loophole because it is already taxed at the local level-what we in reality would be doing is taking the handcuffs off of us and eliminating the marketing advantage the bookmaker has over us, which is a tax. advantage. Mr. Wixx. In either case, the Government is not going to come out ahead, except through the employees you are talking about. Mr. SAMUELS. The Federal Government isn't. The State and local. governments will come out ahead by an increase in parimutuel reve- nues, and society will come out ahead by the fact that the bookmakers, the illegal bookmakers, will have our stronger competition. One of the things District Attorney Ca.hn pointed out, he is going to be less able to compete with us because one of the advantages of competition. is going to be lost. We are in a competition. We have a competitor.. That competitor is illegal. We need all of the tools we can get to compete with him on an even basis, and then I think we can take the business away from him. Mr. WINN. If you set up OTB on the Kentucky Derby, who would collect the tax revenue, Kentucky or New York? Mr. SAMTTELS. What we would do is pay the Kentucky Derby a per- centage like we pay the tracks, or some kind of percentage, directly to them for the horsemen in putting the show on. When we take a bet on the Kentucky Derby in New York, the revenues would come back to New York. On the other hand, the same thing would happen in Kentucky. If Kentucky was taking a bet on a special race, like this Saturday we run the Belmont Stakes, which is a national televised race, if Kentucky took bets on that, they would pay the horesemen and the track for it, but the revenues would say in Kentucky. So each State would have an opportunity to make revenues, using this principle. Mr. WINN. You mean if you had an OTB setup in Kentucky and they bet on the Belmont, they would benefit from the tax revenues for the State of Kentucky? Mr. SAMUELS. That is right. Mr. WINN. And you would for the State of New York, for the bets you place? Mr. SAMUELS. That is right.. Mr. WINN. Do you think that is possible for the bookies to lay off odds with OTB parlors at the present time? Mr. SAMUELS. Yes; it is possible. We watch this very closely. Mr. WINN. How do you control that? Mr. SAMUELS. The first thing is, any time they lay off anything with. us, we take 17 cents out of a dollar. So it is not economically very logical for them to lay off with us. We watch our bets, and we get very few~~ large bets. Once in a while a $500 or $1,000 bet. We have a complete se- curity division, as I mentioned earlier. That is one of the reasons Ralph Salerno is on my staff, because we are very sensitive to the security~~ problem. I can't promise you it doesn't happen, but the economics of it don't encourage it. Mr. WINN. They are pretty smart guys. They are not going to put~. it all in one lump. 81-068-73-pt. 3-4 PAGENO="0050" 1060 Mr. SAMuELS. We take 17 cents out of every buck they play. Mr. WINN. I realize that, but I don't think it is going to slow them `down. Thank you, Mr. Chairman. That is all the questions I have. Chairman PEPPER. Mr. Keating. Mr. KEATING. I won't carry this on any further. We were speaking philosophically and I just found a thread of difference between us. I don't see any reason to renew the discussion because I think it is a philosophical one. Mr. SAMUELS. Sure there is. And there is a lot to be said, Mr. Keat- ing, on your side. I was on your side in this discussion for a long period of time. My views have changed. As Congressman Steiger men- tioned, I may be ahead of my time, but if I am accused of being ahead of my time that is the kind of accusation I don't fear. Mr. 1(EATING. I do not think anyone should, but I just hope you nrc not ahead 0-f your time as it relates to the whole picture in society, what I was really talking about, I guess I find it difficult to accept the fact that if you can't stop it entirely, to zero degree, then legalize it. I `sort of interpreted what you are saying in that regard, and I extended it, of course, to all other areas. Mr. SAMUELS. Actually, it is increasing. I think that is the serious problem. Mr. KEATING. So is the use of narcotics and these other things. Mr. SAMUELS. Sometime, if the committee would allow me, I would be glad to come back and present some suggestion on the whole nar- cotics field. Mr. KEATING. Well, in any event, I don't see any benefit to the com- mittee. We have recognized our differences on that subject and I think I will yield back my time and permit someone else to question. Chairman PEPPER. ~[r. Samuels, we will see if we can't do that. We are very much interested in the subject of narcotics. We have been working on it very diligently. We will try to find appropriate time for you to give us some of your thinking. Mr. SAMUELS. Let me say that I am committed to putting every addict under medical care. That is a relatively simple kind of dis- cussion. The question of how to develop medical care and in a cost-effective way for the Federal Government to get involved in medical care is something I would like to present to the committee. Chairman PEPPER. I don't want to detain my colleague, Mr. Brasco, from questioning, but one reason I personally have been a little re- luctant t-o advocate enforced rehabilitation or enforced treatment is because the methods of treatment that we have at the present time are relatively ineffective. Methadone is questioned very seriously by a great many people. Other methods of treatment are tried in different places with varying degrees of success. This committee recommended a few months ago an intensive research program, sponsored by the Federal Government, to try to develop a drug that would not have the defects of methadone, would not be addictive, would be a long-lasting drug, would not have miurious side effects or reactions upon the individual taking it, and that would be a relatively cheap drug to purchase. Now, we got our amendment substantially into the bill providing for the Special Action Office for Drug Abuse Prevention and research is PAGENO="0051" 1061 going on now, as you know, to try to find that kind of a drug. If we could find that, then I certainly would have no hesitation in recom- mending that the Federal Government, so far as it can, and the States, provide legislation that would make being a drug addict, or heroin addict, an offense that would justify the apprehension of that person and his or her incarceration for treatment. Not for punishment, but for `treatment. They are the perpetrators of a large part of our crime as Mr. Salerno so well knows. I know you have your problems in New York in trying to find the appropriate method by which you can best treat the numerous addicts you have now. Did you have in mind any particular type of treat- ment, or whatever is the best available? Mr. SAMiJELS. Congressman, I don't think the time is here for me to `present the total program. It involves, really multimodality treatment, and we have to understand that. What concerns me in terms of this, is the suggestion that we are going to stop heroin from corning into the country when 20 pounds of heroin per day, worth $~2OO,O0O in the black markeh is all that is necessary to feed all of the addicts in the city of New York. and if we couldn't stop a case of whiskey from coming in .durin~ proinbition, we can't stop that, This is a multirnodality prograni. We presented part of it, which `von might have read, which really in the end, what you have talked about is what we all hope for. is the drug, the one single-cure drug, that is ~roin~ to be eiven to an addict. `in J ~ orld like the opportunity of presenting ne~~ proposaJs in detail at a later time. I might say that this is something I have been studying now for 4 or ~ years. Unfortunately. I had the personal involvement of one of my children in drugs~ and this brings it much closer to home. I feel very strongly about the need for new concepts in this. We cannot wait very long. Mr. Pepper to solve this problem. It is the No. I factor in the decay of the city of New York, a.nd I am sure of other urban areas. And while I hope that the magic drug will come, I would like to present to you in detail some suggested new national `approaches. Chairman PEPPER. We would welcome you. 1~STe will be in touch with on. Mr. Brasco. Mr. BIIASCO. I wanted to commend you for doing what I believe to be a very good iob in a very difficult situation in terms of your author- ship and operation of the off-track betting system in New York. Let me say this: I don't believe Americans view betting as something immoral, and that is why I suspect they do it in great numbers. I am not siiguestlug every Amevican bats, but, however, there are sufficient enough bettors to keep a large number of bookmakers in business. I think that unless we get to a broader spectrum of being able to take bets in every caterory where a bettor has an opportunity to bet, we will never really find out whether or not we can put the illegal book- maker and ore'anized crime in that partjcnlar sphere of endeavor out of business. I suspect from my own personal observation, if the bettor is betting witl'm the bookmaker on 5pOrt5 other than racing, there is a `kind of alliance there that would prevent him from going to OTB, PAGENO="0052" 1062 because he has got other kinds of sporting events that he can bet on. So, unless we broaden the spectrum of legal betting how much we can find out about what the true picture is. While there is betting going on, Government ought to be involved in terms of number 1, setting down the strict regulations for the protec- tion of the public; realizing some of that money that is going to be bet anyway, for some of the critical needs of our day. Let me say this, though While I find myself in agreement with you, one thing does disturb me. I am wondering whether or not, by virtue of some of the advertisements OTB has, we are not getting into an area of possibly drumming up business among new bettors, and one of the things I must confess bothers me is that advertisement that has the shopping list for a woman to do, the woman with the carriage, and it says "Don't forget to pick up the kids from school, don't forget to get groceries, and get hubby's shirt from the cleaners, and don't forget. to visit offtrack betting." I wonder whether or not we are really dealing in a situation of tak~ ing bets away from bookmakers, or developing a whole new group of bettors. Mr. SAMIJELS. I think it is perfectly understandable. I don't know how to run a business without promotingthe business. Mr. BrAsco. I know you are a good businessman. Mr. SAMUELS. When the lottery started in New York, they said,. "Put down a dollar and help education." They didn't sell lottery tickets. New Jersey learned from New York's mistakes and really began to promote it and made it easier for people to play their lottery. Later~ New York went on to advertise, "Win a Million Dollars," and moved to weekly lottery drawings. Unfortunately, there is no easy way to be in the business unless you go after it. There is a risk you bring a lot of new people into betting who wouldn't bet before, and some people will be betting their house money. I say, from the profile of our betting and the amount of money they are betting every day, this does not seem to he exorbitant in the city of New York. The studies that were done in Australia-and I looked for them the other day but I couldn't find them-showed their analysis that the percentage of the gross expendable dollar that was going into the bet- ting, after they legalized offtrack betting, and what they estimated was going on before, are not much different. I haven't seen any studies like this in England since they completely legalized betting altogether. I think there is a. risk in this and 1 prefectiy understand your concern. But I do not know any other way to run a business, except to run it, compete, and organize it, and to develop marketing strategy for it. We are trying to develop marketing strategies in OTB to compete with the numbers business because we don't have legalized nunthers. We think if we had a dollar bet, for instance, and we could show that show on television somebody could bet a dollar who is betting a half a dollar or dollar with a numbers man, and have more money and get more earnings and se~ it on television, we would have to promote it in order to induce the people betting on numbers to bet with us. On the other hand, you get new bettors, and that is the risk we take. Mr. BRASCO. Another advantage in betting with the bookmaker is the question of credit. Being a former prosecutor, we had some of PAGENO="0053" 1063 ~those~ cases of problems that developed when the debt is not paid on time, and obviously comes to your attention one way or another. I am not terribly familiar with it. Is there a credit? Mr. SAXF[TELS. We take no credit at all. We take a few counterfeit dollars (sic) but not any credit, and not many of those. Mr. BIIASCO. A while back we heard some testimony with respect to a racing event at Yonkers, I believe, in June of 1971, where there was what appeared to be from the betting patterns and statements that were made by individuals who did bet on the racing event, that the race in question was a "boat" race, a fixed race. Let me ask you: One of the interesting things that happened at the track was that by virtue of the betting pattern they were able to dis- close some things that had happened, because the betting was done at the track. If the betting wasn't done at the track and it was done strict- ly in an OTB office or several OTB offices, could we detect that kind of problem? Mr. SAMTJELS. No. We have less control of people who bet with us, and as somebody pointed out earlier, they could go to a variety of offices and bet small amounts and we would not know it. Mr. BRASCO. With the hookup to the track and everything else, there is no way to combat that kind of situation? Mr. SAMUELS. No. Let me make a couple of comments about that. I am very concerned about security at the tracks. It is my personal conviction that for every one race that is possibly fixed, there are hundreds of thousands that aren't, and the risk of fixed races are the same risk we had in American business that I have seen. The effective control of this has got to be constant surveillance. I think this is one of the things the Governor's commission in New York, where I think we have the best racing and the best surveillance in the country, still has to look at-greater surveillance in the industry. We have made arrangements. For instance, if we went to television and promoted the superfecta at Roosevelt, Mr. George Levy, who heads Roosevelt, suggested to us, and we agreed, we would have our own surveillance people at Roosevelt. We think there should be more surveillance at the track and when we get a lot of public money and more OTB money, we think we have a responsibility to do that, and *that is where we would try to be forceful. People bet with us an hour before the race, and at the harness tracks they bet with us mostly during the day, so there is less possibility of intrigue involving OTB than there is at the track, itself. Mr. BRASCO. Can a better bet any various combination of bets as they would at the track? Mr. SAMUELS. Same combinations as at the track. Mr. BRAsco. Let me say this in conclusion, Howard. Again, I agree with your statements. I think we are dealing with a situation where people will bet. I don't know whether or not offtrack betting, just as betting within the fence on the track, is going to solve all of the prob- lems, but I do know that if we begin to look into the areas where orga- nized crime operates-and that is betting on all major sports-if we put Government out there with stricter regulations and control. I think we will have an opportunity to be more effective. I think when you look at it on balance, it is probably, as my col- leagues on the committee said, going to be a difficult road to follow, but PAGENO="0054" 1064 I think it is one of the roads to follow if we want to try to find a solu-~ tion to the dilemma we are in. Mr. SAMImLS. Thank you. I might say in conclusion, Chairman Pepper, again my conviction is based on the assumption it will be run in a businesslike way and we have to be assured that is going to hap- pen, that the legalization of sports and numbers and horse betting across the country, again I think in 5 years after it is in operation,. would do to the organized gambling business what the repeal of pro- hibition did to the bootlegger. I know this is a new road. I can't say for sure we can do the job. I just have to say what has been done to date, and much I have heard discussed is more of yesterday and more of the same. I think the Federal Government at least ought to test this and at- tempt to move in a new direction to see if anew direction isn't the way to put organized crime out of business. Chairman PEPPER. Mr. Samuels, we are very much indebted to you for giving us the benefit of your experience and advice in this matter. We consider the drug problem and organized crime problem as two of the most serious problems there are in this country. That is the rea- son we have been concerned very much about both of them. I think serious consideration should be given to any proposal or authority that might tend to diminish the menace of organized crime in this country. We are glad to have had your views on legalized gam- bling because you are experimenting on a rather large scale to see how it works. There is just one question I would like to ask, somewhat related to the question Mr. Brasco asked: Whether or not having your offtrack betting facilities increase the public participation in betting, or wheth- er it does not increase the total public participation in betting, and does take away some betting that otherwise would go to the illegal bookies? Mr. SAMUELS. Congressman, let me say two things: One is we have done one study, a scientific study done by Yankelovich. We are now in the process of hiring another marketing study scientifically done to analyze exactly what you are asking for. I can say from the first study we would have to say we do have some new bettors and the people betting with us have increased the amount of betting that is probably going on in the city of New York. We would also have to say that people are betting less with book- makers today and more with us. So I think both answers, I would probably have to say, and these are visceral feelings and only a small study, and we will make available to this committee the study that is going to be done now and should he finished within 6 months. I would be very glad to send to you, Mr. Phillips, a copy of this report, so you could analyze both factors. Chairman PEPPER. Weighing the two factors that you have de- scribed, does the diminution in the amount of money bet through the illegal bookies overbalance, in your opinion, in the public interest, the increased number of total bettors participating in betting? Mr. SAMUELS. I honestly believe it does. Don't forget, the average bettor bets with us $10 a day, not a hundred dollars a day, as they bet at the track. We take 17 cents out of a dollar. So we take $1.17. So PAGENO="0055" 1065 that is the average a person will lose.. The average bettor will loser $1.17 with us. Is that entertainment or gambling? What effect does it have on his family? It is not more than a couple of packs of cigarettes in New York. It doesn't make it right, but if it is entertainment, if he enjoys figur- ing out what horses are going to run in the morning and looks for the results, that is one thing. If it takes bread off his table, that is another' thing. Again, I want to go back to the concept, I am not sure government can regulate this, can dictate morality to society iii this particular' area. Each individual, in the end, has to have the strength of his own conviction to do things in moderation, just as the basis of what hap- pened with the repeal of prohibition. I think we would still have to. look. Even though we have more drinkers and more alcoholics our' society is better off with the repeal of prohibitio'n than it was with prohibition. Chairman PEPPER. In your opinion, how extensively is organized crime involved in bookmaking in the United States? Mr. SAMiJELS. Well, I can only read the same task force reports~ that I am sure you are familiar with. But as you pointed out, a lot of the ideas and concepts here have been attributed to by Ralph Sa- lerno, who I consider one of the great experts on organized crime. ~Te have estimated-and again these are estimates and I have seen a dozen of them-that in the city of New York, the total illegal gam- bling business is a minimum of $1 billion and probably $2 billion a year. And probably around the country, the figures that we h'ave seen' vary anywhere from $20 to $50 billion a year. Chairman PEPPER. Mr. Salerno, what would be your answer to that?' Mr. SALERNO. The degree to which organized crime participates? Chairman PEPPER. The question was: To what extent is organized crime involved in bookmaking in the United States? Mr. SALERNO. I would say to a very large extent. They t~ally domi- nate the field of bookmaking. In New York City, the New York City' Police Department takes the position there is no such thing as a 100- percent pure-independent bookmaker. That doesn't mean every book- maker is in organized crime. Sometimes he. is an independent, but he; is expected to pay them for the right to breathe. We have people in organized crime who will say: "I have 20 book- makers on my payroll." Meaning they pay him simply for the right' to stay in that business. So he is no longer independent of them. He may be part of organized crime, he may use organized crime for lay- off, hut in New York City we feel. the. entire bookmaking business is dominated and controlled by organized crime. Chairman PEPPER. Mr. Salerno, you appeared before this commit- tee at some of our early hearings in 1969 and, of course, gave very vaIn- able testimony in the field of organized crime. Since that time we have' passed the Organized Crime. Act in the Congress. Can you, at the pres- ent time, suggest any additional legislation or any additional excel- tive answer that could be taken hy the Congress or respectively by the Government of the United States, to attempt. more effectively to curb: organized crime? PAGENO="0056" 1066 Mr. SALERNO. Yes; I think some of the matters we have had under `discussion here are the things I think could be done. I think the legis- lation that has been enacted has proven to be very effective. I think the law enforcement thrust is beginning to sow some favorable re~ suits. To my mind, that is increasing the cost of that illegal business of organized crime. I would like to see that law enforcement effort paralleled with what Mr. Samuels has suggested here, increase the operating cost of that illegal business and take some of the customers away. If we do both- and I think we should try to do both-I think we will put them out `of business. If we take the profit out of narcotics through treatment of the addict and at the same time maintain our law enforcement ef- fort, by doing both, I think we will reduce the problem in a much sooner time period than would be the case if we used one or the other alone. Chairman PEPPER. Any other questions? * Mr. BRASCO. Yes, Mr. Chairman. One of the things that concerns me is we keep talking about orga- nized crime's infiltration of legitimate business. I am wondering whether or not it is your experience that the business is really not legitimate to begin with. I am not talking about a business that is run per se by organized crime, I am talking about people that will allow themselves to be used for a profit. I think we ought to understand that. We had a situation where Dun & Bradstreet allowed a fraud to be perpetrated in great amounts of money only because they just did not check to see whether or not ratings they put out in their manual were true. And based on these reports, which were later proved to be false, the fraud was allowed to begin. I am wondering whether or not you would come up with the same conclusion? Mr. SALERNO. Yes, I would agree with you. The infiltration of legiti- `mate business by organized crime is sometimes an invasion, sometimes at the acceptance of an invitation by a particular business or by an industry. Mr. BRASCO. That is the point I make. Mr. SALERNO. That invitation might be very direct or it might be very general, in laxity, which then becomes an invitation. Chairman PEPPER. Mr. Winu, did you have another question? Mr. WINN. One question to clarify it in my own mind. The figures you referred to, where you say that approximately $2 bilhion a year in New York City are run through bookies. Mr. SAMUELS. Bookies and numbers. Mr. WINN. Bookies and numbers. That is what I wanted to bring out, because I thought you included numbers in those total figures. Thank you. Chairman PEPPER. Thank you, Mr. Samuels, for another magnificent contribution in the public interest. And also to you, Mr. Salerno, for the fine job you have done for a long time and the great help you have :given us. Mr. SAMUELS. Thank you for having me here. PAGENO="0057" 1067 (The following material, previously referred to, was received fOr the record from Mr. Sarnuels:) MEMORANDUM IN SUPPORT OF AMENDMENv OF 18 U.S.C. 1084 To PERMIT LEGAL PARIMUTUEL WAGERING ENTERPRISES To TRANSMIT WAGERS IN INTERSTATE C0M- MERCE The New York City Off-Track Betting Corp. (OTB) was established for two essential purposes. One was to increase State and local revenues needed for public benefit programs. The other was to make a substantial impact on illegal gambling revenues of organized crime. (See Book 65 McKinney's Unconsolidated~ Laws of New York, Part 2, Title 21, Articles V and VI, Section 8063.) In order Satisfactorily to accomplish these purposes, it is necessary that this: corporation be able to enter into combined wagering pool arrangements with out- of-State tracks. In a combined pool, the bets taken by OTB would be added' to the wagering pool at the out-of-State track in order to establish the odds on the horses. OTB presently `has such combined pools with New York State tracks. The advantage of a combined pool over separate ontrack, offtrack pools is that' there is no variance in the final odds on the horses entered in the race. In the combined pool system, the wagers taken by the offtrack wagering enter- prises are totaled through computer devices and relayed over "dedicated" tele- phone circuits to the track, where such wagers are entered into the track's: wagering pool by the track's tote system. This transmission system is designed' in such a way that any interference with the transmission circuits can be detected and any attempt to change the information being conveyed prevented. Combined pools with out-of-State tracks will require OTM's transmitting the bets made with it to such tracks over a wire communication facility in inter- state commerce. At present, it is unlawful under 18 U.S.C. 1084(a) for anyone" to transmit bets or wagers over a wire communication facility in interstate commerce. The purpose of this `section as stated in the legislative history was as follows: PURPOSE OF THE BILL "The purpose of the bill is to assist the various States and the District of' Columbia in the enforcement of their laws pertaining to gambling, bookmaking, and like offenses and `to aid in the suppression of organized gambling activities by prohibiting the use of wire communication facilities which are or will be used for' the transmission of bets or wages and gambling information in interstate and foreign commerce." (1961 U.S.C., Cong. & Adm. Service, p. 2631.) Section 1084 was aimed at illegal gambling activities. When section 1084 was originally enacted in 1961 there were no State authorized offtrack betting enterprises in the United States. New York State believes, as expressed in its legislation, that OPB will aid in the Suppression of unlawful organized gambling activities by providing the people of New York with the opportunity to wager in a legally regulated system. This position is in accord with the purposes of section 1084. OTB is a massive effort to suppress organized, gambling activities. It is most likely that had an organization like OTB been in existence at the time of the original enactment of section 1084 that an exception would have been' made to the section so as to allow a State-licensed parimutuel wagering enter- prise to transmit wagers in interstate commerce in the context of combined' pooling arrangements with out-of-State tracks. There is no reason for not allowing the proposed amendment to section 1084. There is no way in which a combined pool can be of assistance to organized unlawful gambling activities. Moreover, the basic legislative intent of section 1084 is clearly manifested' in the exceptions presently contained in subsection (b) thereof. Subsection (b) now re'ads as follows: "(b) Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State' PAGENO="0058" 1068 where betting on that sporting event or contest is legal into a State in which such ~betting is legal." These exceptions at the time they were adopted comprised the only types of wagering information which could be transmitted across State line without con- travening State laws on gambling. These exceptions were intended to permit the transmission of wagering information for legal purposes. The amendment pro- posed here would simply bring the exceptions granted by subsection (b) up ~to date. The amendment proposed here would also be consis1tent with the provision -in the Federal tax law which exempts State-licensed parimutuel enterprises from the payment of the Federal excise tax on gambling. (See 26 U.S.C. sec. 4402(a).) The recommended amendment to section 1084 is set out below in the italicized portion of subsection (b) (b) Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of bets of wagers or the proceeds therefrom, or of information related to the placing or payment of such bets or wagers, by any parimutuel wagering enterprise licensed under state law, provided that such bets or wagers or proceeds therefrom or information are transmitted in connection with or as part of the operations of such enterprises. Further, noth- ing in this section shall be construed to prevent the transmission in interstate or -foreign commerce of information for use in news reporting of sporting events -or contests or for assisting in the placing of bets or wagers on a sporting event or contest from a State where betting on that snorting event or contest is legal into a State in which such betting is legal. ~MEMORANDUM IN SUPPORT OF CERTAIN AMENDMENTS TO TITLE 26 U.S.C. WHICH WOULD EXCLUDE FROM Gnoss INCOME PARIMUTUEL WAGERING GAINS WHILE DISALLOWING THE DEDUCTIBILITY OF PARIMUTUEL WAGERING LOSSES The New York City Off-Track Betting Corp. (hereinafter OTB) recommends that the Internal Revenue Code be amended to exclude from the gross income of taxpayers any gains from wagering transactions with parimutuel wagering enterprises licensed under State law. The amendment sought is attached as ap- ~pendix A hereto. The proposed amendment will serve the dual purpose of enhancing the net revenues which are paid into city and State treasuries from legal parimutuel wagering and of making a substantial impact on the enormous revenues that organized-crime derived from illegal gambling operations. Illegal gambling operations are the main source of income of organized crime. The revenues that it derives from these operations are channelled into a vast array of socially crippling operations, including dope-peddling and loan shark- ing. Organized crime preys on the poor and the helpless through enticement, manipulation, and strong-arm techniques. It is imperative that these gambling revenues of organized crime be diverted to State and local treasuries where they -can be used in programs which are beneficial to the community. The Federal tax laws as they presently apply to gambling are a stimulus to illegal gambling operations and a deterrent to State regulated gambling programs. Under section 61 of the Internal Revenue Code, 26 U.S.C., a taxpayer's gam- bling winnings, regardless of source, are required to be included in his gross in- conic. The Revenue Code does allow a taxpayer to deduct his losses from wager- ing -transactions. but only to the extent of his gains from such transactions (Sec- tion 165(d), 26 U.S.C.) Although no precise figures are available, the Internal Revenue Service esti- mates that the income taxes collected annually on illegal gambling winnings are -only a small fraction of what they should be. The gross revenue to organized crime each year from illegal gambling is estimated at $20-$50 billion as opposed --to the $1 billion revenue to legalized gambling interests. See 57 Georgetown Law Journal, p. 575 (F'69-"Federal Regulation of Gambling: Betting on -a Long Shot"), citing for these figures the President's Commission on Law En- forcement and Administration of Justice, Task Force Report: Organized Crime 3 (1967). - There is little doubt that bookmakers or others in the business of illegal gain- bling report but a fraction of the income they make from unlawful gambling. It PAGENO="0059" 1069 is equally doubtful whether anyone who wagers with those in the business o~ illegal gambling accurately reports his gambling winnings. The burden, then, as far as the application of section 61 to gambling winnings *ls concerned, falls on those who wager with legalized gambling enterprises. One of the provisions of the Internal Revenue Code which has been interpreted to ensure that there will be at least some reporting of gambling winnings is section 6041 of the Internal Revenue Code. The Internal Revenue Service has taken the po- sition that all persons engaged in the business of accepting wagers who made pay- ment in the course of such business to another person of more than $600 fixed or determinable gain, profit or income in any taxable year must file an information return setting forth the amount of the gain and the name and address of the recipi- ent of such payment. Of course, OTB, just as the tracks where legal parimutuel bets are taken, complies with the regulations of the Internal Revenue Service relating to the information returns flied under sectioll 6041. There are very few other informa- tion returns relating to gambling winnings filed under Section 6041. In short, it is evident that the income tax laws as they apply to gambling winnings work to the detriment of those organizations legally established to `conduct parimutuel wagering, as it is these organizations' and the people who wager with them who will comply with these laws. The illegal criminal syndi- cates which obtain the vast bulk of their income from gambling do not comply with these laws. (See Federal Regulations of Gambling: "Betting on a Long Shot," 57 Georgetown Law Journal, p. 513.) In addition to the Federal income tax provisions above mentioned which re- late to gambling winnings, there are Federal excise tax provisions relating to wagering. Section 4401 of the Internal Revenue Code imposes an excise tax on wagers in the amount of 10 percent thereof. Every person engaged in the business of accepting wagers is liable for this tax on all wagers placed with him. Such person must also pay the $50 per year occupational tax under section 4111 of the Code. On this excise tax on wagering, however, there is an exemption on any wager placed with a parimutuel wagering enterprise licensed under State law. (See Section 4402 (a) of the Internal Revenue Code.) In the legislative history to the exemption granted in section 4402 (a), it is stated: "The bill provides specifically that the tax shall not apply with respect to wagers placed in parimutuel wagering enterprises licensed under State law. Such wagering is presently subject to substantial State and, in some instance, local taxation, and to superimpose a Federal tax upon these transactions would only serve to maintain the existing advantage which bookmakers enjoy over parimutuel betting by reason of their immunity from parimutuel taxes." (1.951 U.S. Code, Cong. & Adm. Service, p. 1841.) The change in the income tax law sought by OTB would complement the pro- vision in the Federal excise tax law which exempts from the excise tax on wager- ing any wager placed with a parimutuel wagering enterprise. It is hoped that the passage of this proposed amendment to the Internal Reve- nue Code will serve to encourage the people who now bet with illegal criminal syndicates to place their wagers with State-authorized parimutuel wagering enterprises. The recommended amendment, we think, by encouraging a shift from illegal to `legal gambling, will help boost State and local revenues in a manner somewhat like the operation of section 103 of the Internal Revenue Code. That section exempts from the gross income of the taxpayer "interest" received on obligations `of the United `States, States and political subdivisions thereof. The exclusion granted by section 103 was intended to permit State and local governments to obtain capital at a low rate of interest, which capital would be used in programs of public use and benefit. (Fow v. United &ates, 397 F. 2d, 119, 122 (1968).) Similarly, the interest on U.S. savings bonds, certificates of indebtedness of the United States, and Treasury bills are exempt from taxation by virtue of section `754 of Title 31, U.S.C. It should be emphasized at this point that State-authorized parimutuel wager- ing was initiated to channel. some of the money which is gambled each year in this country into socially useful programs. At this point in time, much more of this gambled money must be captured from illegal interests and diverted into State and local treasuries where it is badly needed to perform huge tasks of social reform and rehabilitation. PAGENO="0060" 1070 As to the effect of the proposed change on Federal tax revenues, it is main- tained that such change will result in only a small loss in such revenues. The reason for this is that overall taxpayer losses from State-authorized parimutuel wagering transactions invariably far exceed the gains from such transactions. This is so because In parimutuel wagering the operator of the system is not in- volved in the wagering but simply keeps a certain "retained percentage" out of amounts going into the wagering pool. In short, there are very few individual taxpayers who will show a gain from parimutuel wagering transactions during the course of a year. And most tax- payers will probably sustain net parimutuel wagering losses in most years. These excess parimutuel wagering losses, of course, constitute the revenue which is returned to the State and local governments after the expenses of operating the system are taken out. The proposed amendment may raise the concern on the part of the tax enforce~ ment officials, burdened with the task of tracing sources of taxpayer income, that taxpayers will attribute apparent underreporting of income to .nontaxable parimutuel winings. We think that the possibility of using the proposed exclusion for tax evasion purposes can be obviated by requiring strict reporting of pari- mutuel wagering gains and losses even though they will not be involved in the calculation of taxable income. APPENDIX ADD A NEW SECTION 125 TO 26 U.S.C.A. Section 125. aains From Certain Wagering Transactions Gross income does not include gains from wagering transactions with any~ parimutuel wagering enterprise licensed under State law. AMENDMENT TO SUBSECTION (u) OF SECTION 165 Section 165 (d). Wagering Losses Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions. Losses from wagering transactions with any part- mutuel wagering enterprise licensed under State law shall not be allowed. N0TE.-As parimutuel wagering gains will be excluded from gross income by proposed section 125, it is to be expected that parimutuel wagering losses will accordingly be denied as a deductible item from adjusted gross income. QUESTIONS AND ANSWERS ON PROPOSED TAX CHANGE To EXCLUDE LEGAL WAGERING GAINS FROM GROSS INCOME QUESTION 1 How do the present tax laws aid organized crime and illegal bookmakers? ANSWER In practice, people who wager with illegal gambling operators do not report their gambling winnings. They know they can rely on the illegal operator not to divulge any information concerning their winnings and losses to the Federal tax authorities. Consequently, the only people who do report gambling winnings are those who wager in a legal system and are compelled to have information. returns (forms 1099) filed on winnings over $600. QUESTION 2 Why isn't the present Federal excise tax on wagering law sufficient to eliminate Illegal gambling? ANSWER The Federal excise tax on wagering law has proven to be an ineffective way to discourage illegal gambling operations. The Federal excise tax on wagering~ was intended to be prohibitive and drive illegal gambling operators out of busi-~ PAGENO="0061" 1071 ness. Because of the size of this wagering excise tax, 10 percent on the gross amount wagered, bookmakers have ignored reporting and paying the tax. There is no better uroof of this statement than the fact that bookmakers are flourishing throughout the country in spite of the fact that the prohibitory, Federal wager- ing excise tax provisions are still on the books. Obviously, a new approach is necessary. Illegal operators are simply not going to comply with laws which are intended to suppress them. What is necessary therefore is to encourage the betting public to bet with legal operators instead of illegal ones. The bettor, himself, then must be given an incentive to divert his wagering from illegal systems to legal ones. This incentive will, in our opinion, be provided by the proposed legislation. QUESTION 3 Bow much income tax revenue does the Internal Revenue Service collect each year on gambling winnings? ANSWER The amount of income tax revenue collected each year by the IRS on gambling winning is so nominal that the Service does not even keep a separate record of such gambling revenue. QUESTION 4 Why is the incentive contained in this proposal necessary? Isn't the mere avail- ability of legal gambling institutions sufficient to make people leave bookmakers and organized crime operators? ANSWER People today do not view gambling as a serious moral issue. Consequently, they do not respect the laws which make gambling with bookmakers illegal. In addi- tion, the person betting with the bookmaker takes no risk in New York; as in most other States, it is not a crime to place a bet with a bookmaker. It is only a crime for the bookmaker to accept bets. The illegal operator offers the bettor the advantage of being able to evade his taxes, which advantage unfortunately too many bettors are seeking out. This proposal is intended to remove the pri- mary advantages that bettors gain by betting with illegal operators. QUESTION 5 How do you know this proposal will have any major effect on encouraging people to bet with legal gambling institutions? ANSWER It is logical to assume that as this proposal will wipe out the main advantage that betttors obtain from betting illegally, i.e., the evasion of income taxes, that bettors will turn to legal gambling institutions where they will obtain a better re- turn on their wagered dollar. QUESTION 6 What is the estimate of how much increased State and local revenue will flow from the adoption of this proposal? ANSWER It is estimated that as much as $30 million may inure to New York City alone immediately. When other States and localities have established legalized gambl- ing systems for sports and numbers, the amount of revenue that will flow from this proposal could well exceed a billion dollars. Organized crime presently derives a minimum of $20 billion a year in illegal gambling revenue. If legal gam- bling systems could capture, with the aid of this proposal, all of the moneys wagered each year outside legal systems, there is no doubt that States and locali- ties would easily derive well in excess of a billion dollars a year in increased revenues. QUESTION 7 Will this change in the tax laws effectuate a social policy as well as affect revenue? PAGENO="0062" 1072 ANSWER Yes. Just as many tax laws have a social purpose in addition to raising revenue,. this proposal is aimed at fighting organized crime. Precedents for this are exemp- tions for income of charitable organizations and income from Government bonds.. QIJE5TION S Isn't gambling a social evil that we want to discourage rather than en- courage? ANSWER This proposal is not intended to encourage people to gamble. It is intended to encourage people who presently gamble illegally to instead gamble in legal systems. QUESTION 0 Won't this be an encouragement to the poor to gamble and then to spend waste- fully income they can ill afford to lose? ANSWER There is no reason to believe that this proposal will lead to an increase in~ gambling among the poor. The poor, just as the rich, already gamble heavily with illegal bookmakers and organized crime operators. This proposal will have* the virtue of serving as an incentive to bettors, rich and poor alike, to gamble in legal systems rather than illegal ones. At the very minimum, the money that is bet by people. including the poor, in State-controlled systems, is returned to- the people, primarily the poor, by Government through its public benefit pro- grams. It should also be pointed out that the present tax laws also discourage tbe wealthy from gambling legally. Consequently, the tremendous amount of money wagered by the wealthy with bookmakers is lost to the public systems which then. have less money to turn back to the public through public benefit programs. We would point out, moreover, that OTB marketing studies indicate that the~ advent of OTB has not served to encourage the poor to gamble. OTB has proven. to be a preponderantly middle-income phenomenon. QUESTION 10 Won't this proposal enable people to evade their taxes by attributing taxable income to nontaxable gambling income? ANSWER No. Under present law, legal operators would continue to report on form 1090's winnings in excess of $600. In addition, each gambling taxpayer would be re- quired to keep and produce records of his winnings and losses. Thus, in a tax evasion or net worth case the taxpayer would be required to produce records to prove that his income was from gambling winnings. QUESTION 11 Isn't it socially inequitable to give more favored treatment to those u-ho realize income from gambling than to those who earn. income or realize capital gains? ANSWER OTB's proposal does not give an advantage to income from gambling. Gambling winnings with legal entities, such as OTB, have already been "taxed" by the States and localities by the time these winnings become subject to State and Federal income taxes. The initial "tax" on the gambling winnings is the percentage amount retained by the legal gambling enterprise out of each dollar played with it. In the case of OTB, this initial "tax" amounts to 17 percent of each dollai~ played. The 17 percent amount retained by OTB goes into the State and city treasuries after operating expenses are taken out. Therefore, legal gambling income by the time it becomes subject to Fed- eral income tax has already been heavily taxed, a fact which does not hold true for capital gains or ordinary income. The Federal income tax on legal gain- bling income becomes then, in fact, a double taxation of this income. Another reason why it is not inequitable to treat gambling income differently from capital gains or ordinary income is that the vast preponderance of gam-- PAGENO="0063" 1073 hung winnings are in reality not reported. The amount of Federal income tax collected annually on all gambling winnings, parimutuel or otherwise, legal or' illegal, is so small that the Internal Revenue Service does not even separately record the amount. The practical treatment of gambling income, therefore, pre~ sents a unique tax problem. OTB is not asking for favored tax treatment for those who realize income from gambling. It is asking that the Congress deal with a social problem the' solution of which may give the false appearance of favor or advantage. Viewing- the proposal from the standpoint of the benefits which would accrue to all tax- payers from its adoption rather than from the standpoint of some apparent inequity should dispel any objections to the proposal. STATE OF NEW YORK 10545 IN ASSEMBLY February 22, 1972 Introduced by Mr. VAN COTT-(at request of the State Off-Track Parimutuel Betting Commission) -read once and referred to the Committee on Judiciary' CONCURRENT RESOLUTION OF THE SENATE AND ASSEMBLY proposing an amendment to section nine of article one of the constitution, in relation to gambling activities authorized and prescribed by the legislature Explanation-Matter in italics is new; matter in brackets (] is old law to be omitted Section 1. Resolved (if the Senate concur). That section nine of article one of the constitution be amended to read as follows: § 9. 1. No law shall be passed abridging the rights of the people peaceably to assemble and to petition the government, or any department thereof; nor shall any divorce be granted otherwise than by due judicial proceedings; (except as hereinafter provided, no lottery or the sale of lottery tickets, 1)001 Selling, book- making, or any other kind of gambling, except] nor shall gambling activities be hereafter authorized or allowed within the state, eucept: (a) gambling activities- as may be prescribed by the legislature and operated by the state or a publia benefit corporation created for the purpose of operating such activities; (5) lotteries operated by the state and the sale of iotLery tickets in connection there- with as may be authorized and prescribed by the legislature, the net proceeds of which shall be applied exclusively to or in aid or support of education in this state as the legislature may prescribe ~, and except~; and (c) parimutuel betting on horse races as may he prescribed by the legislature and from which the state shall derive a reasonable revenue for the support of government ~, shall hereafter be authorized or allowed within this state]; and the legislature shall pass appro- priate laws to prevent offenses against any of time provisions of this section. 2. Notwithstanding the foregoing provisions of this section, any city, town or villamre within the state may by an approving vote o the majority of the qimali- fled electors in such municipality voting on a proposition therefor suamitted at a general or special election authorize, subject to state legislative supervision and control, the conduct of specific games of chance, commonly known as bingo or lotto, in which prizes are awarded on the basis of designated numbers or symn- bols on a card conforming to numbers or symbols selected at random. If autho- rized, such games shall be subject to the following restrictions, among others' which may be prescribed by the legislature: only bona fide religious, charitable or nonprofit organizations of veterans, volunteer firemen and similar nonprofit organizations shall be permitted to conduct such games: the entire net proceeds of any game shall be exclusively devoted to the lawful purposes' of such organiza- tion; no single prize shall exceed two hundred and fifty dollars; no series of prizes on any one occasion shall aggregate more than one thousand dollars; no person except a bona fide member of any such organization shall iarticipate in the management or operation of such game; and no person shall receive any' PAGENO="0064" 1074 remuneration for participating in the management or operation of any such game. The legislature shall pass appropriate laws to effectuate the purposes of this subdivision, ensure that such games are rigidly regulated to prevent corn- ercialized gambling, prevent participation by criminal awl other undesirable elements and the diversion of funds from the purposes authorized hereunder and establish a method by which a municipality which has authorized such games may rescind or revoke such authorization. Unless permitted by the legislature, no municipality shall have the power to pass local laws or ordinances relating to such games. Nothing in this section shall prevent the legislature from passing laws more restrictive than any of the provisions of this section. § 2. Resolved (if the Senate concur), That the foregoing amendment be re- ferred to the first regular legislative session convening after the next succeeding general election of members of the assembly,, and in conformity with section one of article nineteen of the constitution, be published for three months previous to the time of such election. LAWS OF NEW YORK-BY AUTHORITY CHAPTER 143 AN ACT to amend the pari-mutuel revenue law, in relation to off-track, pari- mutuel betting, and making an appropriation in relation thereo Became a law April 22, 1970, with the approval of the Governor. Passed on message of necessity pursuant to article III, section 14 of the Constitution by a majority vote, three-fifths being present EXPLANATIoN-Matter in italics is new; matter in brackets ;~ ~ is old law to be omitted. The people of the State of New York, represented in Senate and Assembly,, do enact as follows: Section 1. Chapter two hundred fifty-four of the laws of nineteen hundred forty, con~tituting the pari-mutuel revenue law is hereby amended by adding thereto a new article to be article five, to read as follows: ARTICLE V NEW YORK STATE OFF-TRACK PARI-MUTUEL BETTING LAW £1ection 65. Short title. 66. New York State off-track pari-mutuel betting commission. 67. Off-track pari-mutuei betting. 68. Participating municipalities. 69. Administration and operation. 69-a. Use of track facilities. 69-b. Reimbursement on account of lost revenue. 69-c. Disposition of off-track pari-mutuel betting pools; tacces; allocation of eupenses. 69-d. Off-track pari-mutuel eupense and distribution fund. 69-c. Prohibited acts where betting conducted. 69-f. Inapplicability of laws governing betting at the track. 69-g. Notification of results of races. 69-h. Prohibitions as to minors. 69-i. Prohibited acts of officers and employees of commission. 69-5. Prohibition of acts impairing integrity of betting system. 69-k. Court proceedings; preferences; venue. 69-i. Separability. § 65. Short title. This act shall be known and may be cited as the "New York State off-track pari-mutuel betting law." § 66. New York state off-track pari-mutuel betting commission. There is here- by created within the department of state the New York state off-track pan- ~nutuel betting commission, which shall consist of a chairman and four other members, all of whom shall be citizens and residents of the state. No more than three of the five members shall belong to the same political party. The chairman shall be appointed by the governor, by and with the advice and consent of the $enate, and shall hold office at the pleasure of the governor. The chairman shall PAGENO="0065" 1075 devote his entire time to the duties of his office. The four other members of the commission shall be appointed by the governor, by and with the advice and consent of the senate, for four years, provided, however, that of the members of the commission first appointed, one shall be appointed for a term of one year, one for a term of two years, one for a term of three years and one for a term of four years, from April first, nineteen hundred seventy. Their successors shall be appointed for terms of four years. The chairman shall receive an annual salary within the amount appropriated theref or. The members of the comnvission shall receive actual and necessary expenses incurred by them in the performance of their duties under this article. The members of the commission, other than the chairman, shall receive a per diem allowance, to be fixed by the governor `within the amount made available theref or by appropriation, for each day actually spent in the performance of their duties under this article. Vacancies in the com- mission, other than in the office of the chairman, occurring otherwise than by ex- piration of term shall be filled for the unexpired term in the same manner as original appointments. Any member of the commission, other than the chairman, may, after notice and opportunity to be heard, be removed by the governor foil neglect of duty or misfeasance in office, and such a member of the commission may be removed for other cause by the senate on the recommendation of the governor. § 67. Off-track pari-mutuel betting. 1. The commission is hereby authorized to establish and conduct systems of off-track pari-inutuci betting on horse races held within or without the state, pursuant to the provisions of this article. In the exercise of the powers vested in it by subdivision one of section nine article one of the constitution of the state, the legislature hereby prescribes that off- track pari-mutuel betting on horse races, conducted under the adnvinistration of the commission in the manner and subject to the conditions provided for in this article, shall be lawful, notwithstanding the provisions of any other law, general, special or local, including any law prohibiting or restricting lotteries, pool-selling or bookmaking or any other kind of gambling; it being the purpose of this article to derive from such betting, as authorized by this article, a reasonable revenue for the support of government, and to prevent and curb unlawful bookmaking and illegal wagering on horse races. 2. The commission shall adopt general rules and regulations, consistent with this article, estabii~hing and governing the permitted method or methods of op- eration of the system of off-track pari-niutuel betting. § 68. Participating municipalities. 1. Off-track pari-mutuel betting shall be con- ducted only within a municipality or part thereof which becomes a "participating municipality" pursuant to this section. 2. The city of New York may be approved by the commission as a participating municipality upon application by the city and the commission shall act upon an application for approval within thirty days of submission. 3. Any other city having a population of more than one hundred twenty-five thousand may be approved by the commission as a participating municipality if such city, by local law subject to a referendum on petition pursuant to the munic- ipal home rule law, has so requested and authorized the conduct of off-track pari- mutuel betting within such city. 4. That portion of any county, not wholly contained within a city and contain- ing a city having a population of more than one hundred twenty-five thousand which is outside such city may be approved by the commission as a participating municipality if such county, by local law subject to a referendum on petition pur- suant to the municipal home rule law solely in such portion of such county out- side such city, has requested and authorized the conduct of off-track pan-mutual betting within such portion of such county. For purposes of this subdivision, the number of signatures required on any petition seeking a referendum and the eligi- bility of signers of any such petition shall be based solely on that portion of such county outside of such city. 5. Any city having a population of less than one hundred twenty-five thousand and any county not wholly contained within a city and not containing a city hav- ing a population of more than one hundred twenty-five thousand may be approved by the commission as a participating municipality if such city or county, by local law subject to referendum on petition pursuant to the municipal home rule law, has requested and authorized the conduct of off-track pan-mutual betting within such municipality, provided however that (1) the commission shall not approve an application by a city having a population of less than one hundred twenty-five 81-068-T3-pt. 3-5 PAGENO="0066" 1076 thousand prior to January one, nineteen hundred $eventy-one, ~ or if the county within which such city is contained is a participating municipality, and (`ii) when the commission approves an application by a county within which a city having a population of less than one hundred twenty-five thousand is a participating mu- nicipality, such county shall thereafter become the participating municipality, but the commission shall not approve such am application unless due provision is made with respect to investments and obligations of the city macic or incurred as a par- ticipating munIcipality. 6. No referendum on petition pursuant to this section shall be conducted on the same date as a general election or primary election. 7. A participating municipality may withdraw as such upon terms and condi- tions approved by the commission. * 8. For the purposes of this section population shall be determined according to the federal census of nineteen hundred sixty. § 69. Administration and operation. 1. The commission may operate the system of off-track pari-mutuel betting, in any participating municipality, directly through its own employees and facilities. 2. The commission may, on application of a participating municipality, ap- prove a plan of operation submitted by such municipality; pursuant to which such municipality shall itself operate in whole or in part the system of off-track pari- mutuel betting within such municipality (i) in compliance with this article and `the rules and regulations of the commission~ and (ii) subject to audit and super- vision by the commission. When such plan of operation is approved by the com- mission, such municipality shall be authorized and empowered to operate such systeni. If a public benefit corporation is created to operate such system in a mu- `nicipality, the commission may approve a plan of operation submitted jointly by the municipality and such public benefit corporation, and if so provided in the plan such public benefit corporation shall be authorized and empowered to operate such system. Two or more municipalities may submit a joint plan of operation and, if approved by the commission, jointly may operate the system of off-track pan- mutuel betting. Applications under section sixty-eight may be combined with and conditioned upon the approval of applications under this subdivision. Ref erence to the "commission" `in sections sixty-nine-c through sixty-nine-j shall be deemed to inclvde a participating municipality or public benefit corporation authorized to operate such system. § 69-a. Use of track facilities. 1. The commission may establish or approve as part of a municipality's plan an off -track pan-mutual betting pool which combines best placed on and off the track on races at tracks in this state in a single pari- mutuel pool, and shall, in that event, adopt rules and regulations to assure the equalization of the disposition of the pani-mutuel pool. 2. (a) At the request of the commission, a track c~perator conducting a track in this state, shall, upon such terms and conditions as may be agreed upon by such operator and the commission provide appropriate space and/or facilities at its track whereby the commission may perform the functions hereinafter described with respect to the transmission and reception of bets and racing information. The operator shall be entitled to receive as compensation one per cent of the amount of such single pool bets placed off the track. (b) In the event that the commission shall be unable to agree with such operator upon the space and/or facilities of such track to be provided to the commission by such operator, or the terms and conditions of the use and/or occupancy thereof by the commission, the state racing commission or the state harness racing commission (whichever has jurisdiction over the track in ques- tion) shall, upon application in writing made either by the commission or by such operator, determine the appropriate space and/or facilities to be provided to such commission and the terms and conditions of its use and/or occupancy by such commission exclusive of the consideration payable therefor to such operator. (a) Upon the rendering of the determination of the state racing commission or the state harness racing commission, as the case may be, the commission shall be entitled to use and/or occupy immediately the space and/or facilities award~d by such racing commission, i~pon the terms and conditions prescribed by such racing commission, whether or not the consideration to be paid theref or by the commission has been agreed upon or determined as herein provided. (d) In the event that just compensation of the operator for providing such space and facilities exceeds the compensation established by paragraph (a), such operator shall be entitled to recover such excess front the commission. PAGENO="0067" 1077 3. The commission, at each track in this state at which horse races arc con- ducted upon which the commission accepts bets, may utilize the space and/or facilities made available therefor as provided in subdtvision two of this section,. so as to cause (a) the bets received by the commission on each race at such track to be transmitted to such track and incorporated in the appropriate parimutuel pools thereat as hereinafter provided, and (b) the transmission from such track to such of the offices, facilities or premises of the commission as it deems proper, of odds on horse, results of races, values of winning tickets and such other racing information as the commission may deem to be necessary, desirable or appropriate. 4. (a) S1ubjeet to the provisions of paragraph (e) of this subdivision, the commission shall cause all single pool bets on each horse race to be transmitted to each such track in such manner and at such times as to make possible the inclusion of such bets among the bets reflected in the pari-mutuel pools established at such track by the track operator for such race. (b) Sucib operator shall cause all bets, received from the commission prior to the closing of each pool to which such bets relate, to be included among the bets reflected in such pool. (e) Determination of the odds on horses and. amounts due to winning bettors, whether their bets are placed at the track or with the commission, shall be made in the same manner as if the sums represented by such transmitted bets were atcually included in each pool to which such transmitted bets relate. (d) If any track operator shall refuse or fail to comply with the provisions of paragraphs (a) and (b) of this subdivision four, the commission shall be entitled to apply to the supreme court for an order or judgment directing such track operator to comply with such provisions, and upon a showing by the com- mission that such track operator has refused or failed to comply with such pro- visions, a permanent or temporary mandatory injunction or other appropriate order or judgment shall be granted without bond. (e) Nothing contained in this subdivision four shall be construed as requiring the commission to pay or deliver to any track operator amy sum received from any bettor by the commission as a wager or otherwise, but the net amount due from the commission to the operator (in the event that payments to winning bettors on the track exceed the portion of the pan mutuel pool attributable to bettors on the track) or that payments to winning bettors off the track exceed the portion of the pan-mutual pool attributable to bettors off the traol~), as the case may be, shall be paid within seven days from the race. 5. Reference to the "commission" in subdivisions two, three and four shall mean a participating municipality or a public benefit corporation in the event that an approved plan of operation pursuant to section sixty-nine provides that such municipality or corporation may engage in a single pari-nutuel pool includ- ing bets placed on and off a track in this state. 6. The commission may authorize more than one such municipality or corpo- ration to use space or facilities at the same track, and may make such provisions as to sharing of space, facilities, costs and pool adjustments among them as mat, be reasonable. § 69-b. Reimbursement on account of lost revenue. 1. (a) The commission sit aTh adopt rules and regulations providing for the reimbursement of a track operator conducting a track in this state, a local government and the state on account of lost revenues from the operation of off-track pari-mutuel betting pursuant to this article. (b) Reimbursement shall be made with respect to a track only if: (i) the track is located within fifty miles of any part of a participating municipality, and (ii) the track operator has, during the year for which reimbursement is requested, maintained a racing program at least equal in quality to its racing program during nineteen hundred sixty-nine. The quality of a racing program shall be measured by reference to such factors as the condition of physical facili- ties; purses and accommodations for racing participants; the quality of services including food, beverage and betting services; and such other factors as may be appropnia te. (c) The amount of reimbursement shall be calculated under the rutes of the commission to be that amount necessary to guarantee: (I) to the track operator, annual track admis.~ion revenues (after admission taxes) equal to ninety per cent of the average daily track admission revenues PAGENO="0068" 1078 during nineteen hundred sixty-nine times the nvniber of days of racing ~n the reimbursement year up to ihe number in nineteen hunãred sixty-nine. (ii) to the track operator, annual pari-mutuel revenues retained by such oper- ator (plus that portion of the compensation received pursuant to paragraph (a) of subdivision two of section sixty-nine-a which exceeds the costs of providing space and facilities pursuant to section sixty-nine-a) equal to ninety-five per cent of average daily pari-mutuel revenues during nineteen hundred sixty-nine times the number of days of racing in the reimbursement year up to the number in nineteen hundred sixty-nine. (iii) to a local government, annual admission tax revenues equal to ninety- five per cent of average daily admission tax revenues during nineteen hundred sixty-nine, times the number of days of racing in the reimbursement year up to the number in nineteen hundred sixty-nine. (iv) to the state, annual pari-mutuel tax revenues equal to one hundred pci cent of such average daily revenues during nineteen hundred sixty-nine times the number of days of racing in the reimbursement year up to the number in nineteen hundred sixty-nine. (d) Reimbursement shall be made only with respect to calendar years nine- teen hundred seventy through nineteen hundred seventy-five. (e) Any question arising under subparagraph (ii) of paragraph (b) of this subdivision shall be referred to the state racing commission or the state harness racing commission (whichever has jurisdiction over the track in question), which shall conduct an investigation and render a determination thereon. The determination of such racing commission or harness racing commission shall be reviewabie in a proceeding brought pursuant to article seventy-eight of the civil practice law and rules by any party affected. (f) Amounts of reimbursement ordered by the commission with respect to a ~rack shall be chargeable expense against each participating municipality any part of which is within fifty miles of such track. If there is more than one such participating municipality, the expense shall be allocated between them in accord- ance with their respective off-track betting volume during the year for which reimbursement is claimed. 2. The commission shall adopt rules and regulations providing for the reim- bursement of the agriculture and New York state horse breeding development fund on account of lost revenues from the operation of off-track betting pursuant to this article. The amount of reimbursement shall he calculated under the rules of the commission to be that amount necessary to guarantee to the fund income pursuant to section fifty-five-c equal to such income received during nineteen hundred sixty-nine in each year through nineteen hundred seventy-five. A mounts of reimbursement pursuant to this subdivision shall be chargeable against par- ticipating municipalities in accordance with their respective off-track betting volume during the year for which reimbursement is claimed. 3; Applications for reimbursement shall be made to and determined by the commission. Applications shall be made on a calendar year basis within the first th'irty days of the succeeding year. Amounts of reimbursement ordered by th~ commission shall be paid by the commission, except that reimbursement char~je- able against a participating municipality which directly or through a public benefit corporation operates and administers the system of off-track pari-mutuel betting shall be paid by such municipality or public benefit corporation. § 69-c. Disposition of off-track pari-mutuel betting pools: taxes: allocation of expenses. 1. Except as provided in section sixty-nine-a all sums deposited in any off-track pari-mutuel pools shall be distributed to the holders of winning tickets therein less seventeen per cent on harness races and sixteen per cent on running races and steeplechases. The disposition of pari-mutnel breaks and uneaslied tickets shall be made in accordance with ~he rules and regulations of the eom- mission. Retained percentages in the case of off-track pari-mutsiel betting op- erated by the commission shall be paid into the expense and distribution fund established by section sixt~,-nine-d. 2. There is hereby imposed a tax on one-half of one percent on all off-track pari-mutuel bets pursuant to this article. The amount of the tax shall he paid from the retained percentage by the commission and each partiepiating mnniei- pality and public benefit corporation, and shall be paid to the state tax conimis- sion at a reasonable tax by the state, which tax is hereby levied. 3. All expenses of operation and administration of the system of off-track, parti-mutuel betting, other than the general overhead and supervision expen~c~ PAGENO="0069" 1079 of the commission not allocable to such operation and administration, but in- cluding expenses (and reasonable reserves for expenses) incurred under sections sixty-nine-a and sixty-nine-b, shall be required by rules and regulations of the commission to be allocated separately to each participating municipality, whether or not suck municipality itself administers and operates such system, but suck separate allocation of expenses of operation and administration shall not pre- clude a pari-mutuel pool involving more than one participating municipality. General overhead and supervisory expenses of the commission shall be allocated and charged back to each participating municipality and public benefit corpora- tion in accordance with its proportion of gross off-track, pari-mutuel betting revenue in the state, and payments due from a participating municipality or a public benefit corporation which itself administers and operates such system shall be paid into the fund established by section sixty-nine-d. 4. Such rules and regulations of the commission shall require a monthly accounting, before the fifteenth day of the succeeding month, with respect to the operations of the system of off-track pari-mutuel betting within each participat- ing municipality during such month. Net revenues remaining after payment of all expenses including reimbursement shall be paid as follows: (a) eighty per cent thereof to the participating municipality for its municipal purposes, and (b) twenty per cent thereof into the general fund of the state treasury; provided that net revenues in any calendar year in excess of two hundred million dollars shall be paid as follows: (a) fifty per cent thereof to the participating municipality for its munici- pal purposes, and (b) fifty per cent thereof into the general fund of the state treasury. For the purpose of thi~ subdivision, the amount of taxes paid to the state pursuant to subdivision two shall be added to net revenues prior to the calculation of the distributable shares, and the amount distributable to the state shall be reduced by the amount of such taxes. ~ 69-d. Off track parti-niutnel expense and distribution fund. 1. There is hereby established in the custody of the state comptroller a special fund to be known as the off-track pari-mutuel expense and distribution fund. 2. Such fund shall consist of the amounts paid into the fund by the commis- sioner as provided in this article, and all other moneys credited or transferred thereto from any other fund or source pursuant to law. 3. Amounts deposited in such fund shall first be applied to reimburse the state treasury for expenses of administration, and any remaining amounts shall, not- withstanding the provisions of any general or special law, be distributed in ac- cordance with section sixty-nine-c. 4. All payments from the fund shall be made on the audit and warrant of the comptroller on vouchers approved by the commissioner of taxation and finance. § 69-c. Prohibited acts where betting conducted. 1. The commission shall not make any radio or television broadcast of any horse race available for view or hearing in the public area of any facility where bets may be placed, and shall not permit any such broadcast to be so made available in such area. 2. No person shall be permitted to bring into the public area of any such facility, or to keep there, any communications equipment designed for or capable of send- ing broadcasts or messages of any kind or to operate any receiving equipment therein. 3. (a) Persons under the influence of alcohol, bookmakers and disorderly per- sons shall not be admitted to or permitted to remain in any such facility, com- mission and no such person shall be permitted to place a bet directly or indirectly in any facility. (b) The commission shall have the right to require patrons at facilities to pro- duce proof of age an(l identity. 4. No food or drink or merchandise of any kind shall be soldor served in the public area of such facility nor shall any vending machine of any kind be placed in such facility, nor shall any person be permitted to consume food or drink in any such facility. 5. No book, publication, or printed or written material of any kind containing information of any nature pertaining to horse racing, including, but not limited to, details of races, tips or selections, shall be sold, given away or distributed in any such facility; provided that nothing herein contained shall prohibit the corn- mission from providing or distributing such material, as in its judgment is nec- PAGENO="0070" 1080 ~es8ary or appropriate for the orderly conduct of off-track betting and the effectua- tion of the purposes of this article. § 69-f. In applicability of laws governing betting at the track. Notwithstanding any inconsistent provision of this chapter or of any other law, all moneys and all taxes received by the commission from bettors, track operators or otherwise pur- suant to this article shall be paid, distributed and disposed of as prescribed by this article and shall not be subject to the provisions of sections nine, nine-a, fOrty-five or forty-five-a of this chapter. Notwithstanding any inconsistent pro- vision of this article or of any other law, neither the commission nor any offle'r, employee or agency thereof, shall be required to pay or transmit any moneys to any track operator or to the state tax commission with respect to off-track betting. except as required by the provisions of this article. § .69-g. Notification of rernlts of races. Immediately after the conclusion of any. horse raóe conducted at any track in this state by any track operator, such opera- ~or, if `the commission has so requested, shall notify the commission of the official results of the race. ~S1uch notification shall be given in such manner as the coni- `mission shall designate, and the commission shall pay the expense, if any, entailed in such notification. § 69-h. Prohibitions as to minors. No minor shall be permitted to be present in the premises of any office or to place a bet directly or indirectly at any such office. § 69-i. Prohibited acts of o~1cers and employees of commission. It shall be un- lawful for any officer or employee of the commission to place a bet directly or indirectly at' any office or to receive any gratuity from any person who places a bet at any such office. Any violation of the provisions of this section shall con- stitute a misdemeanor. § 69-j. Prohibition of acts impairing integrity of betting system. Any person who, with intent to obtain, or enable himself or any other person to obtain, any payment by the commission to which he or such other person is ont lawfully en- titled under this article, or who, with intent to cause the commission to make any payment not lawfully, due under this article, or with intent to defraud the com- mission, o~ any other person, shall alter, change or interfere with any equipment ci device used in connection with off-track betting, or cause any false, inaccurate or unauthorized information, data, impulse or signal be fed into, or transmitted over, or registered in or displayed upon such equipment or device shall be guilty of a class D felony. § 69-k. Court proceedings; preferences; venue. Any action or proceeding to which the commission or the people of the state of New York may be parties, in which any question arises as to the validity of this article or any plan approved hereunder, shall be preferred over all other civil causes except election causes in all `courts of the state of New York and shall be heard and dctei~mined in prefer- ence to all other civil business pending therein except election causes, irrespective of position on the calendar. The same preference shall be granted upon applica- tion of the commission in any action or proceeding questioning the validity of this article in which it may be allowed to intervene. The venue of any such action or proceeding shall be laid in the county in which the principal office of the commission is located. § 69-i. $eparability. If any clause, sentence, paragraph, section or part of this article shall be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder thereof, but shall be confined in its operation to the `clause, sentence, paragraph, section or part thereof' directly involved in the controversy in which such judgment shall have been rendered. § 2. Section two of such law is hereby `amended to read as follows: § 2. Pari-mutuel betting on horse races legalized. In the exercise of the author- ity vested in it by section nine of article one of the sta'te constitution, as amended by vote of the people at the general election in November, nineteen hundred thirty-nine, the legislature hereby prescribes that pari-mutuel betting on horse races shall be lawful in this state if conducted in the manner and subject to the conditions and supervision provided by this act, notwithstanding the provisions of any other law, general, special or local, prohibiting or restricting lotteries, pool selling or bookmaking, or any other kind of gambling; it being the purpose of this act to derive from such betting as herein authorized a reasonable reve- nue for the support of government and to promote agriculture generally and the improvement of breeding of horses particularly in the `state. Such pari-uiutuel PAGENO="0071" 1081 betting shall only be conducted within the grounds or enclosure of a race track on races at such track and on such dates when racing at such track shall have. been authorized pursuant to this act: provided, however, that nothing in this law shall be deemed to prohibit off-track pari-mutuel betting in a municipality pursuant to article five of this chapter. § 3. Section forty-five of such law, as last amended by chapter ninety-one of the laws of nineteen hundred sixty-eight, is hereby amended to read as follows: § 45. Disposition of pari-mutuel pools. Every association or corporation authorized under this act to conduct pari-mutuel betting at a harness horse race meeting on races run thereat shall distribute all sums deposited in any pari-mutuel pool to the holders of winning tickets therein provided such tickets be presented for payment before April first of the year following the year of their purchase, less (sixteen] seventeen per centum of the total deposits plus the breaks. The breaks are hereby defined as the odd cents over any multiple of ten calculated on the basis of one dollar and otherwise payable to a patron. Of the sum so retained an amount equal to five (and one-half] per centum of the amount of the total daily pool not exceeding (one hundred seventy-five thousand] two hundred fifty thousand dollars, seven and one-halt per centum of the amount of the total daily pool in excess of (one hundred seventy-five thousand] two hundred fifty thousand dollars but not in excess of three hundred thousand dollars, eight and one-half per centum of the amount of the total daily pool in excess of three hundred thousand dollars but not in excess of four hundred thousand dollars, (nine] ten and one-half per centum of the amount of the total daily pool in excess of four hundred thousand dollars but not in excess of five hundred thousand dollars, (ten and one-half] eleven and one- quarter per centum of the amount of the total daily pool in excess of five hundred thousand dollars but not in excess of six hundred thousand dollars, (and] eleven and one-half per centum of the amount of the total daily pool in excess of six hundred thousand dollars to seven hundred thousand dollars, eleven and three- quarters per eentum of the amount of the total daily pool in excess of seven hundred tlbousand dollars but not in excess of eight hundred thousand dollars, twelve per eentum of the amount of the total daily pool in excess of eight hundred thousand dollars but not in excess of nine hundred thousand dollars, twelve and one-quarter per eentuni of the amount of the total daily pool in excess of nine hundred thousand dollars but not in excess of one million dollars, and twelve and one-half per centum of the amount of the total daily pool in excess. of one million dollars, plus fifty per centum of the amount of the breaks shall be paid by such corporation or association to the state tax commission as a reason- able tax by the state for the privilege of conducting pari-mutuel betting on the races run at the harness horse race meetings held by such corporation or asso- ciation, which tax is hereby levied, and the balance of the retained percentage of such pool and of the breaks may be held by such corporation or association for its ow-n use and purposes, except that twenty-five per centum of the amount of the breaks shall be paid by such corporation or association to the agriculture and horse breeding development fund as provided in article three of this chapter to aid agriculture generally and improve the breeding of horses. The payment of such state tax shall be made to the state tax commission at such regular intervals as the said tax commission may require, and shall be accompanied by a report under oath showing the total of all such contributions together with such other information as the said tax commission may require. A penalty of five per centum and interest at the rate of one per centum per month from the date the report is required to be filed to the date of payment of the tax shall he payable in case any tax imposed by this section is not paid when due. If the state tax commission determines that any moneys received under this section were paid in error, it may cause the same to be refunded without interest out of any moneys collected thereunder, provided an application therefor is filed with it within one year from the time the erroneous payment was made. Such taxes, interest and penalties when collected, after the deduction of refunds of taxes erroneously paid, shall be paid by the state tax commission into the general fund of the state treasury. Except as otherwise provided in chapter one hundred forty-eight of the laws of nineteen hundred fifty-two, entitled "An act to enable certain counties and cities to impose a tax on admissions to harness horse race meetings and providing for the collection and administration of such tax," as amended, no county, city, town, village or other political subdivision of the state may impose, levy or PAGENO="0072" 1082 collect a tax on admission fees or tax on admission, on wagers made by patrons in the form of purchases of pari-mutuel tickets or upon such tickets, on pari- mutuel pools, on breaks, on dividends or payments made to winning bettors, or on that part of the pari-mutuel pools or breaks to be retained by harness horse racing corporations or associations under this section. § 4. The sum of one million dollars ($1,000,000) or so much thereof as shall be necessary, is hereby appropriated as a first instance appropriation out of any moneys in the state treasury in the general fund to the credit of the state pur- poses fund, and not otherwise appropriated to the department of state for serv- ices and expenses of the state off-track pari-mutuel betting commission for the purposes of carrying out the provisions of this act. Such sum shall be payable on the audit and warrant of the state comptroller on vouchers certified or approved by the chairman of the off-track pari-mutuel betting commission, or his duly designated representative in the manner provided by law. No expenditure shall be made from this appropriation until a certificate of approval of availability shall have been issued by the director of the budget and filed with the state comptroller and a copy filed with the chairman of the senate finance committee and the chairman of the assembly ways and means committee. Such certificate may be amended from time to time by the director of the budget and a copy of each such amendment shall be filed with the state comp- troller, the chairman of the senate finance committee and the chairman of the assembly ways and means committee. The director of the budget shall not issue any certificate of approval of avail- ability until the New York state off-track parimutuel betting commission has entered into a written agreement with the director of the budget providing that such commission shall reimburse the state of New York in full for all moneys advanced by the state from its appropriation from the revenues of the com- mission or any other sources available to such commission not later than March thirty-first, nineteen hundred seventy-one. § 5. This act shall take effect immediately, except that section three shall take effect July first, nineteen hulldred seventy. STATE OF NEW YORK, Department of fgtate, ~s: I have compared the preceding with the original law on file in this office, and do hereby certify that the same is a correct transcript therefrom and of the whole of said original law. JOHN P. LOMENZO, Secretary of State. Chairman PEPPER. The committee will adjourn until 10 o'clock on the morning of June 13. (Thereupon, at 4:30 p.m. the hearing was adjourned to reconvene on Tuesday, June 13, 1972, at 10 a.m.) PAGENO="0073" ORGANIZED CRIME IN SPORTS (RACING) TUESDAY, JUNE 13, 1972 HOtTSE OF REPRESENTATIVES, SELECT COMMITTEE ON CRIME, Washington, D.C. The committee met, pursuant to notice, at 10:10 a.m., in room 345, Cannon House Office Building, Hon. Claude Pepper (chairman) presiding. Present: Representatives Pepper, Waldie, Mann, Murphy, Wiggins, Steiger, Winn, Sandman, and Keating. Also present: Joseph A. Phillips, chief counsel; Michael W. Blom- mer, associate chief counsel; Chris Nolde, associate counsel; and Andrew Radding, assistant counsel. Chairman PEPPER. The committee will come to order, please. Mr. Counsel, will you call the first witness? Mr. PHILLIPS. Mr. Bobby Byrne. Chairman PEPPER. Will you stand and be sworn, please? STATEMENT OF BOBBY BYRNE, HORSERACING SPECIALIST AND FIXER OP RACES (Having been duly sworn by the chairman) Chairman PEPPER. You may inquire, Mr. Phillips. Mr. PHILLIPS. Mr. Byrne, in the last few years did you become in- terested in horses? Mr. BYRNE. Yes. Mr. PHILLIPS. Did you and others form a group in relation to fixing horseraces? Mr. BYRNE. Yes. Can you enumerate the various tracks where you and this group of individuals working with you did, in fact, fix races? Mr. BYRNE. Well, just about every track on the east coast from Florida to Maine, and as far west as Illinois, and East St. Louis. They run in a circle. In the summertime, right now, they are in the New England area and New York, and this area here, and Maryland, and by the time the summer is over and you get into the real late fall, we~ would be going down south to Florida. You just follow the circuit, you know, and you keep switching from track to track because you went in for a play, let's say for a week. You (1083) PAGENO="0074" 1084 spend a week or 2 weeks at one track and when you make a score you get out of there because you don't want to draw to much. attention to yourself and the track's security, because they had the make on the cars and they knew some of the people I was working with. So you just keep transferring around throughout the country, actually, through- out the east coast. You try and keep one step ahead of them. Mr. PHILLIPS. In other words, you and your group were able to fix races in practically every racetrack on the eastern seaboard; is that correct? Mr. BYRNE. Yes, every major track. I mean, it had to be financially worthwhile for us to go there. Of course, there are times you have a couple of small tracks, you go there and make small money. If you happen to be in the neighborhood, let's stop and see what it's like, and you go and try and do something. And you did, if you did; if you didn't, you didn't worry about it toO much. Mr. PHILLIPS. Essentially you were working the bigger more lucra- tive tracks? Mr. BYRNE. Right. Mr. PHILLIPS. Could you give us a list of the particular tracks, as best you can recall? V Mr. BYRNE. Scarborough Downs, Suffolk, Lincoln, Narragansett,. Tropical, Hialeah, Dover, River Downs, Pocono Downs, Liberty Bell, Cahokia, Bowie, Churchill Downs, Fairmont Park-just about every major track on the east coast. V Mr. PHILLIPS. Garden State? V V Mr. BYRNE. Aqueduct, Garden State, the others. V Mr. PHILLIPS. Pimlico? Mr. BYRNE. Pimlico was another one. Bowie was another one. Shenandoah Downs was another one we went to. Just any one that is in that circuit that multiple wagering and good handles, and that is where you go. You take a track like Shenandoah Downs, River Downs,. or Fairmount Park, the handle isn't as great as at your major tracks, but you have to go to take a little from these other tracks, you know. So it would be like a boxer. Let's keep in shape, you know. Mr. KEATING. Mr. Phillips, what does he mean "keep them in shape"? Mr. PHILLIPS. Would you explain? Mr. ICEATING. If you are referring to River Downs? Mr. BYRNE. Let's put it, if you are a racetracker-and the first thing you do when you get up in the morning, the average person has a cup of coffee: If you are a guy like ourselves, the first thing you do is go out a.nd get the Telegraph and see what horses, jockeys, and trainers are where. You have to keep up with what is going on, or else some trainer could be in one section of the country at one time and over- night, with the air travel today, they could be somewhere else. And they even fly horses today. So you have to keep going. Just keep read- ing up what is going on. : V Mr. KEATING. Could I just ask one more question? I don't want to interrupt your line. Since you mentioned River Downs, did you actually work in River Downs? Mr. BYRNE. Yes. PAGENO="0075" 1085 Mr. 1(EATING. And fix races at River Downs? Mr. BYRNE. Yes. Mr. KEATING. About what year was this? Mr. BYRNE. It must be about 1970. Mr. I(EATING. How many races do you recall that you could have fixed at River Downs? Was it one racing season, or more than that? Mr. BYRNE. It was over a period of years, but I mean there was the races I was personally involved in at River Downs. Two of them were successful and the other wasn't. Mr. KEATING. When you say "successful," you mean you were able to have the horse win that you wanted to win? Mr. BYRNE. Right. Two of them we hit. The other one was just a swindle. Mr. 1(EATING. What do you mean "a swindle"? Mr. BYRNE. We take a sucker along and we do, we extract money from him and get him to bet. We tell him we own all of the hOrses in the race and we bet with his money. And if we win, we won the money. If we lost, we made excuses, and it didn't cost us nothing. So its no problem. Mr. KEATING. I will yield back. I do want to get into this at some length on River Downs, but I appreciate your permitting me to inter- rupt. Mr. PHILLIPS. Mr. Byrne, you were telling us something about the circuit. Could you tell us how this circuit works and how the horses proceed from one track to another throughout the country? Most of us are familiar with it, but will you please describe it for the record. Mr. BYRNE. I haven't been in the New England area for the last cou- ple of months, but Suffolk Downs is operating around early-I think this year they operated early in the spring. Well, Lincoln Downs in Rhode Island would close. Narragansett would close around January or February. They usually open up the season. The horses from there would go to Suffolk Downs and then from there to Rockingham Park. They keep good horses. Like you have good horses that come out of that circuit that are fairly good. They can make it to Aqueduct or Bowie, and they come down to Dover Downs. Now you are getting into the late fall, like real fall, and they start across down South here. And they come down. By the time November and December arrive, December, actually and January, you get down to Tropical, Hiaieah, and you get down in the height of the tourist season, plus the Super Bowl, which is always held, used to be-I guess this will be the first year coining up it won't be held in Florida. You get a lot of money floating around down there and their handles are great because they pool-they shoot for a good pool, like the perfecta pool, $70,000, $80,000, $90,000. Mr. PHILLIPS. Would you describe the procedure you utilize when you decide to pick a race, and how you carried it out? Mr. BYRNE. Well, suppose we were to leave here right now, and I believe Belmont Park is open. I know, in fact, Belmont Park is open. Let's say Pimlico is open. I could go over there and within 10 days to PAGENO="0076" 1086 2 weeks, I could tie up a race. You give me 2 weeks. About 10 days to 2 weeks and I could tie up a race, a perfecta race. What I do, like 3 days before-well, the tracks publish what you call a condition book for the whole meet. And they have for the date, they will have what they are going to run, a $2,000 claimer, a fillies and mares race, a handicap, an allowance race, a starters handi- cap. They have what they call-just a schedule of what races they have up and coming. So now I have this book. I can go anywhere in the country and get this book from any major track. And like 3 days before, we want to pull off a score, what we do is go up to the administration building, I walk in there, put on a pair of old clothes like I was a racetracker, and go up and get an overnight sheet. An overnight sheet tells you-like say today is Tuesday. This over- night sheet would give you the horses that are going to be entered for Friday's running. I would have them 3 days in advance. And I pick the race. Preferably, what I am looking for is a multiple-wager race. Mr. PHILLIPS. Why is this? `Mr. BYRNE. There is more money involved. The percentage of money is greater. The perfecta pools, I have taken them as high as $90,000, and that is your aim, to get as much of that $90,000 as you can. Mr. PmLLIP5. When you fix a perfecta race, you have got to fix it in such a way you get the first two horses? Mr. BYRNE. We have to pick the winner and the horse that comes in second, and all of the money is wagered on it. If you hold the winning combination, you collect your share of that combination. Mr. PHILLIPS. So a perfecta bet is a bet in which you pick, for example, the No. 5 horse and the No. 8 horse. Mr. BYRNE. Right. Nos. 5 and 8. And it comes in and pays $100 and you get about $300 or $400. If you have 40 $10 tickets, you are going to walk out with a good piece of it. Mr. PHILLIPS. You look for that perfecta? Mr. BYRNE. That is the main concern, with the perfecta race, with the multiple wager. Sometimes there is a situation arises where it is just a straight race, you know, it is a regular race. But you might be able to get down at the track and probably put a couple of thousand to win without hurting the odds. But now you call back home-and we called all of the bookmakers we knew, in which we knew a lot of them because we had done booking up there before, so we could make some money, but not enough. That would cover expenses, because our expenses were great. Ijnbelievable expenses. Mr. PHILLIPS. We will get into that a little bit later. You did fix races where there wasn't a perfecta betting or pool? Mr. BYRNE. Oh. yes. Mr. PHILLIPS. But your real preference was a perfecta race? Mr. B~flrnE. Right. Mr. PHILLIPS. How would you go about the technique you utilized to fix a perfecta race? Mr. BYRNE. When we first started we had several techniques. We would get jockeys to hold, or we would have trainers. We owned horses under straws, what we call straws. PAGENO="0077" 1087 Mr. PHILLIPS. Excuse me. Would you explain to the committee what owning horses through straws means? Mr. BYRNE. Well, see, you have a legitimate person, and I know you, and I say, "Look, I want you to fill out a form for me. I own a horse and I want to put him under your name. I actually control the horse and on paper he is under your name, and there is nothing no one can do about it." Mr. PHILLIPS. "I am fronting for you in the ownership of the horse?" Mr. BYRNE. Right. Mr. PHILLIPS. How extensive did you find that practice to be? Mi'. BYRNE. Well, we did it this way here. We could hold our own horse. Say we had a horse entered in one of these races. Now, we would have a jockey, he would run-a jockey would do what we told him to do because if he didn't, he wouldn't ride no more. If he couldn't ride, he couldn't make no money. We get a jockey who had no money to start with or had a weakness, and we play on his weakness. We get him to hold, plus knock out another horse on the gate. We eliminate two horses. Mr. PHILLIPS. Could I interrupt. You said if you have a jockey or he had some weakness. Would you explain what you mean by that? Mr. BYRNE. Every human being in the world has a weakness, I don't care what it is. Someone has a weakness or vice, whether it is girls, money. It is usually one or the other. Nine out of 10 times it is girls or money. If they wanted money, we would supply them with money. Some occasions, some like marihuana. If they like girls-and in cases some even like boys, anything. Whatever they want we give them, just to hold that horse. Once we did that- Mr. PHILLIPS. There is one question I asked you which I would like to ask again. I think you misunderstood my question. it concerns straws; that is, the ownership of horses through front men. Mi'. BYRNE. Right. Mr. PHILLIPS. Could you tell me whether that is extensive, or is that an isolated instance? Mr. BYRNE. You take everybody in this room, take that Naders R.aiders there. They could spend 10 years and they would never find the true owners of 60 percent of the horses. In fact, we had one horse in our group like, say, I am involved with like 10 people, and to this day I don't know how owns the horse. I know whose name was on the paper. But I don't know who owned the horse. 1~\Te had arguments about bringing the horse in. It was unbelievable, the ownership of these horses. Whoever produces the foal papers when they go to the track and enter the horse, there is no problem. As long as the person is licensed and he is an honest person, you have no problem. It is beyond your imagination how many straws there are in the country with horse- racing. I mean there are some legitimate people in racing, but very few. Mr. PHILLIPS. `Would you care to go on? I interrupted you when you. were telling us you had jockeys and trainers that you could get to co- operate with your group. Tell us how that was done? PAGENO="0078" 1088 Mr. BYRNE. We had two particular trainers that we used. They would train our horses. And even in fact, one of the trainers we had listed-in fact, we used him for an ownership, too, because they own horses. One trainer, in particular, he used to train quite a few horses at one time, some pretty good horses, and he lost them in a fire. So, naturally, this was his weakness right off the bat. He is trying to get on his feet again. This is his weakness. This is what lie can do to make some money-train our horses and do what we tell you. He is going to do it. Our other trainer ha.s a license and he is just a $100-a-day racetrack hustler. He is afraid to get his shoes dirty. He wouldn't even walk back in the stable area, he wants to play the part of the high roller in the clubhouse with all of the girls and stuff. But he needed us because he needed money to keep up this front. So he would do what we tell him. We tell him to get the jockey to hold, and the jockey would hold. We tell him to use the syringe on ~the horse. There are some angles to it. When we first started out, we would go to some trainers, you couldn't get to hold their horse for no amount of money. Some would drive them, other you couldn't. So those that we couldn't, sometimes, as long as they weren't too legitimate a trainer, we would hit the horse with something and then say to them, "Look, claim the horse on them." Claim the horse through these trainers and he would lose the horse. So we say to the guy afterwards, Look, the next time play ball with us or we will claim all of your horses and hit all of your horses. And they find a drug in the horse, that guy could lose his license in the whole State. So they more or less come down and play ball with us. Except there are some that won't. Definitely won't. Mr. PrnLLIPs. There are some trainers around who you would not approach, or did not approach, because they had a reputation for in- tegrity and honesty? Mr. BYRNE. Right. And later on, as we got into it, we devised a sys- tem with the drugs to this day I don't think anybody has beaten. In fact, I know there are quite a few people in, let's say the "wise guy" element, that like to know how it works, because we have been so suc- cessful at it. It went to our head and that is why things really fell apart on us afterward. Mr. PrnLLIPs. You say initially, when you got involved in race fix- ing, you worked through jockeys and trainers? Mr. BYRNE. Right. Mr. PmLLIPs. And you worked with drugs? Mr. BYRNE. Right. Mr. PHILLIPS. There came a time when you determined that the best method of fixing these races was to tie them up through drugs. Mr. BYRNE. Right. We come across a drug-and it happened we even had a conversation about it one night in the hotel. You know, who brought the drug along, and what happened was you would always be talking to people about horses to find out who has money, even if you could swindle a guy into betting for you, using his money. And one time a guy, we got in a conversation with a guy that was shipping horses and we found out they used a certain drug to calm PAGENO="0079" 1089 horses down so they could put them in an airplane or travel them over the road. So we had been experimentmg with all kinds of drugs on one horse. rfhe horse belongs at 1-larvard Medical School now, the poor thing. Mr. PrnLLIP5. This group, which was fixing races, was actually experimenting with a horse? Mr. BYRNE. Right. Mr. PHILLIPS. Using various drugs to see whether they could avoid detection? Mr. BYRNE. Avoid detection, see if it would pick up the speed. Any-s way, this horse has had everything from heroin to caffeine. I mean this. Mr. PHILLIPS. What was the horse's name? Mr. BYRNE. Robert Kope. Mr. PHILLIPS. How do you spell that? Mr. BYRNE. K-o-p-e. Mr. PHILLIPS. You say this horse has received so many drugs he belongs at Harvard Medical School? Mr. BYRNE. They should donate him to science, believe me. In fact, he tore up that track that we was talking about at River Downs. You ought to see this horse run. It is unbelievable. They ought to give him the "horse of the year" award. Mr. PHILLIPS. Let me get back to the main line of my questions, and that is: You say that you did develop an approach for using drugs to fix races and you found that to be superior to using the trainers and the jockeys? Mr. BYRNE. Right. Mr. PHILLIPS. Exactly how would you utilize this drugging method? Mr. BYRNE. If you use jockeys and trainers, and you are dealing with too many human elements, and everybody knows somebody, they would know bookmakers, they would call bookmakers and when they get overloaded they would put it through the windows and hurt your play. We found out about this drug. We could use it, and I could ad- minister this drug to a horse, and he would run but he wouldn't win. I could take a wagon horse today, pulling a wagon, and administer this drug to this Riva Ridge and this wagon horse would beat Riva Ridge on any given day, with this drug. If I administer this drug to Riva Ridge. We hit, knock out the favorites. And plus knockout, like say you had 10 horses in a race, it is usually an ideal situation. it is better if you have eight, but if you have 10 horses in the field of a perfect race, what we try to do, what we would do, we forward them alive. Why we would do this? Because what we do now is try to hit six of these horses with a drug, try to hit six of them right off tIm bat. If you couldn't get to all six, which is very rare we didn't, we would have, we would get to a jockey to hold the horse, plus bump a horse out. But toward the end and we were just using the drug and it was working beautiful. So we had four live ones. Mr. PHILLIPS. You say of the 10-horse race, you would knock six out? PAGENO="0080" 1090 Mr. BYRNE. Right. Mr. PHILLIPS. `Mainly, toward the end of this activity, by drugs? Mr. BYRNE. By drugs. Mr. PHILLIPS. Prior to that you would use the jockey and trainer, and mix that along with the drug? Mr. BYRNE. Right. Mr. PHILLIPS. You felt you did not want to continue using jockeys and trainers because they brought a human element into it, and they got a cut of the pie. They would be betting and knocking down your pool. Mr. BYf~NE. Right. In fact, one day they did knock down the pooi on us. We collected $36,000 and the guy we were involved with, his group collected $40,000 and we did all of the work. That is an example of why we wanted to deal with no human element. Mr. PHILLIPS. `It was better to deal with the horses directly? Mr. BYRNE. Oh, yes. They do what they are supposed to. Mr. PHILLIPS. You say you knocked six horses out. How would you go about knocking the six horses out? Mr. BYRNE. Well, see, I can get into any track in this country, back side of any track. I don't care what `security they have or what they haven't, I can get in there. And nine out of 10 times I walk right through the gate, right past the guard. If I don't have a pass, if I can't get access to a pass, just go where all jockeys and trainers stay. Some of them were from out of State. They have to stay somewhere. You go to the nearest trailer court, go to the nearest `bar and restau- rant in that area, and they all have stickers on their car. So what I would do is take some water and vinegar, peel the sticker off, and put it on ~. car I had gotten in that area. I would get a car in that area so we wouldn't have to use our own, because security knew our cars. I put it on and I drive right through the gate and no one would question you, the guy would wave you right on. Here is where our trainers were important.. That is why it is impor- tant to know who is at what track. I would have this overnight sheet, but that only tells you who the horses are that are' going to be entered and the trainer. It didn't tell you what barn or what stall that this particular horse would `be in for this race. If you `had a guy ba'ckside, like we had trainers-look, find out some kids, grooms, find out where such a horse is, by barn, stall 36, or something. So now you have all of the barns and stall numbers. Now you go in. And if you had the trainer's okay to hit the horse, and depending on the track, like in Lincoln T)o'wns we used the trainer's permission, because we had the guy's spitbox tied up, so we let him use the spitbox later on and he let us hit his horse. Mr. PHILLIPS. For the record, explain what the spitbox is and how you tie it up'? Mr. BYRNE. The spitbox? After a horserace, and-now, I am prob- ably a little behind on it now, I have been out of business for the last 6 or 7 months. But they used to only check the winners of the race, the urine analysis. And no matter what drug you used on a horse, it al- ways seems to show up in urine. So we had control of this box. So we would tell thi,s guy, "Now, look, if you let us hit your horse, we are going to let you use the box." PAGENO="0081" 1091 So if he wanted to administer a drug, what we called a "bute"-the name is about that long (indicating), I can't even pronounce it. All horses have sore knees and sore ankles, real sore. And if you give them "bute," it is like-it is like giving a cortisone shot, he can run and he doesn't hurt. His bones don't rub together. So if he uses this, it will show up in the urine test. So if you let him use the box-we had the guy that went around collecting the samples. He put a switch on it, taped the name on the wrong sample. And he used the box and there would be no problem. So now, by letting him use that box, he let us hit his horse. I go in the stall and administer the drug to his horse and that is how we get to the six horses, five or six horses, whatever the case may be. Mr. PmLL1PS. How did you actually hit him, with a hypodermic needle? Mr. BYRNE. Right. In the neck. You could hit him in three places. You could hit him in the neck, or breast, or rump. But the most effec- tive place to hit him is right in the neck, because it travels, it travels faster. This particular drug we use, it travels, it hits them faster. For the first half-hour it is noticeable that the drug is in there because the horse is standing there like he is drunk. After that it wears off and he is kind of dopey. But it hits his brain and his heart. It flows through the blood stream fast; whereas the other places it takes a little bit longer. It is effective, but not as good as in the neck. The neck is the best place to hit him with it. Depending on the cridumstances at the time, you might-_like de- pending on the race and the time you get to this horse, how many cc.'s of this drug you would use. Like, say, the best time to hit, say it is like a race is going to come off after 4:30 or 5 o'clock. The ideal time to hit a horse with 5 cc.'s of this drug is between 8 and 10 o'clock. And by the time he goes to race, he can go to his post position and no one will notice nothing. You couldn't detect it without a test on him. You could Surmise. They run out a few trainers that are pretty sharp, but they would have a hard time. There are certain things they look for, but if you hit it right and enough dosage, they will never detect it. And they don't check the losers. That is why people think we were hitting favor- ites, I mean hitting the horse to win. But what we were doing was hitting them to stop them. We didn't want them to win and they never check the ones who lose the race. They only check the winners. And if any two combinations of our four come across, they take a urine test, and it would stand up in a court of law. I mean there is nothing in there. Mr. PmLrAPs. How did this drug come to your attention? You said something about an airplane flight. Mr. BYRNE. Yes. They transport horses-and a horse hasn't got a brain, really. Everything about a horse is instinct and they are nervous animals. So when you take them over a road-even for a human being to travel in a car and an airplane, it is a pretty tiresome, uncomfortable deal. So you can imagine a horse, they get nervous or fidgety. This guy was using this drug to calm them down in the travel, and that is how we experimented with this particular horse, Robert Kope, and found it worked wonders. Si-OGS-7~--pt. 3-6 PAGENO="0082" 1092 He would run but he wouldn't go anywhere. That is how we come across the drug and really used it to our advantage. Mr. PHILLIPS. In other words, this drug was used by some people just to tranquilize horses? Mr. BYRNE. For transportation. Mr. PHILLIPS. Either by van or plane. Mr. BYRNE. It is a depressant, is actually what it is. It calms them down, relaxes them. And some horses, you have some horses, they will let you do anything to them. And you have other horses, they will try to kill you. They will actually try to bite you, jump you. They will do anything to you. You administer the drug to them. You take the wildest horse in the world and you calm him right down. I don't care what you do to them. It will calm them right down. It is like putting a baby to sleep with a bottle or pacifier. That i~ how good it is. Mr. PHILLIPS. It substantially affects his running speed? Mr. BYRNE. Yes, it does. lie will go through the motion. See, a horse can cover his own length in one-fifth of a second. And the horse travels, let's say, the average thoroughbred travels 40 miles an hour. Let's say 38 to 43 miles an hour, depending on his condition. Now, this horse will go through this motion, but his time is going to increase. And he is going to be traveling like probably 33 miles an hour. Seconds are a vital thing in horseracing, so he will go through the motions, but he just is not going to win. I don't care what anybody says, he is not going to win. Mr. PI-TILLIPS. in all of these; situations where you actually hit the horse, the horse ran out of the money? Mr. BYRNE. Definitely, out of the money. Mr. PHILLIPs. In every case? Mr. B YRNE. It was working so good that we have like our four live ones, and we would stand on the backstretch at different tracks, or at the top of the stretch, and we used to bet among ourselves who was going to buy the beer and lunch and how the four live ones were going to finish, and we have the winning tickets in our pocket. But it was a joke. I say "No. 4 is going to be first." "No, No. 7," you know. We would make a little game about it. We saw all of these suckers at the racetrack, 13,000 of them, not knowing, just hoping their horse will come in a late surge, and the horse looked like lie ran a s-mile marathon, he just couldn't go anywhere. He just couldn't go anywhere. Mr. PHILLIPS. You say you hit a given race with 10 horses? Mr. BYRNE. Right. Mr. PHILLIPS. You practice and you thought a desirable practice, was to hit six and keep four live ones? Mr. BYRNE. Right. Mr. PHILLIPS. Why did you not just hit eight and leave two live ones? Mr. BYRNE. Well, when you are dealing with the human element, you always have an unforeseen thing happening. A horse could fall down, they could click heels, a horse could thump. There was an inci- dent happened in Rhode Island. The track security was wise. They were wise to what was going on, but they didn't know who it was or how we were doing it. I was the only party that was unknown. My PAGENO="0083" 1093 face and name wasn't known to anybody at these tracks, but the people I worked with were well-known and their cars were. `What would happen is we would get the-let's say the one horse we hit, let's say, one time. He was so bad-I don't know how you explain it. We had, like I think it was, I think we left three open this day, at Lincoln Downs. I am positive it was three horses open. So what they did, the TRA went to the stewards and they told them, "We know these guys are around, they are in town." So what the stewards did, they watched the race real close and they use the least bit of excuse, you know, and they watched it. `What happened was, one of the horses coining out of the--not three live ones, excuse me. `We only had two live ones. And this other horse was running, and that two come in, one-two, in that order. * And there was $50,000 in this pooi. What happened was the stewards reviewed the films and they used the least excuse to take the results down, and which they did. They subsequently took down the horse we had finish first and put *another horse up. Our horse that come in second, tied with the third horse we didn't hit. So that killed our perfecta ticket. They couldn't prove that we hit it. They ran a test afterward through one of the laboratories and they found out, they checked all of the horses, and they were right, our horses did have the drug. But they couldn't scratch him because there was no reason. The reason they took it down, you have film patrols at racetracks and they used-I found out the horses bumped, and they used that for an excuse, because a steward has a lot of authority at a racetrack. He only has to answer to, like a racing commission, and he can suspend a jockey, he can tie up the purse. In this case they took the 1~orse down that finished first and placed him third or fourth, I be- lieve. I forget exactly. Subsequently we didn't collect our money. So that is why we leave four horses open for this particular matter. Now, any one of these two of these four come in, we are going to collect, and if they take down any two of them, or any unforeseen ele- ment happens-remember, you are dealing with the human element and you are dealing with an animal that hasn't much of a brain. He is instinct. If they do get off to a poor start, or stumbles, or falls, or loses the jockey, you still have three horses alive. Or you have two alive. If they take down the top and put up the third or fourth, we are still in the money because we have the combination. You might say, "Gee, that's an added expense." But it is like- you have a safety, you know. It would be like going into a fire and besides the hose, carry a fire extinguisher, too. You have a little reserve there. It only costs you like probably an extra $400 .or $500 but it is well worth it in the end. I seen it in some cases. One case, it made a difference between $16,000 and nothing. And that other incident I just explained, it was $50,000, and it was a day we needed the money. We were broke and they took it down. That is why you have to definitely leave four. Mr. PHILLIPS. In a 10-horse race you leave four, and an eight-horse race you leave four or three? Mr. BYRNE. `We leave three. Our practice is to leave three in an eight-horse field; because if-I am trying to think of a race. I can think of a million of them. There was one race in particular, in fact PAGENO="0084" 1094 all of them, but this one race in particular. If you reviewed the films of it, it is like two separate races. Did you ever see a group of jet fighters take off? They take off simultaneously, so many seconds behind the other. This was like two separate races in one. Our group that we wanted to win were running up front, and the other group that were all doped up, were running by themselves, and here they come. And you got a guaranteed winner there, you know. Mr. PHILLIPS. In any event, you say the practice was to leave four or three, depending on the number of horses in the race? Mr. BYRNE. Right. Mr. PHILLIPS. And in those races, did you go through the trainers or did you sneak it? Mr. BYRNE. Sometimes-well, here's an incident now. We have eight horses in a field. I can go into this race now because the case is over with. I believe it was eight horses this particular day. Two of the trainers we knew real well, had done business with them before. So everybody that knows us, all of the bookmakers, figure we are going to use our horses to win. The name of the horses was Willston Kid and Hasty Niece. So what we would do, everybody, the public would say, "Hey, the guys down here, their horses are regis- tered." Some of the guys knew our horses. They figured they were going to win. They put money on our horses. And what we would do was stop our own horses through these trainers. They would tell us where other horses were that we had to get to, and we go along and hit them with the needle and no one would ever know the difference. So we would beat the bookmakers, plus we beat the track and the public. It is beyond people's imagination how bad it is. I wouldn't go to the track today if there was one horse running-with my own money. I might go with somebody else's, but I wouldn't use my own. No way. Mr. STEIGER. That is right. You couldn't get in. Mr. PHILLIPS. You say there is an hour-the amount of this drug and a certain time that it has to take effect? Mr. BYRNE. Right. Mr. PHILLIPS. Tell us about the drug and the conditions for using it. Mr. BYRNE. See, the name of the drug is Acepromazine (phonetic). It works so many cc.'s per hour. Let's take a horse. Let's take a horse, Riva Ridge, everybOdy knows today because of the newspapers on him. If I was to administer the drug to that horse, when that horse is a young horse and has got the guts to run like it does, it can run a half-mile and a mile-and-a-half like it did the other day, I would have to hit that horse, I would have to give that horse 5 cc.'s between 8 and 10 oclock in the morning. If I had-in this particular case, with this horse, I definitely have to sneak him, because I doubt if that trainer is going to let me hit his horse for a couple hundred dollars. It is a horse worth probably a million dollars today, and he needs me like a hole in the head. What I would do is sneak it light. A racetrack doesn't come alive until 4 or 5 o'clock in the morning. That is when they wake the horses and feed them. And it is busy. You get in the track at 3 o'clock in the morning. All you have to watch for is some retired guy on pension, PAGENO="0085" 1095 security. He can hardly walk, let alone run. So if he sees me, I have the advantage. I know where he is, he doesn't know where I am. I go in the stall and hit that horse and at 3 o'clock in the morning or 4 o'clock or 5 o'clock in the morning, depending, I would give him 8 to 9 cc.'s. And why it is so much with that particular horse? Because he is a good ihorse, he has good bloodlines and everything. If he was just a run-of- the-mill $1,200, $2,000 claiming horse, I would only give him like 7 cc.'s, and 4 o'clock in the afternoon he is still not going to run. So it depends. Your timing depends on the class of the horse. And which you get in New England, and like specially in New England, you ought to put them all on the farm and let the little kids have them because they are not worth 2 cents. They are poor quality horses. Once in a while you might get one good one that comes out of New England that could race in the big circuit. But those horses, you give them 5 to 7 cc. `s, and believe me, they just couldn't run. Poor quality. We had one horse we took to Florida-to tell you how erratic these animals are. We had the horse, for the first three-quarters of a mile, this horse wouldn't run. You could beat him, you could put speed in him, anything. "Bute." The first three-quarters he would not run. But after that he would get up his stamina and want to run for the next 2 miles. He would set all kinds of records. What we had to do was devise a scheme to get a drug, before we get into the depressant or bute on them, we had to devise a scheme for timing for this horse. And we were doing it. Someone says, "Look, instead of letting this horse win, why don't we knock him out of the box? Here we don't have to worry about sneak- ing him, let's give him the depressant and see how it works." We gave him a depressant and believe me, we went down there 2 years ago January, it was around January- Mr. PHLTLIPS. Was this Hialeah? Mr. BYRNE. Tropical Park. And we ran the horse and we held him. We had the jockey to hold him, but we still had to administer this drug to him because he was a strong animal. You have a 1,200-pound animal carrying an 80-pound kid on his back. We used the drug. Gave him 6 cc.'s of Acepromazine so he wouldn't win, would give a bad show- ing to the betting public. We sent him off at $200-some-odd to one, and he came in like next to last. About 2 weeks later we ran the horse back, and we were going to win with the horse. We were using him in one of the combinations. But what happened was the race that we wanted to get him in was full and they wouldn't let us. What happened, really, the track security knew we were down there. So what we did, we used him, plus we knocked out about four others and subsequently we won the race. And everybody, to this day, the track security, thinks we lost all of our money. But we didn't. It was 2 days before the Super Bowl and at Tropical Park. Mr. PHILLIPS. Could you tell us approximately how many horses your group had during this 2- or 3-year period? Mr. BYRNE. About a dozen horses all told. About eight-sometimes we had five, six, but we had about a dozen; 10 or 12 horses, plus two of these trainers. We had access to any horse that was stabled at PAGENO="0086" 1096 Suffolk Downs. As long as it wasn't to certain trainers in particular at Suffolk Downs, in that area. We couldn't get to their horses no way. They were between their dogs and their guards, and everything else. They wouldn't let us down. They didn't need us because they had a lot of money and a lot of horses. They were in it for business. In fact, they have about the only two in New England, at Suffolk and in Rhode Island, that I know of, that are legit. All of the rest, you know, everybody is out for that check you don't have to declare on your income tax, let me tell you. So if they want to race, let's say, see they get a purse for $800 or $900. Now $800 or $900 is not a lot of money, because if you have five or six horses, you have to feed them, plus feed yourself, your stable hands. So they are always looking for guys like us. Like one particular day-I can't go into too much detail because there is a case going on, on it-I gave some trainers some money and one trainer, he says to me-this particular one had all of the trainers' okay. I said to this one guy, "I am so-and-so; so-and-so sent me." Where is the money? I gave him the money. He said, "I will go in with the stablehand." The horse was right next to his tackroom, where all of his equipment is. So I sent him into the stall with the syringe. I had five cc.'s of the stuff in there. I am watching him because you have to watch out. They are just as thieving as you are. He might use his horse and we think it's dead. So' I am watching him and he squirted it on the ground, and wiped a little' on the horse's neck and said, "See, I got it." I said, "OK, don't worry about it." I always carried like two or three extra syringes for little jerks like' him. He was bigger than I was. What I did was walk around the stall with him, the hold, what they called "under the shed," and like I am pretending I am going to buy the horse. He was worried about security. While I am looking at the horse, he' was walking `on the one side and I was walking on the one side am~d I was walking on the other, and I stuck anOther needle in the other side, and to this day he is wondering why his horse didn't win the race. "He was running with the dead group. What happened? I didn't pu~ the stuff in." Then he said to me-don't forget, lie was begging us to use his horse. I said, "Don't worry about it. Here's your money, your couple hundred bucks." He said, "You are going to come back and give me the combinations to play, to bet?" I said, "Sure; don't worry about it." I saw him a couple of hours after the race. He says to me, "What happened?" He says, "You didn't come and give me the list of th~ horses to bet." I said, "Gee, the kid didn't come down? I sent the guy down to see all of you guys to give you the winnhig combination." He said, "No, look, the perfecta paid $149." Tears are coming to his eyes. He has got $200 he is itching to bet on a sure thing. PAGENO="0087" 1097 I said, "I'll make it up to you, don't worry about it." Actually, you don't want to tell him the winning combination. There's $200 more that would go in the window and be less money out of the pooi you will get; because your aim is to get as much of that pool as you could possibly get. Mr. PmLLIPS. In other words, getting back to the main line, after you hit the six horses, you have four live horses left in this hypotheti- cal race? Mr. BYRNE. Right. Mr. PHILLIPS. That is, if it is a 10-horse race. Mr. BYRNE. Right. Mr. PHILLIPS. Then you bet combinations? Mr. BYRNE. Right. Mr. PHILLIPS. Explain the betting, for the record. Mr. BYRNE. I guess everybody is pretty familiar with the handicap- pers in the newspapers, how the horses, they have like the list. Let's say the seventh race at $2,000 claiming. There is perfecta wagering on this race. We have 10 horses, now. So you would have like a favorite, 6 to 5, 2 to 1 shot, a 3 to 1 shot. Let's say a 4 to 1, 5 to 1, 6 to 1, go right down the line; 7 to 1, 8 to 1, 9 to 1, and a 10 to 1. There is your 10 horses. Now, if I was to tie up this particular race, right off the bat I have got to get the three top favorites out of the race. The 6 to 5, 2 to 1, and 3 to 1. I definitely have to get them out of the race. Mr. PHILLIPS. Why? Mr. BYRNE. Because if any one of those horses come in first, the perfecta is only going to pay like $34 or $40. That is not worth it, you know. So we go in there. The thing is, we size up the situation: Is it financially worth our while and financially worth it, is the risk worth it, to tie up this race. What kind of pool will they have. If there is a big pool in there, OK; let's go ahead. So I get in back here. I knock off them top three. I am definitely going to knock out my 9 to 1 and my 10 to 1 shot. And the reason I am goi~ng to knock them out, because usually they are in bad shape. They are just used in the race. The trainer is putting them into the race because lie is eligible to give them a race. They are preparing them for another race. He is out of condition, and that would be- now I have my elimination in my field. I definitely got to knock them out. Now I have one, two, three, four, five horses left. Out of that five I would like to get to that 4 to 1 shot, or the 5 to 1, or the 6 to 1. It is not always possible, but, well, when you got the drug and you sneak it. I get the 4 to 1 shot. I have a 5 to 1, Otol.7tol,8to 1. I have four live horses here. If any one of these horses come in, the least it is going to pay, if it goes off according to the betting odds, because the public does-~because they bet according to chalk, not only the favorites. If the morning line is 5 to 1, by the time the last list goes up on the board, it will stay, maybe change a dollar or $2 either way, but basically the same. So my winning horse is going to pay a minimum of $12, that is to win. That is the 5-to-i shot. The highest payoff would be $18 on my 8- to-i shot. PAGENO="0088" 1098 I like to see my 8-to-i and 7-to-i shots come in on my perfecta be- cause that would give me a payoff of about-I can walk out of here with about a $300 to $400 perfecta on a $2 ticket. For every $2 I put up, I am going to get at least $200 back. Say we are going to bet the race. All right. What we would do is we would get like 40 tickets on our 8-to-i and 7-to-i combination. And we would get 40 tickets on the 8 to 1, and the 6 to 1, using the longest shots on the board. You buy the smallest number of combinations in `$10 perfecta tickets. The reason you do it with the smaller number, you buy 40 tickets, or 30, depending on what kind of money you are going to put through the window. What the favorite, what we would call the favorite would be that 5-to-i shot. We probably load out 60 tickets, 60 combinations. So if the 5 to 1 comes in, and we had like 60 some $10 tickets on it~ we would get the great amount of the pool that way. And if we had 40 on the two longer shots, we could still take the greater majority of the pool. So either way there is a little-just because you hit them this here way, you get access to the majority of that pool. Let's take a $70,000 pool. You would get like-we could realize $50 out of a $70~000 pool. What would happen is we could take $50,000 `out of the $70,000, and that would leave $20,000 more, plus or minus. And what we would do is iS percent of that, $10,000 more of that would go to John Doe, to the honest citizen. He goes in there and picks the thing by luck. He is going to take $10,000. So we got rid of $60,000. The other $10,000 is going to be taken away by little old ladies that play their house number, birthday combination, and never fail; the stum- blebum drunk at the bar, he will walk away with the other $iO,000. And that is basically how you cut up the $70,000. That is how you realize $50,000 out of the $70,000. Mr. PrnLLIPs. You say you could realize that and `did realize that out of a number of these races? Mr. BYRNE. Yes. Mr. PrnLLIP5. Very, very high scores: $10,000, $30,000. Is that correct? Mr. BYRNE. Sometimes things didn't work out like they should, like one time `at Rockin~ham Park we walked out with $4,400, $4.000~ some- thing like that. But you figure our ovethe'ad~ like here we live in this area of Boston and Rockingham Park is like 15 minutes away, we `could go up there `and tieup a race through a couple of local phone calls `and we have a trainer up there and our expense is nothing. Plus, remember, we are never betting with our o'wn money. We would never bet with our own money. So if we lost, ~av som'ethin~ did happenS like when we first started out, we didn't lose nothing. We didn't lose a dime. Mr. Pmr~~i~s. Tell us how you worked that. Mr. BYRNE. There is `an incident one t;irne I was sitting in a bar where we hung `around at. A couple of my buddies were out of town. So we got a phone call `tha't a kid wanted to get down on a certain horse, get it with the bookmaker. What happened, there was so much action by the time I `got the call, they got `hold ~f me, in fa~ot they had to call my house and subsequently my wife had to chase me down to bet a certain h'orse. PAGENO="0089" 1099 Another buddy of ourswe used, he was trying to get me to get some money down, he wanted to dump $400 or $500 on a horse. I called a couple of bookmakers I knew and they wouldn't take any more bets on the race. I live on the city line, like Cambridge and Somer- ville would be like walking from here to the desk up there, and I took them to a couple of other bookmakers and they wouldn't take it. Meanwhile, they had a hippie kid with him and he had on like a leather jacket, and I started to toil him, "Gee, I have `access to a lot of leather," you know. I didn't, but I knew where there was some I was going to subsequently sell to them. I said, "I have a buddy `of mine who owns a leather factory, I will take him to you." I went to meet the guy. He said, "Guys have been robbing my joint,. breaking in." I said, "Look, I know all of the thieves in the n~ighbor- hood. I will straighten it out. I won't get the stuff back, but I will tell them to lay off." He said, "I would appreciate it." Two weeks later the kid gives me a call. I am buying a few beers and lie says, "What is the story on the leather? I could use some." I said,. "I am busy now. I bought `a couple of horses." I ~a'id, "I have a better thing going." Remember, this kid, when I went in there, real hippie-type kid. I said, "This kid has some money." I told him, "Some friends of mine and me, we have the horse racing. We fix a little race." I said, "Are you interested?" He. said, "Geez, I am always interested in making money." We went down, myself and an- other buddy of mine went down to see him and told him like we owned horses under different names and we drug them and we control the race. And so the kid turned to us and said, "If you control the race, what do you need me for?" We said, "We got all of our money tied up in horseflesh and by the time this is all"-and we don't have money left, we probably had about 400 bucks to bet. "We could scrape it together, but we will cut it up and let you handle the money." The kid was interested. So he said, "How much should I bring?" We started him off small. We had him bring `$1,000. We took him down there, bet the perfect race. I took him down. I got him at the track and wining and dining him all day. We got to the track, he put the money through the window and makes off the list, we are going to get 60 tickets on this, 40 on that, and we. are watching the race. I think about a thousand dollars to win, maybe a little more than that. I let him hold on to the tickets. I let him cash it in. The guy counts out -$10,040 is what it was, was the payoff. So the guy at the window gives him the $10,040. The next thing I know, this guy is giving the guy behind the window a $20 tip. I said, "Come on, get out of here." I was mad. I didn't want to give away the. $10~000. I walked away. I `said, "Hey, you let me hold the money. Someone will rap you over the head. No one will touch me." I am 160 pounds, 5'S" and I am go- ing to defend this guy. He gives me $10,000. I go back. Pius the same guys, they had an- other sucker around. He put $6,600 through the window. We end up making $14,000 for the day. PAGENO="0090" 1100 We are sitting in the bar, getting ready to cut it up. We are trying to convince the guy, "Why don't you leave the money up. We are going to buy you a horse wortli $10,000. We can enter in some of the State taces at Aqueduct and Bowie, which can win the purses of $50,000, $60,000. "Yes, yes, yes, just a fine job. Give me my initial money back." Finally he said okay. "We have to get on the street and get some more money. Sit here and we will be right back." We just left him sitting there and took all of the money. What could he. do? He couldn't go to the police. What is he going to say? He is part of .a conspiracy to fix a sporting event. He can't do nothing. And then it is an out and out swindle. He didi~i't see no horse being hit. There is nothing he can do, any police force in the country, they can't convict you. What are they going to do? That is how w~ worked the swindle. Mr. PI-IILLIPs. Did you do that on a number of occasions? Mr. BYRNE. Oh, yes. If I had a pocket full of money. Like I could have a pocket full of money but I wouldn't bet a dime on a horserace. But I would let someone come along. Just to keep, it would be like :a boxer, he has to keep in shape, stay away from the girls and beer. You have to keep in shape. Spend theirs, don't spend ours. I like to gamble on anything. I wish I had 10 percent of the money I have had in the last 5 years. I would be a rich man today. Mr. PHILLIPs. On some of these scores, which amounted to $30,000, ~$50,000, how did your group divide it? Mr. BYRNE. What we would do, sometimes we would be so stingy and greedy, we wouldn't even pay our hotel bill. We would beat the hotel. We would have a stolen credit card. What we would do, if we, did have to pay the hotel, let's say Rhode Island, for instance, where ~ve `stayed. We w~ent to Rhode Island an awful lot. So we check in a hotel down there. So we had to pay that bill because we are lmown by the bartender and everybody, the maids. We would pay it. So let's say we would get-one incident, I can't go into that one, but one incident, we collected, I think it was about $17,000, $16,000. Out of that we had a hotel `bill and phone bill. Being there 2 days we could run up quite a tab. You would think we had a convention in thére: Beer all over the place, our phone bill,. We pay off to the tune of probably 400 bucks, or so. We have to take care of a trainer, a couple of hundred here, and any expense, all ex- pense money comes off the top, and we divide up the rest among four of us or five of us, depending on how many were with the group. Basically, when you come down to it, we made money. But at that time the money was rolling so fast and it seemed that a couple of thousand, $3,000, $4,000, or $5,000 a week was no money at all to us. I was spending it as fast as I was making it. It went in this pocket and it was just gone. We would always pay off the people we were supposed to pay, that we had to pay, that we had to use again. That money would deflnitely come off the top, because it would go back. Remember, like I said, we had to; is it financially worth our while to use that guy again. Play up the advantage. Is he any use to us after this. If he wasn't, chase him. Don't even pay him. If he is of use to us, pay him, be good to the guy, wine him or dine him. If a guy PAGENO="0091" 1101 needs a television, we wouldn't go out and buy one. I would gd in the B. & E. joint and steal one out. That is how cheap we were with all of that money. Give him stuff like that. Mr. PmLLIrs. You spent most of the money on high living? Mr. BYRNE. High living. Mr. PHILLIPS. Girls and drinks and- Mr. BYRNE. Well, I got a wife back there. I don't want to face a shotgun. I would rather face- Mr. PHILLIPS. The other men in the group? Mr. BYRNE. I would rather face the greaseballs who are looking for me. Mr. PHILLIPS. In any event, you also did some gambling; is that correct? Mr. BYRNE. Right. Mr. PHILLIPS. Was that on sports? Mr. BYRNE. Sports. Hockey, football, baseball. I was a junkie gam- bler for football and hockey. A real junkie gambler. I would even swindle bookmakers. But if they were connected, I had to pay. I used a lot of my money to help a lot of guys. I was a sucker. I couldn't see a guy spending a couple of months in jail for a lousy $500 on a $5,000 bond. You know, always help a guy out. It always seemed. I was known for that, "Call Bob, he might have some money, he will bail you out." I was spending, more time in the Charles Street Jail than I was in my own house, you know. Mv money went so fast it was unbeljevabie. Remember, you go into a strange town, even though we were welcomed with open arms in some Of these places, we still had to keep up a front to these people. No matter what. Because once they get an inkling you have no money, they are going to be suspicious of your operation. They are not going `th come up with, you know, we want these people to come up with a couple thousand to put in the window. If they get that little doubt in their mind-to get a guy to spend $2,000 of their life's savings, it is easy to convince them, but. there is always that doubt there. And once that doubt is there, he is going to hedge on you. So you go in the joint and live excessive sometimes. You drink the best, eat the best, you go to the best, Everything would be the best. You go in `a clothing store-you wouldn't be like a woman today, like `today's shopping. My wife, she goes in the store, she is looking for the price, two for a dollar, or something. She said, "Gee, I remember the `days we come in the door and it's give me this, give me t'hat." You had to put up a front. You had to wear good clothes. Every- `thing had to be first `class. If you had, let's say $5,000, I would say `$1,500 of it, $2,000, you would `have to use for your image. Spending, you would never-it wasn't a thing, if you went with the potential suckers, the potential people you were going to extract money from, I w)uld pay for the bill and everybody's hand seems to get stuck in their pockets. You have this bill on the table, no argument, and that would be it. The next minute you have this guy's life's savings. Mr. PI-IILLIPS. In relation to some of this money, was some of it paid t~ jockeys `to `hold horses? PAGENO="0092" 1102 Mr. BYRNE. Right. Some jockeys you can buy cheap and others, one guy in particular, he is expensive. Other jockeys will do it. Like one jockey we had, he had no qualms, he knew we would take care of him. And if we made a score, a.nd we were using the jockeys and trainers, we made a score, we would take care of him. He never had to worry about money. We didn't give him too much because the more you give them, the more they want. If you give them a couple hundred now, they want $400 next time. So if he asked for $200, you give him $150 Some other jockeys, you tell you are going to give them the winning combination. A couple of jockeys, they got a price, and they want their money up front. What I mean by "up front," they want their money first, before they go in the jockey room. One guy in particular, he is a thousand-dollar guy. He wants his $1,000 and you have to give it to him before noontime or else he is not going to do any business for you. Mr. PmLLIPs. You also had a jockey who was setting up other jockeys? Mr. BYRNE. Right. We had one jockey, we went to the jocks' room~ we would give him like $500 or $600. Like we would know. We would. say to him, "Now go see so a.nd so," or this guy. I talked to him on the phone last night, show him the money. Say it was late, we would send him in. Go into the room and distribute the money. So he would go in and say, "Here's a hundred, do me a favor, hold it." "I need the money, sure." So he not only made money, but he has got the same thing coming from this kid. This jockey. "Look, I helped you out before, now do' me a favor, will you ?" And no questions are asked. No questions are asked. Once they are in the jocks' room, it doesn't do them any good to find out who's who, except in some cases there were some jockeys. that get to their agents, that tell me know bookmakers. But by that time it is a little too late for them to get down any `big money to speak of. We send the kid in and he would do what he is supposecT~ to do. If he got to him and we would try to sneak the horse-in one case we used to sit in the backstretch at Lincoln Downs and flash our' headlights. Two flashes means the race is off, and one flash is hold. the horse and bump another one that's on. If it was a last-minute' situation, because there are always unforeseen elements involved, because you are dealing with a lot of human beings and you just never know what is going to happen. Here's a case of a guy pulled a little switch on us. You go in the' stall and hit a horse. This is the most important part of it. Once you hit a horse, like I would hit him, I would have to take the horse I hit and look for a distinguishing marking on him. No two thorough- breds have identical markings. They might have some, but they stand out. Among 10 horses they will stand out. So when they come from the paddock area, just before you put the money in the window, you look in the paddock area to make sure that wa~s the horse you gave the drug to, because there are cases where, I guess, a trainer got wind I was going to hit his horse and he put him in another stall and he just put an old junkie horse in there and I hit the wrong horse. PAGENO="0093" 1103 If we don't do this system, we would have lost all of the money. We couldn't have collected nothing. As it was, the score came off, we made the money. Mr. PHILLIPS. In that particular situation, were there times when you had to get the cooperation of grooms or people at the track? Mr. BYI~NE. Oh, yes. Grooms, you have grooms, stable kids, or any- body. This is why I was so successful at this. I could put on a pair of dungarees, a sweatshirt. I don't grow a heavy beard, but get stubble. Let my hair grow. Just wash the sleep out of your eyes and walk around the track and I fit right into the picture. Remember, I know what security looks like. I know who they are but they don't know who I am. So these grooms and kids, they don't make any money. Some guys, give them $5 a day, $7 a day. So what (10 they do with their money, instead of putting food in their belly, either they buy marihuana-I have seen them bet through the win- dows thinking they have a sure thing and they would be betting cold. The kids never have any money. They are not educated kids. So if I went in there and flashed a roll of fifties and hundreds and twenties and I would say. "Hey," then pull out a $20 bill and show them the needle. He say. "What do you want to do?" You show him that syringe, he knows what you want to do. "Pick out, show me where the horse is. Where is your boss today? When are you going to have the horse in?" Because sometimes there are cases when a horse might be on a farm and they don't ship him in until that morning. It always seems lie is the red hot favorite in some of these cases. It doesn't happen every day. but there are cases where it has happened to us. So what we do: "Tell us where he is going to be stalled. Can you hit him for us? 1-Tere is some money." He will do anything for that money. One kid, he hadn't eaten for 3 days. this kid. I-Ic used to take care of a horse for us, at Narragansett, RI. He hadn't eaten for 3 solid days. I had to bring him down some money so he could eat. The minute I give him some money, this kid went out and said the kid hack in there has got to eat. He got a couple of bags of marihuana. He didn't put a drop of food in his belly. These kids, they don't know any better. They could care less. Mr. PTIILLTPS. And they are easily accessible? Mr. BYRNE. TTnbelievable. They are easier than anybody. Mr. PhILLIPS. Approximately how many horses have you hit over this 3-year period? Mr. BYRNE. You should say how many I didn't hit. Geez, 1 day alone I have hit up to a dozen horses, 16 horses. I couldn't even come close to a figure. Mi. P 1TILLTPS. A tremeuidous amount? Mr. BYIrNE. It's too many. I couldn't even count them all. In fact, I forget half the names, you know, of some of these horses. I have hit horses at just about every major track, one way or another. And I am only one of one group. Mr. PI-IILLIP5. There are other groups, as well, doing this? Mr. BYRNE. You take at Suffolk Downs. When we were operating there was aiiother group operating. Remember, too, you also have this other group operating. Of course, they were operating a little different PAGENO="0094" 1104 way. They were-I am not sure, but I am almost positive we were the only group that successfully got this drug down to a science, the way we were doing it. I mean, other people were using it but not like we were. But the other group was holding and pulling. and got the jockeys and trainers and they were going on, they were dealing with the hu- man element. In fact, one of the guys in this particular group worked for th~ owner of Suffolk I)owns at the time. He was supposed to be like, you know, he is key man and all o-f this stuff. So what this kid was doing, he would go around and tie up a race for him and his buddies. And they would tell the guy that owned the track about it and they would collect the money and no one would. be the wiser. But every so often they would feed him a race. Say, "1-Icy, look, we have this going." And there is a guy who also owned the horses himself, you know. In fact, he raced under different colors. So, in a racetrack, let's take Suffolk Downs, period. At one time, the time I was arrested at the' track, there was myself, our group, another group, plus you had the trainers and the jockeys. So you have four groups swindling the pub-- lie every day. The public don't stand a chance. There is no way. You take 2 out of 10 people walk out of a track a winner. Now, the thing about parimutuel betting is that the money is supposed to revert back to the people, and they take the taxes and the track and the overhead off the top. Well, you get 2 out of 10 people; you get the little old lady that gets a quarter, the drunk that gets a quarter, and you get the wise guy. So everybody is a loser, but the little old lady, the drunk, and the wise guy, because they don't know what is going on. So the public is getting swindled every day. I see guys that went down there, didn't have groceries on the table, get down and bet the~ whole week's pay and didn't know what was going on. You will never in a hundred years clean it up. I don't care what you do. There's no way you can straighten it out. The public, it is amazing. Here is how gullible the public is. We have this case, there is a case~ coming up this fall in Rhode Island. I can't go into much detail be- cause I am going to be a witness in it. When that thing hit the front pages of the paper, there was 24 people indicted for fixing races. So the handle fell for the next couple of days, the public hears about fixing races. The handle and the betting and the attendance drops down a little bit, you know, for a couple of days. That's all. Then people are right back again shoving that money right through the window. They are so gullible. They know it is crooked, they suspected it, and there are people that know definitely it is, and yet they come back everyday looking for more. They are a glutton for punishment. Let's. f ace it. The American people are. We are noted for being the biggest suckers in the world, and other countries take our money and here I am, I take the American people's money because there's more of it. So it's the same way. You will never clear it up in a million years. There is no way. Mr. PHILLIPs. Isn't it a fact you have heard the same group that was involved in these cases were right back fixing races while they are awaiting trial? PAGENO="0095" 1105 Mr. BYRNE. Yes. We were indicted in February, January, or Feb- ruary. And that very next week, back in the action, fixing races. In fact, they got in a scrape down there. I believe it was Bowie, this last meet at Bowie. I am almost positive. They were down here to set up the scores. Subsequently they got in an argument and ended up getting pinched. But we were out on bail and I got a phone call from one of the guys, he says, "Hey, keep your eyes open for suckers. We are not out of action, you know." But a funny thing, you send all of these guys to jail, and you know, like I have been away before, but usually when the guy comes out of jail he likes to spend a couple of days with his wife and kids, and you go to a hotel with your wife and get a couple of bottles and you spend a couple of days. Go home with your family. The first thing they do when they get out of the can is go to the nearest smoke shop and buy a racing form, a Telegraph. What's going on. I was 17 years old, I will never forget it, walking right out of the commissioner's house at the Rhode Island House of Correction, and here I am doing a year in jail and I am calling horses out of the jail. That is how extensive it is. Mr. PmLLIP5. Really? Mr. BYRNE. Yes. It was unbelievable. I would get a job-there was two guys at work in the commissioner's house, and I used to take care of the commissioner's boat. So the kitchen is like separated, so you go in and have a cup of coffee or something. There are phones all around the house. Like anybody else, and I knew the guy, and I did favors for some guys, I got favors for them. One hand washes the other and we call in horses, selling it over the telephone and run cables out of there to a junk dealer, and using that money to bet horses with and using the commissioner's phone all of the time. Mr. PmLLIFs. What was the maximum number of races you tied up ml day? Mr. BYRNE. In 1 day? Four races in 1 day. A daily double and two perfectas. Mr. PmLI~IPs. I think you also told us previously, you mentioned to me in any event, in one 6-day period at Aqueduct and Pimlico the group hit over $80,000. Mr. BYRNE. Right. I got a kick out of it. I don't know who the guy was. He says, "Aqueduct, Saratoga, and Belmont we got such security that no one can fix the race." I am laying on the couch with a bottle of beer, and roll off the couch laughing. I read it in the paper. I said, "I would like to meet this guy. Give me $600 and 2 weeks, and I will make some money and we will see how good his security is, if he wants to put his job up against my drugs." Here I know for a fact, you know, firsthand, personal knowledge of money that comes out of there in the 6-day period. We are talking $80,000. And here is a guy saying it can't be done, you know. It is like they build safes and everything else. Anything man made, where there is the human element, they can beat it. You take the average person in this room, at 4 :30-5 :00 o'clock they go home and have supper with their family; do whatever they do, go to bars. That is it for the day. They forget about what went on today, their job. The average American citizen forgets, and you people, you may relate a little bit to your job. Remember, these people, we stay up PAGENO="0096" 1106 all day long, argue all night long, all we talk about is horses, horses, scheming to steal, so that if we put the brains together, we form a corporation that would put General Motors to shame if we went legit. All them brains going down the drain. Mr. PHILLIPS. Could you tell me about how many jockeys you have worked with through the years that your group has been operating? How many jockeys were involved? Mr. BYRNE. At one particular meet alone we would have access to like a dozen jockeys. But we used two key ones. Two key jockeys, three key jockeys, and they would be buddy-buddy. There had to be phone numbers to their horses, where they were staying. Remeniber, them kids, some of them are making good money. But the average jockey, he doesn't make any money. So a guy, like the same guys again-he has got a weakness for money. He wants to make money. lie says, "Gee, look, these guys ride around in big cars, good clothes, living in the best. Here I am out among the horses all day long for a 10-percent piece of the purse, and probably a little workout in the morning. I have to get up early in the morning." You know. they say, "I have got to get with this, I want to go where the money is." Everybody is in it for the money no matter what their trade. If you are a jockey, if you are a businessman, a factory worker, you are work- ing to make money. Mr. PHILLIPS. One last question: Name the tracks you thought were easiest to hit? Mr. BYRNE. The easiest? Mr. PHILLIPS. Yes. Mr. BYRNE. The easiest were the two tracks in Rhode Island; River Downs: Lincoln; Narragansett. As I said. Scarborough, Dover. Dover Downs here in Delaware, Dover, Del., and River Downs and Lincoln Downs. Really, I did three "ice cream" tracks. Real ice cream tracks. It is unbelievable what you could do there. Chairman PEPPER. Mr. Keating. Mr. KEATING. Thank von. Mr. Cli airman. You just mentioned that River Downs was one of the easiest. `What makes it easy? Mr. BYRNE. It is so easy, too much access to the track. We have had- I don't think there is any case coming up involved in it, it is a matter of a race that we tied up and there was a photograph taken and every- body standing with the horse that won the race, and we have a couple of suckers along and everybody else. And here's the photograph right under all of this security. It is easy. Mr. 1(EATING. Do you have easier access? Mr. BYRNE. No problem. Mr. KEATING. Are the grooms more available? Mr. BYRNE. Grooms are more available. Mr. KEATING. Trainers? Mr. BYRNE. The trainers are more available. Mr. KEATING. Jockeys? Mr. BYRNE. Well, the jockeys, too. We had a little jockey down there. We shipped our own jockey in. But horses are too easy-I can get to them. Mr. KEATING. Do you know if that situation prevails today? PAGENO="0097" 1107 Mr. BYRNE. No; because they are in jail. Mr. 1(EATING. Pardon me? Mr. BYRNE. They are in jail and I am here. Mr. KEATING. You mentioned the last time you were there, I believe, was in 1970? Mr. BYRNE. This is 1972-I would say it was the last time that Robert Elope ran at that track. Mr. KEATING. Who is Robert Elope? Mr. BYRNE. He is a horse. Mr. KEATING. That is the one who should be in Harvard Medical School? Mr. BYRNE. He sure should be. I-lie should get the Nation's highest award. Mr. KEATING. Did you administer the drug, yourself, to Robert Elope? Mr. BYRNE. No. Robert Elope we used to win the race. Mr. KEATING. The other horses were drugged? Mr. BYRNE. Were hit. If you ever see the photo of him coming down the stretch, he is winning by about nine lengths. It looked like he won it, he is over in the next city. Mr. KEATING. Do you remember how much you won that day on Robert Elope? Mr. BYRNE. I believe that day we took about $22,000, $23,000 out of there. I am not positive. Mr. KEATING. Was Robert Elope your horse? Mr. BYRNE. Right. And we had the jockey. See, it was a short race. See, River Downs is one of the tracks in the country that runs short races, and this horse was an ideal situation. He is another reason why we would travel from track to track. You take a horse like Robert Elope, he could run for 3 to 5 furlongs beautiful, but after that he couldn't run. He would tire. So you get a situation here at River Downs, you can enter him in a fourth-I think it was 31/2 or 4 furlong race-and he ate up the racetrack. So if you stop a couple of the favorites, you have a sure guaranteed winner. Mr. KEATING. Did you ever get involved with the management at any of the tracks? Mr. BYRNE. At any of the tracks? .Just one track. Well, he actually isn't the management of the track. He was a State official. But it was only one track. Mr. KEATING. Do you deal with any State officials in Ohio? Mr. BYRNE. No. Mr. KEATING. Have you ever? Mr. BYRNE. No. Mr. T(EATTNG. Have you dealt exclusively with the trainers and jockeys and grooms? Mr. BYRNE. Right. Mr. KEATING. And is that true at River Downs? Mr. BYRNE. Definitely true. Mr. KEATING. Do you remember any of the people you worked with down there? Mr. BYRNE. Yes; but I can't go into it so much because there is a couple of cases outstanding. Cases are coming up in the fall. I can't go into the names of them. 81-068-73-pt. 3-7 PAGENO="0098" 1108 Mr. KEATING. Are you going to testify in those cases? Mr. BYRNE. Yes, I am. Mr. KEATING. In Ohio? Mr. BYRNE. No; in Rhode Island. Mr. KEATING. What about any one in River Downs? Mr. BYRNE. Well, remember- Mr. KEATING. They travel? Mr. BYRNE. They travel, too. Mr. KEATING. Y ou are not incarcerated anywhere at this time, are you? Mr. BYRNE. No. Mr. KEATING. You are not destined to serve time anywhere? Mr. BYRNE. No. Mr. ICEATING. All right. I would like to get back to River Downs. Do you remember the exact dates when Robert Kope ran? Mr. BYRNE. I can get the dates. No problem in getting the dates. I don't have them on my mind offhand. Mr. 1(EATING. You mentioned there were three races that you fixed at River Downs. Mr. BYRNE. Right. Mr. KEATING. And that would have been in the year 1970? Mr. BYRNE. Right, 1970. Mr. KEATING. And in the two where you were successful, was Robert 1(ope involved in both of those? Mr. BYRNE. Robert Kope was involved in two of them, yes. Mr. KEATING. Were those the ones you were successful on? Mr. BYRNE. Right. Mr. KEATING. And how many horses did you drug in those two races? Mr. BYRNE. One race, three horses, and another race, four horses. Mr. KEATING. And the one that you were unsuccessful, what hap- pened? Mr. BYRNE. We couldn't get certain horses, so it was a favorite we were trying to knock out. If we couldn't get to him, we would rather sacrifice and take the loss of our expenses instead of taking a chance. Mr. KEATING. Now, did any of the trainers that will be tried in the fall work at River Downs at any point? Mr. BYRNE. Yes. They didn't work-they had horses in there. Mr. KEATING. I understand, they worked at the track on their own horses. Mr. BYRNE. Right. Mr. KEATING. I understand management is out of this. Mr. BYRNE. Yes, the management is out. Mr. KEATING. As far as River Downs is concerned? Mr. BYRNE. Right. Mr. KEATING. And these fellows worked a lot of different tracks? Mr. BYRNE. Right. Mr. KEATING. And it is through your association with them in the fixing of races that they are being tried in the fall; is that correct? Mr. BYRNE. Right. Mr. KEATTNG. In addition to those three races that you were directly iiivoived in, was your group involved in other races? You said you traveled. PAGENO="0099" 1109 Mr. BYRNE. In other races at River Downs? Mr. KEATING. Yes. Mr. BYRNE. Yes. Mr. KEATING. Did you administer the drugs, yourself? Mr. BYRNE. Right. Mr. KEATING. How many races would you say were involved? Mr. BYRNE. Probably about six or seven. Mr. KEATING. Was this all within this one period of time? Mr. BYRNE. This was within a period of 1969 up to 1971. Mr. KEAT1NG. Are you aware of any races that were fixed at River Downs as recently as 1971? Mr. BYRNE. No. Not that I was personally involved in. No. Mr. KEATING. Are you aware, from your own knowledge, of any races that were fixed in River .Downs in 1971? Mr. BYRNE. I am not sure. Mr. KEATING. Now, this group of four or five that worked together, do you work as a team at the racetrack? Mr. BYRNE. Yes. Well, we wouldn't go to the racetrack. That is why we were so successful. I would be the only one that would go to the track. That is why we were so successful at this. Mr. KEATING. The other fellows made the contacts? Mr. BYRNE. Stayed at hotels in the area, you know, working from phones, working through people we knew. Like I say, we could go from city to city and be welcomed with open arms. We had an okay, as long as we didn't step on any toes. Mr. 1(EATING. Who was the registered owner of Robert Elope? Mr. BYRNE. The registered owner was Paul Staghiano. Mr. KEATTNG. Where is Paul Stagliano now? Mr. BYRNE. At some racetrack somewhere. Mr. 1(EATING. Does he still have the horse? Mr. BYRNE. No, I don't know what happened to the horse. I think he is drugged up somewhere, the poor thing. Mr. KEATING. How many horses have you owned? Mr. BYRNE. Have I owned? Mr. KEAT1NG. Or had a part of. Mr. BYRNE. About 12 of these we had access to, that we owned under different names. Mr. KEATING. How many different names did you have them reg- istered under? Mi'. BYRNE. About five or six different guys. Mr. KEATING. Haive any of these fellows ever been indicted or had hearings as a result of having a horse in their name that they didn't own? Mr. BYRNE. Do you mean have they appeared before here? Mr. KEATING. No. Before any racing commission that you are aware of, in any State. Mr. BYRNE. No. Mr. KEATING. So that none- Mr. BYRNE. No; I am almost positive no. Mr. KEATING. None of them have been indicted? Mr. BYRNE. Right. Mr. KEATING. And you say this is an extremely common practice? PAGENO="0100" 1110 Mr. BYRNE. It is extensive. In fact, one of our owners, the Massa- chusetts State Police swore up and down it was a name we made up. First they thought it was the name of a horse, that we got it from the name of a horse, because they didn't believe a human being existed by this name. They couldn't find no such person. And the guy exists. Mr. KEATING. Do you know if this exists in River Downs in Cin- cinnati? Mr. BYRNE. This existed at every racetrack in the country. Owners through straws. Mr. KEATING. Now, the one horserace you ~were unable to fix, were unsuccessful at River Downs, Robert Kope was not running in that race? Mr. BYRNE. No. Mr. KEATING. How many times would you say you visited River Downs? Mr. BYRNE. About five times. Personally, myself, about five or six times. Mr. KEATING. These three races you were involved in, they were on how many different days? Mr. BYRNE. You are speaking a period of-one meet overlaps anoth- er. There was two at one meet. I think the year 1969-in fact I know 1969 is one of the years, that the meet in 1969 and the meet in 1970. I am almost positive. I would have to look it up, but it is not that hard to find out. Mr. KEATING. Have you ever been barred from any track? Mr. BYRNE. No. No one ever knew me. No one knew what I looked like or what my name was, or nothing. How could they bar me? Mr. KEATING. It is a different situation today, I guess? Mr. BYRNE. Right. Mr. KEATING. Mr. Chairman, I yield back the `balance of my time. Chairman PEPPER. Mr. Steiger. Mr. S'rmGER. Thank you, Mr. `Chairman. Mr. Byrne, the fact of the matter is you haven't been to every race- track in the country, have you? Mr. BYRNE. Every racetrack, no. Mr. STEIGER. You keep saying every racetrack is the same. So have you confined your activities to the east coast? Mr. BYRNE. Well, I have been out as far as Illinois. Mr. STEIGER. Illinois, Ohio. Mr. BYRNE. Right. Mr. STEIGER. Kentucky? Mr. BYRNE. Right. Mr. STEIGER. Do you know what the Thoroughbred Racing Protec- tive Bureau is? Mr. BYRNE. Yes. Mr. S~ri~ionn. Do you know beforehand whether a track is a member of the Thoroughbred Racing Protective Bureau? Mr. BYRNE. Right. M. STEIGER. Is it tougher to get into a TRPB protected track? Mr. BYRNE. I don't care what kind of security you have at any track, I can get in there. I can get into that stable area one way or the other. PAGENO="0101" 1111 Mr. S~IGER. I wasn't thinking so much about access to the horses as I was about access to licensed personnel. Is it easier to find willing confederates among the licensed personnel, the grooms and trainers and the jockeys, and is it tougher at TRPB tracks? Mr. Byrne. It doesn't matter what group they belong to, they are human beings and they have a weakness. Mr. STEIGER. All right. You mentioned Acepromazine. How do you acquire the Aceproma- zine? Has it a trade name? Mr. BYRNE. Acepromazine is the name of the drug. Mr. STEIGER. Who manufactures it, do you know? Mr. BYRNE. I couldn't tell you. I don't remember. But we had no problem getting hold of it. Mr. STEIGER. How do you get it? Mr. BYRNE. We had a vet. He was ruled off the track years ago. He owned a little horse shop down in Rhode Island. Mr. STEIGER. What do you mean? A tack shop? Mr. BYRNE. A tack shop and all of that stuff. Mr. STEIGER. What is his name? Mr. BYRNE. Doe Siegel. Mr. STEIGER. And he is the sole source? Mr. BYRNE. We were getting that source from him at first, yes. Mr. STEIGER. You say at first. Where else did you get it from? Mr. BYRNE. Well, some of it come from another party that one of the group I know, he knew a chemist, I think it was, that got him that. I don't know how they got it. But I used to get it from the other guy. Mr. STEIGER. Was it Siegel who determined the dosage, or you did it by experiment? Mr. BYRNE. We did it by experiment. Mr. STEIGER. You mentioned you would adjust the dose according to the class of the horse. You didn't consider the weight of the horse at all? Mr. BYRNE. No. Like I say, the class of a horse, see, horses are run by class. The better horse runs in a better race and so on down the line. It is pretty well in black and white for you, who's who. We are not talking like is this a thousand dollar horse or a $2,000. Mr. ST~IGER. If you were going to hit five in a class, one weighed 1,200 pounds and one weighed 800 pounds, you would give them the same dosage? Mr. BYRNE. Same dosage, 5 cubic centimeters. Mr. STEIGER. Very scientific approach. You never had any problem with acepromazine. Mr. BYRNE. No problem at all. Mr. STEIGER. No detection? Mr. BYRNE. No detection. The only time we had to be careful-see, they only check the winners. Mr. STEIGER. I understand that. Mr. BYRNE. The only time you had to be careful in administering the drug, make sure no air got in the syringe. Otherwise you get a bubble on his neck the size of a golf ball or bigger. Mr. STEIGER. By detection, I meant there were no visible symptoms such as excessive sleepiness? PAGENO="0102" 1112 Mr. BYRNE. Yes, there is. But only in the first half hour or so. The horse, he will stand in the stall- Mr. STEIGER. I mean in the parade or paddock area. Mr. BYRNE. Oh, no. No, there is no way you can detect it. You would have to be a real- Mr. STEIGER. Geldings don't have a tendency to let their penis hang out as a result of this? Mr. BYRNE. If you hit the horse with an overdose. You hit him- let's put it this way. Say a horse was to run at 4 o'clock and I was to hit this horse with 5 cubic centimeters at 12 or 1 o'clock. And they bring him up in the paddock area. His penis is going to hang out. Mr. STEIGER. All right. So did that happen or did you know of a fix in which that happened? Mr. BYRNE. Yes, that happened once. Mr. STEIGER. Did they ever scratch the horse on that basis? Mr. BYRNE. I don't believe the horse was scratched. I am almost sure. Mr. STEIGER. The trainer of the horse didn't notice anything? Or was he in on the fix? Mr. BYRNE. The trainer, we had the OK-I am not positive if we had the trainer's OK that day. Mr. STEIGER. That is fine. All right, in your experience-prior to your finding of the drug-fixing a race you found to be relatively difficult. You mentioned the frailty of human beings. Mr. BYRNE. Right. Mr. STEIGER. As a practical matter, it is very hard to fix races without drugs; isn't it? There is always someone who doesn't get the word? Mr. BYRNE.~IS it difficult, you say? Mr. STEIGER. Yes. Mr. BYRNE. Well, let's put it this way: For someone like you it would be difficult. If you know one or two people, a trainer, jockey, or groom-let's forget the groom-and you are going to use the human element. If you know them and they work for you it is not hard. I mean there's problems, yes. But it is not that hard. Mr. STEIGER. I am talking about the physical problems of fixing a horserace without drugs. Have you found it relatively difficult? Mr. BYRNE. Oh, yes; because the jockey, they would just as soon- see, you use a jockey-let's say there is eight horses in a race and we have four jockeys. We have four horses held. What is to prevent those jockeys from not holding their four horses, you know, working among themselves to get at us? Because they have the protection of the track. I mean, you know, they have the protection of security and everything. Mr. STEIGER. We heard testimony here, Mr. Byrne, that there were a series of ringers running in 42 races-very professional job. They took $10,000 horses, took allowance horses, ran them at the bottom. They only won 14 of those 42 races. Wouldn't it indicate it is a little difficult under those conditions? Mr. BYRNE. You are dealing with the human element. Mr. STEIGER. You can't trust people? Mr. BYRNE. That is right. That is why with the drug we were so successful. Mr. STErnER. So really, the indictment you have made of racing in general is one in which you are saying the public isn't getting a fair PAGENO="0103" 1113 shake because they really don't know all of the "Mickey Mouse" that is going on, yet, with the exception of drugs, the "Mickey Mouse" hasn't really ever worked even over the years. There would always be people who try. Mr. BYRNE. Right. Everybody is trying different ways. Mr. STEIGER. Excuse me, Mr. Byrne. In your experience-and this is important-would you ever mess around with a stake race, or a class race? Mr. BYRNE. No. Mr. STEIGER. Don't say "No," because I obviously want you to say that. Why not? Mr. BYRNE. Because, financially, it isn't worth our while. Mr. STEIGER. Explain that, please. Mr. BYRNE. Well- Mr. STEIGER. I realize because there is no Mickey Mouse betting, no exacta, no perfecta. Mr. BYRNE. Right. So where's the advantage. There is a case now of-let's say we want to get to a certain trainer's horse and he won't play ball with us and we know, we have used him before, but this time he wants off of it. He has got a better horse, he has got the real favorite. Just because he has the favorite doesn't mean lie is going to win. But we-what we will do to him, we will even forget the race, forget all money. V\Te will go in there and hit this horse with bute, or any- thing that will- Mr. STEIGER. Excuse me. On the use of bute, you indicated a recog- nition that bute is nothing more than a pain reliever. You don't think bute is a stimulant of some kind, do you? `Mr. BRYNE. A little. It is not what you would really call a stimulant. It is on the stimulant side, but all it does is make a horse feel better. It is like, if you have a sore arm, and I give you cortisone, bute works the same way. Mr. STEIGET~. It works a good deal like aspirin? Mr. BYRNE. Right. Mr. STEIGER. I would like to analyze the kinds of races you try to fix. I think you made a good point on the exotic bets. Would you rather fix a race where there is a lot of speed, a short race, under 5 furlongs, or would you rather fix one with a lot of ground? Mr. BYRNE. It doesn't matter, as long as there is money in that pool. Mr. STEIGER. That is not a consideration as far as you are concerned? Mr. BYRNE. No; it doesn't come into it at all. Mr. STEIGER. Isn't it a fact if there was prerace testing on all horses, you guys would be out of business? Mr. BYRNE. You would be definitely out `of business as far as drugs. Mr. SrI~IGER. So, really, concerning your statement that there is no way to clean it up, you are really referring to the innate greed of man? Mr. BYRNE. The human element, right. Mr. STEIGER. But as a practical matter, this one device that appears to be exceptionally successful, the administration of a depressant to horses that are not going to win, would be eliminated, because acepro- mazine will test, I gather? Mr. BYRNE. Right. Mr. STEIGER. I understand it tests in both spit and urine; is that correct? PAGENO="0104" 1114 Mr. BYRNE. Right. Mr. STEIGER. So if we had prerace testing on all horses, you would have to find something else? Mr. BYRNE. Right. You would eliminate all chemicals or drugs. Mr. S~rEIGER. Now, I would like to ask you: Is it easier to operate in some States than in other States? Mr. BYRNE. Oh, definitely. Mr. STEIGER. What States are easier to operate in? Mr. BYRNE. Rhode Island is easy. Mr. STEIGER. Why is that? Mr. BYRNE. There are more thieves down there. Mr. STEIGER. You mean there are more people willing to cooperate with you? Mr. BYRNE. Right. Mr. STEIGER. You are talking again, only on the back side, or are you talking about officials? How about local law? Does that make a difference? Mr. BYRNE. It doesn't matter. It is easier like, if we come into town, let's say I am going to Rhode Island. We go into this club, we got to the Vets Club there, a little bar and everything, where we operate out of when we are in town, or a hotel. Where our cars were known, we would know people down there, and they would give us their cars to use for the day, so I could ride back and forth to the track. Mr. STEIGER. I understand. Mr. BYRNE. You have everything going for you. Mr. STEIGER. It is a friendly atmosphere? Mr. BYRNE. Right. Mr. STEIGER. Is there any one track that you would rather not operate out of? Mr. BYRNE. Is there one that I rather- Mr. STEIGER. Is there one where they rOust you, or it is tough to get around or they have better security? Don't tell me that Aqueduct is as easy to get into as Scarborough? Mr. BYRNE. Oh, no. Mr. STEIGER. All right. Are the bull rings generally easier to get into than the better tracks? Mr. BYRNE. Oh, yes. There is no question of it. I would rather not go to any of the New York tracks. Mr. STEIGER. Why is that? By New York tracks, you are talking about NYRA and Belmont? Mr. BYRNE. Right. Mr. STEIGER. How about Canandaigua, upstate New York, Finger Lakes? Mr. BYRNE. No, never been there. You take a track like New York, you get a better class of horses and you have people that run, like at New York, and like I have been to Laurel, Hialeah is another one, I don't like. I don't like Hiaieah at all. Mr. STEIGER. It is the same people that run at Aqueduct and Belmont? Mr. BYRNE. Right. You are dealing with that breed of people. They are in it purely for the sport and the prestige. No amount of money is going to sway them. PAGENO="0105" 1115 Mr. STEIGER. All right. So you have now narrowed your indictment down from all racing to cheap racing. Let's assume for the- moment that the pots were big enough so a trainer could make a living even with a cheap horse, and he w~as required to pay his help a living wage. Would that make it tougher to get to them, or do you still think you could be persuasive under those conditions? Mr. BYRNE. With the difference in class, you mean? Mr. STEIGER. No; I am talking about if the purses at the cheaper tracks were such that an owner and trainer could make a legitimate livin~. Mr. BYRNE. Decent living? Mr. STEIGER. Decent living; and he was required to pay his help a decent wage and the jockeys could have a decent wage. Mr. BYRNE. Oh, yes. I don't say you would stop it, but you would stop a lot of it. Mr. STEIGER. I understand you operate with four guys? Mr. BYRNE. Welli, mainly four, three or -four guys; right. Mr. STEIGER. If your outfit knew that what you were doing was a Federal crime-any of the things you have mentioned, either bribing a trainer, bribing licensed personnel, administering a drug, if you knew that was `a Federal crime-would this inhibit y~our activities? Mr. BYRNE. As it exists now, what we were doing, we were leery of violating certain Federal `law that we were careful of. We tried to be very careful of, because once you `get involved in a Federal law-let me explain something. After this indictment came clown, no one minded going to the jail in Massachusetts on this charge. Mr. STEIGER. Excuse me. I don't understand. What was the indict- ment for? Mr. BYRNE. Conspiracy to fix a race. Mr. STEIGER. At Suffolk? Mr. BYRNE. Suffolk Downs, right. What happened in Massachusetts, the law only carries a sentence of 2 years in the house of correction. So you can get oitt on a parole up there like, as it was, I only got a year. You can get out in half your time or even less `on a sheriff's parole, on half your time. No one minds going to jail for a year or 2 years. Making the kind of money we are making, what's a year? Sometimes you get arrested. It is part of the ball game. Now, the only thing everybody was leery of, and why they don't care to, like me, any more because of this "The dominoes are starting to fall," because being implicated in other States and using the tele- phone to register bets, you know, and stuff like that. Mr. STEIGER. And that is because that is a Federal violation, use of interstate phones? Mr. BYRNE. Right. And now-another thing what happened like I said before, Rhode Island is an ice cream track. Of course, now it isn't for us, but when they fouiid out what the sentence carries down there, the sentence in Rhode Island carries a 10-year sentence. And 10 years, you are like 35-40 years old, a 10-year sentence is a big chunk you are talking about, especially if you are out of State, for your chances for parole and stuff~ knowing you are half a. wise guy, are not too good. Mr. STEIGER. So if the States had a statute that would impose a rela- tively significant penalty, but particularly if the Federal Government PAGENO="0106" 1116 had a statute that would cover these situations, you think it might at least inhibit it? Mr. BYiu~E. No question in my mind about it. Mr. STEIGER. I have one more question, Mr. Byrne. The owner of Suffolk Downs you mentioned, involving his employees, was that Mr. Vet? Mr. BYRNE. No; Mr. Edwards. Mr. STEIGER. Was that Mr. Jim Edwards? Mr. BYRNE. Yes. Mr. STErnER. Do you know if Mr. Edwards called his man off? I gath- er he, at least at one time, advised Mr. Edwards he had a good thing, and let him in on the bet. Is that correct? Mr. BYRNE. Sure. Mr. Edwards also owns Audley Farms. He races under the stable name of Audley Farms and he does a little "Mickey Mousing" of his own. And he has had pieces of other tracks, Scar- borough Downs- Mr. STEIGER. Have you ever used any of Mr. Audley's horses? Mr. BYRNE. I hit one of his horses, yes. Mr. STEIGER. Do you know of your own knowledge how many strings of horses he has out around the country? How many horses would you say he has in action, at least when you were in action? How many horses did he have in action? Mr. BYRNE. In Suffolk alone, there I knew he had about eight to 10 horses. All of his horses was always going off. A lot of time,s his horses were going off favorites and that is why he could get knocked out. Mr. STEIGER. Would you do that in cooperation with his trainer? Mr. BYRNE. WTeII__ Mr. STEIGER. Did you let him know when you were using his stock? Mr. BYRNE. No. Mr. STEIGER. You say he pulled his own "Mickey Mouse." What kind of "Mickey Mouse" was that? Mr. BYRNE. He's got a guy working for him, to this day none of us knew what the hold was he had over Edwards. Mr. STEIGER. Who had over Edwards, his help? Mr. BYRNE. Yes. Mr. STErnER. Who was his help, in particular? Mr. BYRNE. Pardon me? Mr. STEIGER. Which man in particular had what you felt was a hold over Mr. Edwards? Mr. BYRNE. Mustona. Mr. STEIGER. Would you spell his name? Mr. BYRNE. M-u-s-t-o-n-a. Mr. STEIGER. Was he a trainer? Mr. BYRNE. No. Mr. STEIGER. Was he a hot walker? Mr. BYRNE. He was just like-he was a thief. Mr. STEIGER. But he took care of Mr. Edwards' horses? Mr. BYRNE. He was more or less, let's put it this: This kid had free access to anywhere in that racetrack. Anywhere. Mr. STErnER. He was the right-hand guy? Mr. BYRNE. He was one of Edwards' boys, you know. Mr. STErnER. Excuse me. At Suffolk, he didn't have to be licensed because he was working for the president? PAGENO="0107" 1117 Mr. BYRNE. He was working for the guy who owned the joint. Of course, the track security didn't like it, but it don't come out until later on, I guess. Mr. STEIGER. It would have been very difficult for Mr. Edwards not to know Mr. Mustona was a thief; is that correct? Mr. BYRNE. Of course, he knew he was a thief. ~ o one could convince me otherwise. Mr. STEIGER. I interrupted you. You started to tell us how Edwards pulled some "Mickey Mouse" with his own horses. Mr. BYRNE. Let's take this kid that worked for him. Kid-he IS older than I am. He would say, "I am going to make sure"-look, there's a group of guys operating around here, fixing horses. I want to make sure they are not. What they would do, Mustona would fix a race, knocking out Edwards' horse. He would make a score, him and his buddies would make a score, and every so often fed Edwards a winner, keep him, pacify him. One hand washes the other. The only thing, some of the guys in my group knew Mustona very personally, so subsequently we could do a little business together. Mr. STEIGER. Did you ever operate with any people you know were in organized crime? Mr. BYRNE. Can you be more specific? I understand what you are getting at. Mr. STEIGER. Were there racetracks that you operated at in which you had to get a clearance before you could operate, from people who were members of organized crime? Mr. BYRNE. No. Let's put it this way. We just didn't go into a town and start operating on the cold. Like if we went to-let's put it this way. How can I explain it? We go into a track, we tie up a race. Now, the people I am involved with have very good connections. Mr. STEIGER. Who have they got good connections with? Mr. BYRNE. Angiulo and Baroni. They got these connections and they have some connections with people in New York. Mr. STEIGER. Excuse me. Which people in New York? Mr. BYRNE. I can't name them, because they are under the indictment. Mr. STEIGER. Anguilo and Baroni, are they members of a known family of organized crime? Mr. BYRNE. They run the city of Boston, but they have to answer to someone else. Mr. STEIGER. Did they answer to Mr. Patriarca? Mr. BYRNE. They answered to Raymond, right. Mr. STEIGER. Did they do that to Mr. Tamello? Mr. BYRNE. Tamello, yes. Mr. STEIGER. Does Mr. Tarnello have a responsiblity in the Pat- riarca family for the sporting activities, or is he kind of a right-hand man for all activities? Mr. BYRNE. He was more or less-he was like the go-between, let's say. I can't elaborate too much on the subject for firsthand knowledge, let's put it. Mr. STEIGER. All right. And Angiulo, was he a paid member of Mr. Patriarca's family, to your knowledge? PAGENO="0108" 1118 Mr. BYRNE. Oh, yes. Mr. STEIGER. So you had to clear with somebody? Mr. BYRNE. What you would do, we would go in and, let's say we are going to tie up a race at Lincoln Downs, for instance. Just before- try to cut down to the last 15 minutes before t'he race could go off-we would call back to Boston to our connected bookmakers we knew and we would say- Mr. S~r1~IGEI~. Excuse me. By "connected" you mean the family relationship? Mr. BYRNE. R~glit. Mr. STErnER. The Patriarca-controiled people? Mr. BYRNE. Right. We called the Boston people and then call cer- tam-I don't know who the guy is they called in Rhode Island. In other words, don't get hurt on this horse and dump the money some- where else. We are truly independent. The next phone call, we would bet with the independent. Mr. STEIGER. Again, in your experience, was there anywhere you operated in the States you have mentioned where you did not have to get a clearance or okay from some organized crime family? Mr. BYRNE. River Downs. Mr. STEIGER. You did not have to? Mr. BYRNE. Right. Mr. STEIGER. You could go to- Mr. BYRNE. You go to Scarborough, you can't bet. You can't bet River Downs or Scarborough with a bookmaker. Mr. STErnER. Why is that, if you know? Is it because it is so crooked the people don't want any action? Mr. BYRNE. Right. You couldn't get down. In fact, we had an in- dependent bookmaker, let's say early 1960's or middle 1960's, when Berkshire Downs was in operation. Well, a connected bookmaker, you couldn't get a result, no service, nor result with a bookmaker, and no one would take a bet off you. But we had one bookie, he would take. the bet off us, but he got burned a couple of times and stopped it. Mr. STEIGER. Yes. You mentioned Churchill Downs. Did you have to check with anybody? Mr. BYRNE. As long as we called back to Boston. Mr. STEIGER. In other words, actually, what you were concerned with was the connected bookies. You weren't concerned with the local turfs? Mr. BYRNE. No. Mr. STEIGER. Did you ever operate at Latoma or Hialeah? Mr. BYRNE. No. Mr. STEIGER. And the only ones you played in Florida were~ Mr. BYRNE. Hialeah and Tropical. I have been to another track down there but we didn't do nothing. It seemed to me every time the joint was changing names, you know. It was a small track. I don't remember, Florida Downs or Sunshine Park. It was so bad we didn't even want to go there. Mr. STEIGER. But in your travels, did you ever hear of an outfit knOwn as Sportservice, Emprise, or the Jacobs family? Mr. BYRNE. Yes. Mr. STEIGER. What did you hear about them? PAGENO="0109" 1119 Mr. BYRNE. I will tell you how we-when I got pinched, before I got pinched, what we were going to do was try and get me a job back- side with a trainer under an assumed name and phony I.D. Mr. STEIGER. So you could be licensed? Mr. BYRNE. Right. Get a phony license. So now they checked out- it has a tendency to bounce back, and I think now at some tracks we are taking fingerprints, and we haven't been arrested before and my fingerprints are on record or something. One guy come up with the suggestion, let's go up to work, get them to work on one of the concessions, you know. One guy gets involved, said no, because there's another group. He checked with someone, I don't know who he called. He called someone to check on it, and no, it would be no good, because that is another group all by itself. Stay away from it. Mr. STEIGER. What concessionaire was that? Mr. BYRNE. That would be Sportservice. Mr. STEIGER. Do you remember what track you were going to do that at? Mr. BYRNE. No. Honestly, no. WTe didn't go into too much detail about it. Mr. STEIGER. The story was they already had some people working for them who were doing these kinds of things? Mr. BYRNE. In other words, they got their own thing going, you guys got your own thing, keep them separate. Don't intermingle with them. Mr. STErnER. Did you ever hear of a relationship between Sport- service and the Patriarca family? Mr. BYRNE. Not honestly, no. Mr. STEIGER. I have no further questions, Mr. Chairman. Chairman PEPPER. Mr. Winn. Mr. WINN. Thank you, Mr. Chairman. I just want to continue along the line Mr. Steiger was pursuing. Mr. Byrne, you mentioned the fact that you were more careful, your group and the other groups were more leery, of Federal laws, or in- volvement with the Federal authorities. Was this because you felt that the Federal laws were tougher? You mentioned Massachusetts and a 2-year term, and you mentioned Rhode Island where you could work out of the reformatory or the prison. Mr. BYRNE. That prison was in Massachusetts you could work out of. Mr. WINN. That prison was in Massachusetts. in your experience, did you find that you could buy off or do business, as you have said all morning, with the local establishment? Mr. BYRNE. Let's put it this way. I have an extensive police record. I have done three terms in jail, and I think my last time in jail was in 196G. Since that time I have been arrested probably about four o~ five times for burglar tools and opening safes and B. & E. and I haven't done a day in jail. Mr. WINN. Then you found it pretty convenient to do business with the local law enforcement officers? Mr. BYRNE. Right. Mr. WINN. This is exactly what several of our other witnesses have said. And along the same line, Mr. Steiger mentioned-and this is PAGENO="0110" 1120 one thing that this committee is considering-if we had a Federal racing commission, or a commission with Federal inspectors, and investigators whose job it was to enforce Federal laws under the lead- ership of a racing czar or just a Federal commission, would this be a detriment to your type of operation? Mr. BYRNE. Definitely. If it was done right, it would be. It is like, today, you have all of this talk about legalizing gambling. The only way you are going to be successful at it~-like you have several States that have lotteries. It is going to work, but people are still going to bet with the local bookmaker, and so forth and so on, because suppose the Government was to take over control of all tracks? All right. And license it. And lease it out on a bid basis, no ap- pointees, keep the politics out of it. Let the guy bid for it, check it to the guy, he is solely responsible, do away with these racing coin- missions. You have to keep stewards because they are pretty tough guys. They don't care about nothing. They let you have what they have. Mr. WINN. Some of them can be bought off, too. Can't you do business with some of them? Mr. BYRNE. Let's put it this way, I never had the experience we had to. Mr. WINN. You might try it if the pot was big enough, wouldn't you? Mr. BYRNE. If I didn't come across this drug, I would have. I would have tried, anything, you know. rI;ake it way from them. Mr. WINN. In other words, you are endorsing the idea of a Federal commission; do I understand you right? Mr. BYRNE. No question in my mind. Mr. WINN. You think it would be touother? Mr. BYRNE. ~o doubt about it. Ancr I'll tell you, I would like to be hired for the job to see if we could get to fix a race. If we can't, then you know you are successful. Mr. WINN. I tell you, with your background and your experience, you might be the type of man we want to hire, because you could save us a lot of time. Mr. STEIGER. Oh, yes; a lot of time. Mr. WINN. At least you would have the contacts. I-low many groups like yours are operating all over the country? You, basically, are operating on the east coast. Mr. BYRNE. Right. Let me put it this way: To be specific about a certain track, I know there is thievery going on there. It is the same case. You take a person, anyone here-take you, the average intelli- gent guy, 5 to 7 years to be able to really read and analyze a Telegraph or racing form. I mean to really read it. It would take you a minimum of that. Now, it would take you a lifetime to read the thievery and you still wouldn't have it all. Let's break it down just like that. Mr. WINN. I am one of the few, according to the fellow from New York the other day, that still enjoys horseracing or all sports for the sport of it. What you said, basically, this a little while ago, too, that there are a great many people in the country, the consumer or player that go there, they really go to bet, but they also go for the sport of the thing.. Mr. BYRNE. Sure they do. PAGENO="0111" 1121 Mr. WINN. There is a great sport, there is a great feeling from watching eight of 10 horses get out there and run, supposedly what they think to he, at full speed. We now find out we have all different types of gears in those horses, depending on whether they have been drugged, or not. Mr. BYRNE. There is no question of it. It is a heck of a sport. It is a beautiful sport. I don't know how familiar you are with horses. Mr. WINN. Not very. Mr. BYRNE. They are a beautiful animal just to even watch. People, there are people at racetracks that go to the racetrack that don't even bet. They just go to watch them. Mr. WINN. That is true. Mr. BYRNE. Take any racetrack in the country and I will pick out a half dozen a day. They just go to watch them. You get people in there, they bring down the sun chairs, their lunches, newspapers, they don't bet a dime. They pay their money, sit there, and just love to watch them. Mr. WINN. We had one member of this committee say that maybe horseracing is so bad we ought to rule it all out, completely. Do you agree with that statement? Mr. BYRNE. I do, yes. Mr. WINN. That we should rule it out, or should we try to clean it up? Mr. BYRNE. If you are going to clean it up, let me put it this way: If you are not going to a 100-percent job and follow it through, forget it. Just forget it. And the public, like I said before, is so gullible that they are not going to let you eliminate it, the betting process. And then the States get involved. They realize how much tax dol- lars you are dealing in. These other States are getting wise to it. This additional money-you are talking about $500 or $600 million. You are talking big money. When you close down all tracks a couple of States are going to be in serious trouble. Mr. WINN. I don't believe there are very many on the committee that would want to close down all of the tracks. Mr. BYRNE. It wouldn't be fair to the average citizen, really. Mr. WINN. Right. Mr. BYRNE. And you put a lot of people out of work. But like I say, if the Government is going to step into the track, if they don't go into it with their eyes and ears open and forget these corporations and subsidies-like you take the Arsden Corp. Mr. WINN. What is that? Mr. BYRNE. Arsden. That owns Suffolk Downs. Let's take Jim Edwards. Mr. WINN. That is Mr. Edwards' corporation? Mr. BYRNE. Right. Here is a man that is supposed to have sold that track. It would take you the rest of a lifetime to convince me that man doesn't still own that track. The man that owns the track now. The racing secretary, is a man that was president or vice presi- dent of one of his corporations. Mr. WINN. But you are talking about corporations and people that deal with State and local officials? Mr. BYRNE. Right. PAGENO="0112" 1122 Mr. WINN. You are not talking about a controlled or an enforced racing situation in these United States, enforced by the Federal Government? Mr. BYRNE. You would have to enforce it 100 percent, or else. Remember, it also takes just that one little quarter of a percent for a guy like myself to get in there and do something. Mr. WINN. I realize that. Mr. BYRNE. I can go into a track, you know, like you say I can't get into a building, I can't do this. There's a way. If there is a will, there is a way. Mr. WINN. Any time you are dealing with human beings. But if they are faced with Federal laws and regulations and enforcement it could be a lot tougher than it is now. Mr. BYRNE. There is no question of it. Mr. WINN. Thank you, Mr. Byrne. Thank you, Mr. Chairman. Chairman PEPPER. Mr. Mann. Mr. MANN. Mr. Byrne, you mentioned that you try to operate on other people's money. I know you described a hippie, but what was the typical source of your money for placing the bets? Mr. BYRNE. A typical source of our money: from professional people-doctors, lawyers. They have access to money they are trying to hide. Mr. MANN. Who would make the contacts for those people? Mr. BYRNE. Who would make them? Anybody, I would, they would. Anybody. On travel, remember, I said we live first class. You travel in airplanes. Mr. MANN. But it would be members of this three- or four-man group of yours? Mr. BYRNE. Right. No matter where we go, remember we are going first class. We are going in airplanes. And if you are in an airplane, the average man traveling is a businessman. So if you have a business- man, you have a professional man, and you get the conversation- I am in the horseracing business. So if the guy has one inkling about the sport, which the average male American does, he is interested in some form of sports, you are on your way to a potential sucker. Mr. MANN. All right. And a large portion of those situations you would end up swindling the angel? Mr. BYRNE. Definitely. No question of it. Mr. MANN. Were there sources of funds that were more business- like, that required you to make a strict accounting? Mr. BYRNE. I don't follow that question, sir. Mr. MANN. Did you deal with anybody that had the capacity to require you to pay off? Mr. BYRNE. You mean any of these people we are trying t.o swindle? Did they try to make us pay them off? Mr. MANN. Did you get any money from organized crime sources that you felt you should account for? Mr. BYRNE. We didn't have to account for a penny of it. We didn't get any money from other wise guys. This was our-you know- remember, you already got money. The theory is, don't use your own money. Why spend yours when you can spend someone else's. PAGENO="0113" 1123 Mr. MANN. You are saying you have no direct source of funds from otherwise- Mr. BYRNE. Oh, yes; toward the end. When we got the drug down to a science, we did. Mr. MANN. Where were you getting money? Mr. BYRNE. A couple of fellows in New York. Mr. MANN. Were they members of an organized crime family? Mr. BYRNE. Yes. Mr. MANN. Can you tell us what family it was? Mr. BYRNE. Gambino. Mr. MANN. All right. And you were sharing with the family then the winnings? Mr. BYRNE. Toward the end, when we had this drug down to a science. Now we don't have to take the chance with suckers. We had some people who would back us financially and right off the top, they handled the money. There is no swindle involved here because you end up with a couple of air-conditions-holes in your head, you know. What we would do, we would call them, set up a score, and they know our score was to come off. They would fly down, drive down, whatever it was, and there was our money. They would control the money, put the money through the windows themselves and take their expenses off the top and the rest would be divided evenly. It was work- ing so smooth, you don't have to deal with jockeys, you don't have to deal with this guy, it is a process of elimination. It is easy, like taking ice cream from a baby. Mr. MANN. Did your financial connections with the Gambino family restrict you to any specific racetracks? Mr. BYRNE. No. In fact, it helped us to a great advantage. Because we could go anywhere, and our expenses were covered. Like in one period of, let's say, 1 week, we covered, we only covered two tracks but we covered like five races. In a period of 1 week, to set up a score. And you know, go first class in the airplane, go into the hotel. No problem. Mr. MANN. Did the Gambino family open up any other doors for you. such as giving you trainers or jockeys that they had? Mr. BYRNE. Jockeys and horses. Mr. MANN. That they already had some former relationship with? Mr. BYRNE. Right. Mr. MANN. Or relationships with other groups? Mr. BYRNE. No. We had access to more horses, and a jockey, and some trahiers. Mr. MANN. What I am asking you is: Did they seem to have some other connection with the jockey that you had not set up? Mr. BYRNE. Well, let's put it this way: We had our jockeys, they had theirs. We met theirs, they met ours. See, our main goal was, toward the end of this thing, before the roof fell in, we would have our horses under different names, have jockeys that we could supply a race. We would own the whole race, every horse in the race would `be ours. So instead of taking $50,000, it was a $70,000 pool. We were taking about every dime of that $70,000. That was the set goal. Now, not only that, now you can pick, you eliminate, here is a process you could eliminate probably your four horses. The one I told you 8i-068-73-pt. 3-8 PAGENO="0114" 1124 about, we kept four horses live. We have access to all eight or 10 horses, that we can whack all eight of them. We can take them any time in the morning, day or night, we want, and guarantee our combination to come in. Mr. MANN. All right. You have referred to the fact other groups, similar to yours, existed. Were you aware that any of the other groups had a connection with another family that you ran into every now and then? Mr. BYRNE. Not that I could prove, or nothing. All through conver- sation, that's all. No matter where we went, we were welcomed with open arms. Like down here at Dover, Del., one day. And we got a call. "Inter- ested in going to Florida? Ship a horse to Florida?" Had a guy here that called someone in Florida, said, "I have a couple of guys coming down from the East, take care of them." We went down and stayed at a guy's house and ate the best and everything, open arms. No matter what we said or did, that was law. This guy gave us his whole house to take over and took us wherever he was supposed to take us. The best clubs. Didn't have to spend no money. And then we looked at other possibilities down there and some insurance deals with the horses and stuff like that. Mr. MANN. Did you find out that after you made the Gambino family connection that it improved your relationship with any track man- agement? Mr. BYRNE. No. All it did, it opened up like, let's say, where do we go from here, there aren't enough tracks. Let's branch out. Like me, I was supposed to go to California for a year with my family, move out there for a year and size up the situation at Santa Anita and Holly- wood Park, and then over the border into Mexico, to see how things were. And they were going to come out for a couple of trips, because on the east coast where our cars were made and they were known, they were going to branch out and go out to California for a while. And when it got warm there, go to Florida, come back East. It is a field day, it is an open field on the racetrack throughout the country. Mr. MANN. Did you operate at Hazel Park or Jefferson Downs? Mr. BYRNE. No; that was off limits. Mr. MANN. Why? Mr. BYRNE. I think we were at Fairmount Park at that time, and be- fore we left for Fairmount Park, one of the fellows I was with made a call. We told him we were going out there, anybody out there we can see, or something. IFie said no, but stay out of Hazel Park. You know, we went down to Florida, same as going to Jefferson Downs; because these people have their own thing going outthère and they don't want any outsiders. There's enough tracks running of yoilr own, stay away. There was another track, too. I forget the name. Another major track in the Midwest we were supposed to stay out of. it is in the Chicago area. Mr. MANN. You are telling us the word came through from the Gambrno connection to leave these three tracks alone, Jefferson Downs, Hazel Park, and one other? Mr. BYRNE. It was a combination of two connections, really. The people in New York and some people in Boston. Stay out of there. You know, you have enough tracks to operate in, stay out.. PAGENO="0115" 1125 M r. MANN. The people in Boston, who were they? Mr. BYRNE. We got the word, the word actually come up through Patriarca to stay out of there. It was just an approximation, you call someone you knew and they would call someone else, and the word was to stay out. Mr. MANN. So there apparently was cooperation? Coordination? Mr. BYRNE. In other words, we don't come to your place, and don't come here. It is a mutual respect. No problems. It would be the same thing if we beat a bookmaker and he was connected, found out he was connected. One case in particular that one of the guys in my group was called in on, the Yoga, beat the guy for $2,000 and he called in, and "You owe me $2,000, and you beat my bookmaker, you are trying to beat me." "Gee, I didn't know he was your man." "Well, he was." "Sorry, won't let it happen again." "What do you mean, you're sorry ?" You know. Don't worry. It's a respect thing. I didn't mean it, I won't do it again. Because of your close relationship, if that were John Doe on the street that did that, they would probably still be looking for his body to this day. Mr. MANN. When you speak of connected bookies, you are telling us that these bookies have some financial connection with either the Gambino or Patriarca families? Mr. BYRNE. Yes. Mr. MANN. And fence with you? Mr. BYRNE. Right. Mr. MANN. You made the statement that you did not think we could ever straighten out the gambling at racetracks. Of course, you base it primarily on human nature and not on the improved techniques for security which might happen. You also made reference to the fact you are heavily involved in other types of gambling, because of the extra money you had from time to time. Mr. BYRNE. Right. Mr. MANN. What spillover was there, what connections were there with your associates in the horseracing gambling business and the other sports? Mr. BYRNE. Let's take an instance I know personally, where we had a hockey player. He is a good kid and everything else. All of his life he likes horses. He is a junkie gambler now. He is making big money in professional hockey. He ends up, he owns some thoroughbreds and he has been stabled, I believe-well, he had them running at Suffolk Downs at this particular time I am talking about. Now, right off the bat, he doesn't realize it, but he is being used for a sucker because we would do the same thing to someone else. If you had money and I say to you, "Look, I know all about horses and why don't you buy it. You have some money and you are interested in horses but you don't know that much about them. You would love to become a horse owner. You become a horse owner, the next minute it gives me an authorization to enter the race I can stop. That is easy to be accessible to. Plus, you have got money. And if you have some money, we use your money to bet with." This kid here, in fact it is a matter of public record through state- ments in the newspapers, he does bet horses bad, himself. He loses all the money he makes, and he makes good money. He bets them. Some- times his horses win and sometimes they lose. Just keep feeding him PAGENO="0116" 1126 enough money and keep him interested. If his horse is losing all of the time, he says, "Hey, this is costing me money, forget it." Just keep money to satisfy him. The next minute you get to know a bit about his personality, how he feels. Like he would be invited- like a friend of mine just opened up a barroom, "Why don't you and a couple of your guys come down for a few drinks? We are not going to use you for publicity purpose, invite a big crowd," that he has so and so. Just come down and help the guy along. "Sure, I would be glad to." Once he says, "Yes, I am going to come down," he is not coming alone and he will bring a couple of buddies. The first thing we do is get a half dozen girls, bring them in, a couple of flashy girls, and right off the bat the beer would start flowing free, the joint and the girls, and the next minute the kid has a game coming up in a few days and the betting money, there might be a two-point, 11/2~ or two-point favorite, and we know this guy is coming off a big drunk, he is going to be playing, his reflexes are going to be slower, it gives us an extra handicap. You also find sports figures invited to these sort of things. They do it unknowingly. They don't know they are being used. Believe me, they don't even know they are being used and being taken to the cleaners every day. It is unbelievable. Mr. MANN. A~'e there any cases of which you have direct knowl- edge, where an effort was made to corrupt or fix a sports event, other than a race? Mr. BYRNE. Not that I could positively go into, no. Mr. MANN. In your betting on professional football, basketball, or baseball, where did you get your edge? Where did you get your information? Mr. BYRNE. From what I explained to you there about the hockey player. See, these people, connected people, have a bunch of guys that go around, your team followers. You set up betting lines. The odds make you set up betting lines. Remember, a wise guy, now, he has some money, he has all of this money coming in from the bookie operation, this and that. No matter how much they get, they want more. Believe me, I was the same way. The more I had, the more I wanted. You fol- kw the guys around and find their weakness, supply them with girls, joints, anything. There is a weakness. It gives you the better advantage. Of course, some people do it more elaborate. Of course, I have no personal eye- witness dealings in it except my own with certain individuals in Boston. Mr. MANN. All right, now, reference was made to improving the method at racetracks, such as a prerace testing for drugs. What recom- mendations do you have concerning the security at tracks that permit access to horses? Mr. BYRNE. Let me put it this way here: There was a lot of publicity about building a receiving barn at Suffolk Downs. In other words, so many hours before the race, put them in this receiving barn with State officials to more or less watch them, so that no one would have access to him for drugs, or anything. PAGENO="0117" 1127 Right here. at Dover, Del., Dover Downs, they have a receiving barn and I just walked in and knocked horses. So the receiving barn is not the answer. They have a kid and a guy in at the office and the guy would pull in with his truck and say, "I am so and so, what stall am I assigned?" They would put hIm in the stall. The owner, or kid, or family, the trainer, they go back and have coffee, and the kid goes back to the of- fice. lie `had no one patrolling the receiving barn. I walked around for 4 hours and the first time I was ever there, no one ever `bothered me. No one batted an eyelash at me. I walked around as free as I could be. I went in the stall and hit one horse in particular. Three people were right there and didn't bat an eyelash. I had a brush and pail in my hand. They just figured I was the guy that was taking care of that horse. So if you have a receiving barn, you have to have it like, I don't know if you ever seen them, in England they have `a situation of a horseshoe- type stable. It is shaped just like the horseshoe, and the open part is the gate they have to come in. Of course, you are going to involve `over- head here. You have to pay some people some money. But you put a horse in there, like I say, you put a horse in there 2 days before `he is suppesed to race. Of course, the horse has to still go on the track to be worked out. You have to keep your eyes open. It `only takes like a mat- ter of seconds to administer a drug. You take the litt (sic), the jockeys hide it in their belt, and before they weigh in after the race, they dump it at the stretch, at the `turii, and it gets turned over all of the time. It is going to be a tough thing to really police it bec'ause you have too many human elements involved. Mr. MANN. I believe that is all, Mr. Chairman. Chairman PEPPER. Mr. Murphy. Mr. MUTRPITY. Thank you, Mr. Chairman. You mentioned a certain track in Illinois that you were told to stay away from. Was it Maywood Park? Mr. BYRNE. No. Mr. MURPHY. Sportsman's Park? Mr. BYRNE. Sp'ortsman's Park, that's it. Mr. MURPHY. Who told you to stay away? Mr. BYRNE. Well, the same people in New York that we were doing business with and it comes out of our connections in Boston and Rhode Island to stay out of there. Mr. MuRPHY. Did you ever hear of a man by the name of Joe Baron or Joe Barboza? Mr. BYRNE. Yes, I did. Mr. MURPHY. He testified before this committee and he stated that there was a certain nightclub-you remember the name? Mr. BYRNE. The Ebb Tide. Mr. MURPHY. Where jockeys would frequent and they would get in- v~lved with debts and `they were paying exorbitant interest. Mr. BYRNE. They sure were. Mr. MURPHY. They would threaten them with their lives and some- one else would come `in and play the good guy and pay `off their debts and Barboza said, `as `far as he knew, these jockeys were in the guy's caravan and owed him a favor. Mr. BYRNE. Right. PAGENO="0118" 1128 Mr. MURPHY. He didn't take any step further than that. Could you add to that, after the obligation? Mr. BYRNE. He had to hold the horse. He was owed a favor now, and he had to, he was obligated to these people now to do him a favor. Like I said, everybody has a weakness. If you have something they want, something you can supply them with, you have them in what we call our pocket. Our hip pocket. They do what we tell them. Mr. MURPHY. This information came down to you from the Ebb Tide? Mr. BYRNE. No; that was another group. See, that's like another group in itself. They work that way. Of course, when this was taking place, this particular type of stuff was taking place, this was before the drugs got involved. I mean really involved. This is when everybody was using jockeys and they had control of a couple of brothers that were jockeys that really ran the New England circuit crazy. Plus another jockey. They had thehi pretty well in their hip pocket for themselves. Mr. MURPHY. Did you have any information about basketball games that might have been fixed? Mr. BYRNE. No; I was told when to bet certain games, though. Mr. MURPHY. In the Boston area? Mr. BYRNE. Well, not necessarily. The Celtics. I wouldn't bet the Celtics. None of us guys would bet on them. Mr. MURPHY. Why? Mr. BYRNE. We didn't trust them. We had word they were no good, they would win. We just didn't want nothing to do with them. Mr. MURPHY. How about `Cincinnati? Mr. BYRNE. I can't go into too much detail `but I will tell you what I know about it. One night the Detroit Pistons were playing. And they were playing at the-I believe they were playing-I won't even go into who they were playing. This was like 2 weeks before even the game come up, and the guy says to us, he called a buddy of mine and says, "Look, do any of you guys need some money? Two weeks from now Detroit has a game coming up at home, get the 51/2 points. `Take the ~~/2 and bet Detroit." Sure enough, Detroit wins beautiful. This is 2 weeks before the game even comes off. Like I say, I was a heavy gambler, and ever since that time and a couple of instances, I wouldn't touch basketball with your money. You give the money to bet it and I would put it in my pocket and spend it on something else. I just wouldn't bet it. Mr. MURPHY. How about professional football? Mr. BYRNES. Nothing to my knowledge, except the gambling end of it. I shouldn't even go into the thing because I have no firsthand knowledge of it. Mr. MURPHY. You described a certain racetrack in Delaware, Dover Downs I think the name of it was, as an ice cream thing. Would you elaborate on that? I understand it means it was an easy track, but in what way was it an easy track? Were the people there all involved in fixing races or what? PAGENO="0119" 1129 Mr. BYliNE. We could go in there and have a jockey to point out horses to us, and we would go to the window, put the money through, and walk around to the other side in the collecting windows and wait for the race to be over and cash our tickets. That is what I mean by ice cream. That is how easy it was at that track. Just like Lincoln Downs, it was so easy. Mr. Munpiiy. Did you have any business with harness racing? Mr. BYRNE. No, none whatsoever. Mr. MURPHY. You mentioned the fact you would use sucker's money, so to speak, never use your own money. Mr. BYRNE. Right. Mr. Mniipi-iy. Did any of the suckers ever get so infuriated that they would want to come back at you? And if so, would you have protec- tion? Did you have musclemen around you that would protect you? Mr. BYRNE. Well, we had one sucker that went to the police and there was nothing they could do about it. We had one guy, we took him for like $18,000 and he never saw a profit or a dime. And what followed with that guy, his wife found out and she was going to the police. She knew a little too much so that we couldn't afford to, you know, press it, so why even go into it and threaten them because for every sucker you got, there are 10 more waiting in line. You don't have to threaten anybody. In one incident a trainer threatened me. But what is the sense in him threatening me, because with my connections and everything else, I am going to come out the winner. Mr. MURPHY. What do you mean "with your connections?" Whom do you have fronting for you? Mr. BYRNE. The people who I am working with, plus who they know. This guy don't stand a chance. Mr. Munpriy. You are talking about organized crime? Mr. BYRNE. Right. We want to use his horse one day. I wanted to hit his horse and he wouldn't let me. I tried to offer him a couple hun- dred. I went on over, he had two grooms sitting outside the stall, and I offered the kid up to $600 to go in and hit the horse. I think I just about had him. I would have been successful with the money, but the trainer started to come back and made a threat. When I called one of the guys I was with, he made a threat to him, and nothing would ever come of it, because the word was getting around, he don't fool around, you are barking up the wrong alley. He naturally mentioned to another trainer and the other trainer subsequently told him and he mentioned to a few friends of his, we don't want no part of it. Because he threatened to kill me with a knife and I grabbed a pitchfork at him. He doesn't stand a chance. They don't stand a chance. Mr. MURPHY. Did you, or any member of your friends or group, ever use force to collect a debt? Mr. BYRNE. Yes. Well, yes; we use force. Mr. MURPHY. How much force? Mr. BYRNE. Put a beating on a guy that he won't forget. Like he owed us some money. Mr. MURPHY. You would do it personally, or have someone do it for you? PAGENO="0120" 1130 Mr. BYRNE. Depending on the circumstances. If it was enough money and the guy had a little bit of help behind him, I don't mean con- nected help, I mean he had a little bit of help, we would get an out- sider. We would get an outsider, someone he didn't know. In other cases we grab a guy, slap him around a bit, give him a few hits in the shin, make him walk funny for a couple of days. He would pick up. One bookmaker in particular we took for about $50,000. He thought he was going to get away without paying us and he mentioned he was connected and all of this. We jumped in the car without a song and gave him a phone, go ahead and call your connection. We threatened to kill him if he didn't come up with the money. 1-le came up with the money. He came up with $35,000 and wanted us to let him off the hook for the balance, which if we let him off the hook for the bal- ance-at the time we didn't need it-but if we let him off the hook, we became the suckers. I believe we gave him 12 hours to get the money. I think we even gave him less than that. We got the balance of the money with no problem. We know he had a couple of calls to find out and he found out, he had better pay him or else you're in trouble. It is the same thing if we rush in an independent bookmaker. Which one guy it happened to recently, before all of this I mentioned, up to even 5 months ago. We took him for a lot of money. Mushed his agents. We are paying- Mr. MURPHY. Mush? Mr. BYRNE. Right. And we were mushing his bookies and we were hitting him. We were calling in sport bets, horse bets, just gambling with the guy, and if you get in the hole, you are supposed to settle up on Tuesday. So we were in the hole for a couple of grand apiece, wouldn't pay him. What can we do? The guy he works for is a nonconnected guy. He has to buy his muscle. Mr. MURPHY. How could they buy the muscle, through the family? Mr. BYRNE. Right. Mr. MURPHY. What type of money would they pay for the privilege? Mr. BYRNE. It would depend on the circumstances. I mean, if you are talking thousands of dollars. But it depends on the circumstances that would warrant it, you know. Like one incident, it would be $2,000, but he would get beat for his $2,000. Here is a case, a guy went to complain to Baroni one day and said, "Geez, these guys are doing a terrible thing. They are beating me for all of my rndney, they are mushing my bookmakers, they are beating me at both ends." He says, "I want something done about it." So naturally he will ex- tract like five grand for them. All right, I will take care of them. The next minute we get the word, lay off the guy for a while, you have enough money out of him. Lay off him for a while. Mr. MURPHY. Would you have to pay money to operate this way? Mr. BYRNE. No. Remember, we are making the call, that last minute callback. Out of our respect. So there is the one hand washing the PAGENO="0121" 1131 other. In other words, all of his booking operations, say that we give him the live horses and the dead horses. The live horses he would take off the board and the dead horses he took all of the money and it would be 100-percent profit. He knows they are dead. It is a sure winner. He knows it is a sure loser. Mr. MURPI-JY. Was it incumbent upon you or your group when you went into new areas to pay for protection in those areas? Mr. BYRNE. No; we didn't have to. Mr. MURPHY. Would you call ahead? Mr. BYLiNE. Just call ahead. Someone knows someone. it is like a string of command. You want to go here, call ahead. How do you know this, where can we go? Mr. MURPHY. Why would they be so tolerant of you and your group and take an independent bookie and use muscle on him? Why did they let you operate with a free hand? Mr. BYRNE. Because, remember, we are paying them back out of re- spect. We are giving them firsthand information. We are giving them the best information in the world. Remember, you know how much money a bookmaker makes. Say they got on the street taking bets for that race and the six horses are dead. He realizes they are dead, all of that money, no chance of anybody winning, and he has bookies work- ing 50-50, giving him 25 percent. That is all going in his pocket. That is an awful lot of money. By you utilizing that respect, the doors are always open to you. Remember, these guys worked with them. They had a booking busi- ness of their own. I booked for years. Mr. MURPI-JY. Would you say that in every section of the country in which you have had experience placing these bets, there is always some family or some type of organized crime involved there, that you would check with before you go in? Mr. BYRNE. Oh, yes; you wouldn't go in blind. You wouldn't leave yourself open. You could cause unnecessary trouble and that is what, you know, that is where the respect comes in again. Respect what I am doing and we will respect you. Don't step on our toes, and so forth. If we go into a town, we know they know we are there. As long as we don't bother their operation, or something, they let us operate. Mr. MURPHY. How long have you been operating? Mr. BYRNE. About 3 years, in full force. Mr. MURPI-TY. In all of that time, did you ever go to the premises of a racetrack and have some security guard come up to you and say "We don't want your type around here, get out of here?" Mr. BYRNE. No, because they didn't know me. See, I would be the only guy to be going into the track backside, plus going into the win- dows. And they never `knew. They kruw horses were being drugged, a stimulant and depressant, but they didn't know who was doing it. They knew the people I worked for had a hand in it, but they couldn't-like we were never seen together. We go into this bar near the track, where you hang around at. I sit a couple of seats away at the bar, and there would be no connec- tion between us. `So that they wouldn't know who to look for or what to look for. I know them and they don't know me. You have a big advantage there, and that is why it is so successful. PAGENO="0122" 1132 Mr. Muiipiiy. Have you ever shot any horses in the Illinois area, the Chicago area? Mr. BYRNE. No. Just the Fairmount Park. Mr. MTTRPHY. That is all the questions I have. Chairman PEPPER. Mr. Nolde. Mr. NOLDE. Mr. Byrne, regarding the Ebb Tide where Mr. Barboza used to beat up jockeys, who owned the Ebb Tide? Mr. Bm~n. My personal knowledge, I don't know. I don't know who owned it. Mr. NOLDE. Was Mr. Castucci connected with it? Mr. BYRNE. He operated out of it. He had a piece of it, but my per- sonal knowledge of it, I don't know. Mr. NOLDE. Did you know Mr. Castucci? Mr. BYRNE. Yes. Mr. NOLDE. What does he do? Mr. BYRNE. He is a bookmaker and a thief. Mr. NOLDE. Does he have a criminal record for bookmaking? Mr. BYRNE. Is he a convicted bookmaker, do you mean? Mr. NOLDE. Yes. Mr. BYRNE. I think he has taken two pictures for bookmaking. I am almost positive he has. Mr. NOLDE. Mr. Castucci appeared here as a witness 2 weeks ago. Do you know whether he owns any horses through fronts? Mr. BYRNE. I understand he owned one horse. I don't have personal knowledge of, who the horse was. I don't know. But he is one of the guys we beat for a lot of money. He was not used to us. Mr. NOLDE. Was he connected? Mr. BYRNE. He is and he isn't. He is a type of guy-let's put it this way: He is an independent yet he is connected, but what his connec- tion is, they are solely after his money. It is just the money involved. It is not, you know, a buddy-buddy friendship stuff. He couldn't go into one of the guy's houses and break bread with him. Mr. NOLDE. Did you spend any time at the Ebb Tide? Mr. BYRNE. I have been there; yes. Mr. NOLDE. Were jockeys and other sports figures frequently there? Mr. BYRNE. At the time I was involved going into the Ebb Tide, I have only been in there like maybe three or four times. It was to settle up scores with some safes in the area, some people down there had sent me down there' to see. In fact, that is where I met Barboza. And I went in there. There was jockeys in there at the time, all hanging around with the girls. It was a pretty swinging place there for that type of guys, if you like that stuff. Mr. NoLns. You mentioned earlier that the straw ownership, through fronts, is very extensive, perhaps reaching as high as 60 percent. Are there substantial numbers of organized crime figures, criminals and others, who would be denied ownership were their true identity known? Mr. BYRNE. Let me put it this way: The people that, my personal knowledge, these two people we worked with in New York, one guy owned. I think at the time like he had control of nine horses, and what he would do is ship them under different trainers' names. The same procedure we were doing. In fact, he used one of the trainers we had in our pocket down at Rhode Island to race. PAGENO="0123" 1133 So I know that horses are not under their true ownership. There is no doubt in my mind. Let's put it this way: To prove it, let's say you get some guy to go out there and stare fooling around with one of them horses. You find out how fast, you wouldn't be fooling with them without someone's permission. Then you find out how well connected that horse is with an owner. Mr. NOLDE. Right. You mentioned at any given meet you had per- haps, as many as 10 to 12 jockeys working for you to fix races-using two key jockeys. Mr. BYRNE. Right. Mr. NOLDE. Who would those two key jockeys in the New England area be? Mr. BYRNE. These two: one was Norman Mercier and the other was George Leone. Mr. NOLDE. Who is Norman Mercier? Mr. BYRNE. 1-le is a jockey and he is in charge of the-like the jockeys guild of jockeys in the New England area. And he happens to be the thousand-dollar guy. You would have to pay him a thousand dollars up front. Mr. NOLDE. "IJp front," meaning you have to pay him in advance. Mr. BYRNE. Before the race, or he would do no business. That was it. He had a strict rule, a thousand dollars or no business. The other kid was $100, $50, just give him enough to exist and keep him. Of course, Christmas time, throw him extra money and stuff like that. Mr. N0IJE. You never had any luck operating at Atlantic City Race- track, did you? Mr. BYRNE. That's true. I was never able to operate out of Atlantic City. Mr. NOLDE. Thank you. No further questions, Mr. Chairman. Chairman PEPPER. Mr. Sandman. Mr. SANDMAN. I think we have covered the whole waterfront. I was interested in my own State. Did you do any operating in New Jersey? Mr. BYRNE. Yes; Garden State. Mr. SANDMAN. What year? Mr. BYRNE. 1969 andl97O. Mr. SANDMAN. On how many occasions? Mr. BYRNE. My personal involvement? Two occasions. Mr. SANDMAN. Were they big races? Mr. BYRNE. Perfecta races, yes. Big pools. Mr. SANDMAN. What were they? Mr. BYRNE. Good-sized poois. Mr. SANDMAN. They weren't any stake races, or anything like that?. Mr. BYRNE. No. Mr. SANDMAN. In comparison with other States you have been to, did you have more or less difficulty in New Jersey? Was it one of the "ice cream" deals you talked about? Mr. BYRNE. It was mediocre. It wasn't the hardest and it wasn't the easiest. I would classify it as mediocre. You could operate there with no problem. And it wasn't the easiest, but there was more money there than at some. of the other tracks. PAGENO="0124" 1134 Mr. SANDMAN. One last question. The jockeys that you worked with, were they big name jockeys? Mr. BYRNE. Well, one of them, he is big name on the New England circuit, let's put it that way. And the rest are all of the smaller type. You know, you couldn't get to them-like guys like Kid Laucirica, forget it, he needs me like a hole in the head, you know. Mr. SANDMAN. In other words, the only ones you can reach are those that are not known; is that so? Mr. BYRNE. Get the ones with the weakness, have no money, stuff like that. Mr. SANDMAN. They are all kids that don't make a whole lot of money? Mr. BYRNE. That is right. Mr. SANDMAN. Once a fellow gets into the big circuit where he is known nationally, you can't reach him? Mr. BYRNE. There is no advantage to him to operate with you be- cause, remember, a lot of these big name jockeys are under contract. They get good points, they get 10 percent of the big purses. They are making a good year's pay. You get these other guys that are riding for, like a hundred dollars a day. To a jockey isn't a lot of money. It is not a lot of money. You figure for his expenses- Mr. SANDMAN. The two occasions you had in New Jersey, did you succeed? Mr. BYRNE. Succeeded in one; didn't succeed in the other. Mr. SANDMAN. How did you do that? Mr. BYRNE. How did we do it? With drugs. We used acepromazine. Mr. SANDMAN. Since you have covered this, I won't ask any more questions. Thank you. Chairman PEPPER. Mr. Steiger, another question? Mr. STEIGER. Just one. Mr. Byrne, you mentioned that you got the word to lay off Hazel Park and Jefferson Downs. Mr. Bm~. And the Fairgrounds. Mr. STEIGER. And the Fairgrounds? Mr. BYRNE. Right. Mr. STEIGER. In New Orleans? Mr. BYRNE. Not the Fairgrounds. What is the one? Mr. STEIGER. Sportsman's Park? Mr. BYRNE. Sportsman's Park. Mr. STEIGER. All right. Was that the same word that you got when they told you not to try and get hired by Sportservice? Mr. BYRNE. I couldn't say for sure. Mr. STEIGER. Did you d~rectiy get the word to lay off Hazel Park? Did you make the phone call and tell them, or did two other people? Mr. BYRNE. Right. Mr. STEIGER. Did you know if he talked to the same guy when he mentioned the Sportservice, about being hired by Sportservice? Mr. BYRNE. I couldn't be sure. Mr. STEIGER. Thank you, Mr. Chairman. . Chairman PEPPER. Mr. Byrne, you mentioned your experience with Hialeah in Florida. What has been your experience with Tropical Park and Gulfstream? PAGENO="0125" 1135 Mr. BYRNE. Tropical Park, we tied up a race down there. One race we ran a horse, we had a horse run down there for two races, and I don't like Florida at all for operating out of. Of course, the Tropical Park was pretty easy because we had our trainer down there and I had access to the stable area. It is one of the tougher tracks to sneak a horse in the country. I would say that Hialeah was the toughest of them all because of the security. But I was successful at it, but I would rather not do it. So we made some money down there. We got out of there. One time we didn't get money, we get out and tried to pull a swindle off and we get out of there. Chairman PEPPER. How about Gulf stream? Mr. BYRNE. I was over to Gulfstream once, but nothing successful over there. Nothing successful at all over there. Chairman PEPPER. Tell us, by way of summary, how extensively is organized crime involved in horseracing in the United States, in your opinion? Mr. BYRNE. Let's put it this way here: I have been sitting in the bar back room in Boston and got calls there as far as Miami to bet horses. In other words, it would be appreciation for what we had given some other guys to bet when we operate out of New York, the same in New Jersey we had calls from. I am not talking about like you go to the tracks and you always meet some guy that will say, "Hey, I got a hot tip." This here is a race that is sewn up and we have no problem. We get all of these calls from all of these people. Chairman PEPPER. Is it your answer that organized crime is rather extensively involved in racing in different parts of the country? Mr. BYRNE. No question about it. Chairman PEPPER. Different groups operate in different areas, gen- erally? Mr. BYRNE. You might have two or three groups working at one track. There is a lot of money involved there. I mean, you figure that the greatest percentage of that money is returned to the betting public. And like I say, the wise guys, they are going to take out most of that money. Except for what the little old lady bets, and the drunk. They are going to take out the money. Chairman PEPPER. Do the organized crime groups divide up the country, some take some areas and others take others? Mr. BYRNE. Let's put it this way: Certain areas you can't go into. I mean we can't go into. Chairman PEPPER. Why is that? Mr. BYRNE. Because they have a thing going there. You guys got enough tracks out your way, stick to them. `We don't go there. it i~ a respect. No hard feelings, or warnings, or threats. No problem. We don't go in and ask them what you are doing and they don't ask us what we are doing. Because there, is enough money involved that it is cut up every way. So each group has, you know, financially the same. It comes out with different people and they operate differeiit tracks. We may be down, like here in the Maryland area, Delaware area, some other guys from the South might be up in the Northeast area. Remember, horses are shipped from all over the country. So that ac- PAGENO="0126" 1136 tually, pinpoint anybody with ownership in one, by the time they pay to go and check everybody out, the owners and everything, they will go crazy. If I am a trainer, registered trainer in Massachusetts, I can race my horse at Hialeah. If I am registered in the State of Florida, I can raceit at Suffolk Downs. It works the same way, mutual agreement. Chairman PEPPER. Did the organized crime groups generally know where the other groups were? Mr. BYRNE. This is the purpose of reading that Telegraph. You find out where the thieving is going on, what horses and what trainers are where. So if certain trainers are in certain areas, you know certain moneymen are in these certain areas. That is how you find out. Or through calling. You call around, you guys got something going on down there. I could probably be of help to you, something like that. They have it pretty well wrapped up. Chairman PEPPER. You said that after you fixed certain races you called Boston and New York. I believe you said you called New York? Mr. BYRNE. Right. Chairman PEPPER. You wanted to be sure the New York people were not adversely affected by what you did, that they were in:formed? ~ Er. BYRNE. Right. As long as they didn't get hurt financially. See, we are not obligated to anybody as long-if we are using their money, now we are obligated. But out of respect, out of associ- ation with them, and doing favors and working for them, don't hurt them financially, help them financially. Then if we need a favor, say one of their straws owns a horse, if we want to use that horse. Chairman PEPPER. When you gave them that information and kept them from losing money, did you share any of their winnings? Mr. BYRNE. No; their winnings are their winnings, and our winnings are ours. Chairman PEPPER. You only laid the predicate for future favor. Mr. BYRNE. Right. Let's say we beat, like I said before, we beat one of their bookmakers. "Gee, I didn't know the guy worked for you." They get a little mad. "Gee, you guys should have checked. Your check other things, why didn't you check on that? Don't let it happen again." Chairman PEPPER. How extensively is organized crime involved in bookmaking and horseracing? Mr. BYRNE. They control it. Chairman PEPPER. They control it? Mr. BYRNE. They control it 100 percent. Chairman PEPPER. One other question. Have you noticed that any of the strike forces or task forces set up by the Federal Government, or in the case of New York, the strike force set up by the Federal, State, and local authorities, have had any success in trying to keep or- ganized crime out of the racing industry? Mr. BYRNE. I know personally in New York that our two connec- tions in New York will not operate in the State of New York because there is too much heat on up there. Chairman PEPPER. So this task force is keeping organized crime out of horseracing in New York? Mr. BYRNE. Yes. There is probably cases going on, I don't know. But the two people in New York we were working with won't go up there. PAGENO="0127" 1137 Chairman PEPPER. So it would seem to follow the same kind of task force could do good in another area. Mr. BYRNE. Right. No question of it. Like I say, you get that over- night sheet, and you analyze it just like a psychiatrist. Where is the financial gain? You have to eliminate the risk. It is like being a burglar. I would rob a store, or a safe, or a house. I wouldn't take any risk. My biggest risk involved is getting into a place and getting out. It is the same way operating in the track. Is it financially worth our while. What are the consequences if we get caught, what are your chances of getting caught, and you break it down. And in New York right now, the situation right now, it is not financially advisable to go up and fix a race. Chairman PEPPER. You said your wife was here. I don't know whether you have children, or not. But you are a citizen, you were born in America? Mr. BYRNE. Yes, I was. Chairman PEPPER. You are a citizen of this country. Does it frighten you, now that you know what you know about the existence of orga- nized crime in this country-the extent of it, and the potential of it, to harm innocent people? Mr. BYRNE. Well, let me put it this way: The average American citizen today doesn't. It is beyond their imagination to realize how extensive they are. I was discussing with my wife, I said, "Gee, I ought to write a book," I says, but she said, "Who would be~lieve it?" The American people are so gullible that they will never believe it. Organized crime is another conntry in itself. You have communism, you have organized crime, and you have a democracy. And organized crime is another nation all in itself. Believe me. That is how extensive it is. Chairman PEPPER. Would it be your summary that organized crime is a great menace in this country? Mr. BYRNE. There is no question about it in my mind, at all. Chairman PEPPER. Mr. Murphy, did you have another question? Mr. MURPHY. Yes. You mentioned earlier in your testimony that you had shot up horses at Fairmont racetrack in East St. Louis? Mr. BYRNE. Yes. Mr. MURPHY. How many times? Mr. BYRNE. Well, I tied up one race there. We were there for a 2-week period, about 10 days or a 2-week period. Mr. MURPHY. In that whole time, you tied up one race? Mr. BYRNE. Right. Mr. MURPHY. Did you have the cooperation of a jockey or trainer? Mr. BYRNE. We had a little cooperation from a jockey. Mr. MURPHY. How did you come on to this particular jockey? Mr. Byrne. Through our association with knowing other people and their jockey knew some jockey that was racing up there. And so and so sent me and we have this jockey back home, his phone number, wherever he is, and if the kid doubted, call California. He talked to him on the phone. Said they can help you make money. Help him out if you can. Mr. MURPHY. How many horses did you shoot up? Mr. BYRNE. Three. I think it was three. I am positive it was three. PAGENO="0128" 1138 Mr. MURPHY. How many were in the race? Mr. BYRNE. Eight horses in the race. It was three that were hit and it was one held and one knocked out. Mr. MURPHY. That was the only time you were at Fairmount? Mr. BYRNE. Right. Mr. MURPHY. How much money do you think was in that pool; do you remember? Mr. BYRNE. It wasn't a lot of money. They don't have a big handle there. We made small money there. But it covers our expenses of nosing around the country. In other words, we are looking for greener pas- tures, what we call virgin country, to our drug situation, and that happened to be one that didn't have it. So we went out there to see how it was. The money wasn't enough to make it worthwhile to stay there, but while we were there, let's pay for our expenses and make a few dollars. Mr. MURPHY. How is the security at that track, if any? Mr. BYRNE. No problem. It didn't have any problem. It is not the easiest, but it is not the hardest. Mr. MURPHY. Who would the family be out there that would con- trol that area? Mr. BYRNE. Who would control it? I don't know who would con- trol it. As long as we made our call back to Boston, make sure we are not stepping on no toes, we were all set. Mr. MURPT-TY. That is all. Chairman PEPPER. Mr. Keating, another question? Mr. KEATING. Just a couple of questions. Earlier I asked about this horse named Robert Kope and you had indicated that he ran at River Downs on two occasions and you were successful in fixing the race on those two occasions. Mr. BYRNE. He ran several times there, but I am talking about suc- cessful times that I know of. Mr. KEATING. Two successful times. You indicated also you could arrive at the specific dates. Can you work that out in your mind now, about when that would have been? Mr. BYRNE. They are out of business, but I think I may even have a copy of it at home, of the Telegraph. And the dates that were involved, a specific race, and everything. Mr. KEATING. I would really like to see something like that or get it, if you feel you could get it to this committee. We tried to do a fairly quick check up what that date might be, and haven't been able to come across a horse named- Mr. BYRNE. You haven't been able to come across a horse of that nature? Mr. KEATING. Right, that ran at River Downs. Mr. BYRNE. He ran. Mr. KEATING. He ran at River Downs. Mr. BYRNE. Believe me he ran. Mr. KEATING. More than one meet? Mr. BYRNE. Yes. The people to contact, to verify he ran, call-I know a person that knows him very well, who knows he ran there. Vince Murphy. Mr. KEATING. That is a name from the Thoroughbred Racing Asso- ciation? PAGENO="0129" 1139 Mr. BYRNE. Right. He knows the horse very well. Mr. KEATING. And he would know he ran in Cincinnati? Mr. BYRNE. Right. I think he has the dates. He has all of the dates with the horses we used, pinpointed down. Because I had to go over it with him previously and I spent some extensive time with him to pin- point the dates. Mr. KEATING. I think you indicated this horse was in the name of Peter Stagliano? Mr. BYRNE. Paul. Mr. KEATING. Paul Stagliano. Is he the one suspended in 1970 at Rhode Island? Mr. BYRNE. Right. Mr. KEATING. Now, if he were suspended in Rhode Island, could he run Robert Kope at River Downs? Mr. BYRNE. That suspension is only for that State. Mr. KEATING. Don't they honor those from other States? Mr. BYRNE. They do honor them, but see, you are dealing with two types-the suspension doesn't mean nothing. It is under advisement. His license is suspended. He is under a suspension for that particular track. He hasn't lost his license completely, so he can still race, you know. He just is barred from that particular track, really. Mr. KEATING. Where can we locate Vince Murphy? Mr. BYRNE. Right now, in New England. What is open now-they are out of Suffolk Downs. The main office is in New York. Mr. KEATING. What is his position with TRA? Mr. BYRNE. He is in charge of the New England racetrack. Mr. KEATING. Security? Mr. BYRNE. Right, except for Suffolk Downs that they don't have a contract with no more. Mr. KEATING. Robert Kope ran there for more than one meet and on more than two occasions? Mr. BYRNE. Yes. Two occasions I know. Mr. KEATING. I understand it is K-o-p-e? Mr. BYRNE. Right. Mr. 1(EATING. This was the one you doctored the most; is that correct? Mr. BYRNE. That is right, used our experiments. Mr. KEATING. We will try to track it down, then. I yield. Mr. BYRNE. It was in the month of May he ran. Chairman PEPPER. Mr. Byrne, I cannot commend your past and things you have done. I imagine now you perhaps regret you ever got in it. I do commend you for coming before this committee and giving the information that you have given. We hope it will be helpful in try- ing to break up the menace of organized crime in this country. We thank you very much for coming. The committee will recess until 2:30 this afternoon. (Thereupon, at 1 :20 p.m., the hearing was recessed, to reconvene at 2:30 p.m. this same day.) AFTERNOON SESSION Chairman PEPPER. The committee will come to order, please. Mr. Counsel, will you call the next witness. S1-OGS-73-pt. 3-9 PAGENO="0130" 1140 Mr. PHILLIPS. The next witness will be Mr. Walter Floss. I think it might be appropriate to have Mr. Norman J. Wolf and Mr. Floss testify together. Chairman PEPPER. Will Mr. Floss and Mr. Wolf come to the witness table. STATEMENTS OF WAITER 3. FLOSS, IR., AND NORMAN ~. WOLF, MEMBERS, ERIE COUNTY (N.Y.) LEGISLATURE (Having been duly sworn by the chairman) Chairman PEPPER. You may inquire, Mr. Counsel. Mr. PHILLIPS. Mr. Floss and Mr. Wolf, the committee has asked you to come here essentially to tell us about a franchise application made on behalf of the Buffalo community to obtain both football and baseball in that particular area. In relation to trying to obtain those sporting facilities in Buffalo, a stadium was contemplated as part of these particular plans. In rela- tion to the stadium, it developed that a number of the county legisla- tors were indicted and convicted in relation to the activity and we will hear more evidence about that now. If you would give us some of the background of how this entire issue developed and provide us with the basic knowledge of the sequence of events, then the evidence which will follow will be more meaningful. Chairman PEPPER. Would the gentlemen give us some background about themselves. You are members of the legislature now. Which body of the legisla- ture? Mr. FLOSS. We are with the Erie County legislature. We took office January 19, 1968. Chairman PEPPER. In the State legislature? Mr. FLOSS. This is the Erie County legislature. There was a new form of government came out at that time. Mr. PHILLIPS. That is a unicameral body? Mr. FLOSS. Yes. Mr. PHILLIPS. And you are called county legislators; correct? Mr. FLOSS. Right. Mr. PHILLIPS. Will you tell us what particular district you come from, Mr. Floss? Mr. FLOSS. The 16th district, a suburban area of the county. Mr. PHILLIPS. Mr. Wolf, what area do you come from? Mr. WOLF. The 17th, which is an adjoining suburban district com- prising six rural and suburban towns. * Chairman PEPPER. Are you a member of a county legislature as well? Mr. WOLF. Yes, I am, sir. Mr. PHILLIPS. Could you tell us how the dome stadium came to the attention of the county legislature? Mr. FLoss. I will start off. The idea of a stadium in the Erie County area commenced before Mr. Wolf and I took office, by the old board of supervisors. They were our predecessors. It was a joint venture with the Buffalo Cham- PAGENO="0131" 1141 her of Commerce; that is, a study on a stadium. The first few months that we were in office, there were discussions, but nothing very serious. But then in May, we were sort of panicked into the idea that there was an opportunity for Buffalo to receive a major league baseball franchise, and the best way to insure this would be to build a dome stadium. Up to that time, they were talking about a multiuse stadium, a bowl with an L-shape, back to back, you know, all purpose. In a matter of a short time, the public in general seemed to think well of the idea; both major newspapers there pushed the thing, and we felt we just couldn't lose the opportunity of receiving a major league franchise. And the legislature: There being 20 members, 19 voted in favor. Mr. PHILLIPS. Nineteen members of the legislature voted in favor of having a dome stadium? Mr. FLOSS. Of a $50 million bond issue to construct a dome sta- dium somewhere within Erie County. Mr. PHILLIPs. After the legislature voted for the bond issue, what happened next in this procedure of selecting a site for the dome stadium? Mr. FLOSS. Well, we had an impasse there for a great length of time. There were those legislators who felt it should be in the urban area, right within the heart of the city, and there were those of us out in the suburbs that felt it should be built where there was more room for parking, and better access, similar to the Houston site. This waged back and forth for many months, some of us coming up with various sites. Not the Lancaster site, it wasn't thought of at that time. I particularly championed for one near the airport, figuring there was a lot of room, good roads, and the airport would have provided transportation as well. Those in the city felt that it would do something for the blighted area, that it would have torn down. Both sides had valid arguments at the time. Mr. PHILLIPS. What happened, as a result of these arguments; did anything take place? Was any decision arrived at in relation to whether it should be in the suburbs or in the city? Mr. FLOSS. No. Actually we never got to the point of a decision dur- ing that period of impasse until the Kenford offer, and then it was a site no one had ever really studied or thought of. This then made the site, of course, then crystallized. It was. the Kenford proposition to utilize their land, that they had acquired Sufficient land to bring about a great deal of peripheral development, and it was on this premise that we had to now forget any different site, but had to go on whether or not we wanted to build a dome stadium under this total proposition. Mr. PmLLIPs. What was that total proposition? Mr. Fr~oss. The propositions change a little bit as they go along. You had the chronological order here, but basically it is that the county would build a stadium in the heart of the property that Kenford had acquired and that Kenford would lease that stadium from the county and they, in turn, would build in the area hotels, restaurants, and other things that would complement the stadium. PAGENO="0132" 1142 I might just interject, this is the first time that a site was selected, that that community in which it was selected was in favor of it. All of the other sites we had chosen outside of the city, the particular community wanted no part of a stadium itself. But the townof Lan- caster did in fact, and still does, want that dome stadium with the Kenford plan of millions of dollars of peripheral development, which would have broadened their tax base. Mr. PHILLIPs. What was the view of the legislature in relation to the Kenford proposal? Mr. FLOSS. Well, finally-and I will have to just look here and see what the date was-this was on June 18 of 1969. The Kenford pro- posal come about in December 1968, so after 6 months, the legislature adopted, 19 to 0-because one legislator was away-to go ahead with the program under the outline that I am sure you have some docu- ments on. In other words, there would be a lease with certain basic things contained therein, or if we could not negotiate a lease, then the pre- determined management fee was set up. And as I say, this was a unani- mous agreement of 19 of the 20 legislators. Mr. PHILLIPS. Did that program then carry on to a successful con- clusion? Mr. FLOSS. No, it did not. That was the beginning of problems. We were aware there were pressures occurring at all times, so that ones the press, all of a sudden switched, and we had two major papers and you wouldn't `believe you were reading the same procedure of the legislature that day. `They were both on opposite ends. Mr. PHu~LIPs. I have heard that from a Government official who worked up there. I-Ic said he had attended one or more of these meet- ings, and he said you couldn't, by reading the press, know that one paper had covered it properly, or the other paper had not, because they were so divergent in the coverage of the same particular meeting. Is that your opinion? Mr. FLOSS. They were at 180 degrees of each other throughout, for a long period of time. Mr. PHILLIPS. Did one of those newspapers have an interest in this particular location? Mr. FLOSS. I wouldn't say either paper had an interest in the Ken- ford location, or Lancaster location. Mr. PHILLIPS. Well, one of them was affected financially by locating this particular stadium at Lancaster? Mr. FLOSS. Possibly adversely. ` Mr. PHILLTPS. How was that? Mr. FLOSS. One paper has a community television franchise for the entire city of Buffalo. They also have a license to originate broadcasts. It is conceivable if a studium would have been built in Buffalo, it could have been a grand studio. It cert/ainly would have been to their benefit, since they had the franchise already tied up. But out in Lancaster, it was an unknown who would have the fran- chise there, so I would say, and I always speculated, this was why they pressured against and tried to form public opinion against building out in that suburban site. Mr. PHILLIPS. Did there come a time when Sportservice'was men- tioned in relation to the Lancaster site? PAGENO="0133" 1143 Mr. FLOSS. At a meeting-there were a number of people, I can re- member some, not all. Mr. PHILLIPS. Tell us who was at the meeting. Mr. FLoss. Those that I can remember. I do remember of the legis- lators, I am sure that our majority leader was there, Mr. Miller; our chairman, Mr. Carison; I know Mr. Poring was there; and myself. There may have been others, I am not certain. I do know there was Mr. Boyd Weiss, construction union; Mr. Jan Pierce, communications workers; Mr. Cottrell was there. I am not sure if Mr. Walker was or was not. He usually attended the meetings such as that. But at that time Mr. Cottrell made a statement-and I am not sure, maybe the executive was there, but at least it was stated that through the executive a bid had been made that if Sportservice were to be allowed in the dome, in other words, if Cottrefl would negotiate the concessions and give up the concessions to Sportservice, that the neces- sary votes would come about to approve the lease. And this, of course, is what we were fighting about every month. Every time the Kenford would come up to a certain agreement, and the executive would agree that this was now a good lease, then certain legislators would vote against it, even though it exceeded the basic rules or basic agreement they had in fact voted on in the first instance. Mr. PHILLIPS. So that some of the legislators who were required t~ approve this lease voted against the lease, even though it exceeded the minimum requirements that they had originally requested; is that correct? Mr. FLOSS. That is correct. Mr. PmLLIP5. And some of those legislators have been indicted; is that correct? Mr. FLOSS. That is correct. Mr. PHILLIPS. And convicted? Mr. FLOSS. Correct. Mr. WALDIE. Indicted and convicted for what? Mr. FLOSS. Well, I only know what I read of the case. Mr. Wolf is an attorney, I am not, but I assume that they were either convicted for taking bribes or attempting to, or asked for bribe money. This I am not sure. Mr. WOLF. I think they were convicted of a Federal law involving conspiracy to solicit bribes, if I am not mistaken. Mr. WALDIE. Was the conviction for soliciting of bribes by these legislators? Mr. WOLF. I don't think the actual conviction was based on solicit- ing, but on the premise of conspiracy. Mr. WALDIE. Conspiracy to solicite bribes from whom? Mr. WOLF. I don't think this has ever been establi~hed. Mr. WALDIE. Was the implication that counsel left by the question- ing, that Sportservice was the one that was offering the bribe, true? Mr. WOLF. I did not attend the trial, nor has t:hat implication ap- peared in any of our local papers. Mr. WALDIE. Let me ask either of you: Is that the implication you sought to leave with the committee, that Sport.service was involved in this conspiracy to solicit a bribe with these legislators? PAGENO="0134" 1144 Mr~ FLOSS. No, I think there is a two-pronged thing here; I think we suspected, at least when told by Mr. Cottrell, that Sportservice wanted concessions because he-or Cottreli wouldn't get the votes. We then established in our thinking that Sportservice was able to control votes, to vote in opposition to the stadium. Now, Ludera and Pordum voted in opposition to the stadium, along with nine other legislators. Then, at certain points-and this is what I found through the trial-4hey asked for or solicited bribes from the architect in order that first, they would vote for the preliminary draw- ings, which was part of the lease agreement, the preliminary draw- ings would be accepted. and I do know it got rather hitter after the many long hours of debate, you know you were 100 percent in your logic and then you would find these votes going the other way. Mr. WALDTE. I may be anticipating something, but there was a ques- tion asked of you, and the response that someone attributed to Sport- service the ability to control votes as to where this stadium was to be located. The next line of questioning dealt with the fact that legisla- tors who voted in accordance with the ability of Sportservice to con- trol votes, were indicted and convicted for s'oiicitation of bribes. Was there a connection between the solicitation and conviction of bribes. end the activities of Sportservice? Mr. FLoss. No, I was trying to draw this. I think that these two fel- lows were. a part of those controlled by Sportservice, if we are to assume what Mr. Cottreli said was true. Then on three times they voted in step with the side voting for the stadium. These were times Mr. Walker said he had to pay them. In other words, to vote in favor of the stadium. I think they were working two ways. This was my con- clusion. What they were convicted for, then, was the times that they voted in favor of the. stadium. Mr. PHILLIPS. Just the point I was moving up to when Congressman Wal die asked you these questions. In the course of the conviction of Pordum and Ludera. testimony was adduced from Walker, and Walker said, essentially, that Sport- service was putting up $~50,000; didn't he ~? Mr. FLoss. We heard this rumor that-we heard this-they had ~250.000 out. In other words, to control votes. Mr. PmLLIP5. Pordum and Ludera told that to Walker; is that correct? Mr. FLOSS. I never attended the trial, or any part of it, but all I am saying to Mr. Waldie's questioning is that their actual conviction was the times they were paid to vote for the stadium, at the same time possibly having been paid by Sportservice to vote against the stadium. They broke the tie each time. Mr. WALDIE. Just a. minute. When you say at the same time possibly having been paid by Sportservice. to vote against the stadium, that is a very stron~ accusation to make against Sport.service. Are you at this point making the accusation that Sportservice bribed legislators to vote against the stadium? Mr. Fr~oss. I stated earlier I was told this at a meeting. Mr. WALDIE. By whom? Mr. Fr~oss. By Mr. Cott.reil. Mr. WALDIE. And it is on the basis of that conversation that it is your opinion that Sportservice in fact bribed legislators to vote against the stadium? PAGENO="0135" 1145 Mr. FLOSS. It was only a personal conviction, when 19 legislators voted to do something and then 11 of those fell off and voted against it Mr. WALDIE. Is that your conclusion, that Sportservice bribed leg~ isiators to vote against that stadium ~ Mr. FLOSS. It was a conclusion. Mr. WOLF. If I may, Mr. Phillips. I just want to say in response to the Congressman's questions before., that I, myself, have never heard, nor have any substantiation for the statement that Sportservice may have been involved in the bribery case. The first time I heard of this situation in terms of what. you just mentioned, was earlier today whe.n I heard a portion of the transcript read. It certainly was not covered, to the best of my knowledge, in. the Buffalo papers. Nor did I ever attend that trial. Mr. PhILLIPs. You had an opportunity today to read the transcript of Mr. Walker's testimony is that correct? Mr. WOLF. No, just a short portion was read to me, and that is the first time I ever heard of such a thing. Mr. PnTLMP5. You said that the. fact that testimony was adduced at the trial was never reported in the Buffalo press? Mr. WoLF. To the best of my knowledge. You might laugh at me, but I get. oniy one of the two Buffalo papers, because the accuracy of the other leave.s me a little upset at time. So no, in the one I get, it did not. appear. Mr. PHILLIPS. Mr. Steiger would like to know which newspaper you reacT? Mr. WOLF. The Buffalo Evening News. Mr. PHTLLTPS. So it. came to von as a revelation that Mr. Walker did in fa.ct testify about. the $~5O,OOO from Sportse.rvice? Mr. WOLF. It. caine to me. as a surprise, because. I would have assumed that. some local action woi,ilcl have, been initiated if, in fact, that statement. was macic under testimony and under oath. Mr. PHILLIPS. And to your knowledge, no such action has taken place? Mr. WTOLF. To my knowledge, nothing has taken place. Mr. Fr~oss. They did follow through. after the Federal grand jury~ the county started a gra.nt jury investiga.tion, but I never attended and I don't know any results. The only results were some more archi- tects were. ju]([ic.ted. Mr. STEIGER. Mr. Floss, you weren't aware of the possibility of Emprise paying off any of your colleagues? Were you aware of any other pressure from Emprise or Sportservice? Were you aware of their interest? As a member of the legislature, were you aware of them pressuring any of your colleagues? Mr. Fi~oss. No, sir. Only after be.ing told specifically by Mr. Cottrell, at this time you begin to make things fall into pieces an.d why votes were made in certain ways, and you draw conclusions. Mr. STEIGER. So the concl usions you arrived at. were. arrived at after the fact? You were never approached ? Mr. Fi~oss. No, sir, Mr. STEIGER. Under normal lobbying bases? Mr. FLOSS. No, sir. Mr. STEIGER. How about the other gentleman? Mr. WOLF. No, sir. If the dome stadium was const.ructed, it would have benefited my legislative district. It would have been in the heart PAGENO="0136" 1146 of my legislative district. And if I may just digress for a minute and say this, that I still think the majority of the people in Erie County would have wanted a dome stadium, privately operated stadium with a substantial peripheral development in the neighborhood of $200 to $300 million, which would have gone on our tax rolls. If you view this as 5 years of legislative debate, the rise of a dome stadium, the demise of a dome stadium, and the rise of a stadium which can be equaled by about 180 other communities in the United States, you have got to scratch your head and say either, like the old Penn- sylvania Dutch, too soon smart or too late smart, too soon or too late smart, because this stadium, the dome stadium, extremely beneficial to our community in all ways, shapes, and manners. Mr. STErnER. Were either of you gentlemen aware that Emprise, since they apparently couldn't get written in as a concessionaire, was opposed to the dome stadium? Were you aware of opposition? Mr. FLOSS. Only by the statement made by Mr. Cottrell at a meet- ing I attended. Mr. STEIGER. That is the only time you were aware of it? You never heard any of your legislators referring to it? Mr. FLOSS. Heard rumors all of the time. Mr. STEIGER. That is what I meant. Mr. FLOSS. There were rumors. Mr. STEIGER. You know of Mr. Abgott? Mr. FLOSS. There was an Abbott and an Abgott. Both of them were legislators. I know both of them. Mr. STEIGER. One is a printer? Mr. FLOSS. That is Mr. Abgott. Mr. STErnER. Did he ever make you aware of Emprise's position? Mr. FLoss. No. Mr. STEIGER. You weren't aware he knew what Emprise's position was in this? Mr. FLOSS. No, sir. Let me say, just so we are clear, he at one time introduced a resolution lauding Emprise or Sportservice. That came to my committee. and I had it received and filed. Mr. STEIGER. But he never made you aware of what Emprise's posi- tion was with regard to the dome stadium? Mr. FLoss. No, not directly. In fact, not too many people talked to Mr. Wolf and I. We were pretty stubborn. Mr. STEIGER. Why don't they talk to you? Mr. FLOSS. They know we don't change our minds. Mr. STEIGER. You don't read the right paper; right? Mr. Fr~oss. We don't change our mind. Mr. WOLF. Representing the district where the dome stadium would have been constructed, and Mr. Floss being adjoining, we, throughout the 5-year period, have been steadfast in our support for the dome stadium. As a result, I think if there was any attempt to lobby. et cetera, that people would avoid us like the plague because they would know darned well that we would. Mr. PHILLIPS. One of the things I am particularly interested in: Pordurn and Ludera, they were both county legislators; correct? Mr. FLoss. Correct. PAGENO="0137" 1147 Mr. PiuLLIP5. And they were indicted by the Federal Government, not by the local authorities; is that correct? Mr. FLOSS. Right. Mr. PHILLIPS. Do you know how that investigation came about? Mr. FLOSS. Yes. I believe I do. I understand, at least it was told to me by Mr. Cottrell, or Mr. Hussack, one or the other, that when Mr. Walker went to them to solicit funds, because he felt that he only had a certain amount to gain in the architectural fees, that the Kenford Co. certainly had a great deal more that they should share in these bribes. It was at that time this Mr. Cottrell said they had Walker go to the authorities and make the statement, and this started the investigation. Mr. PHILLIPS. In other words, Mr. Cottrell reported this to the Fed- eral Bureau of Investigation and an investigation was started? Mr. FLOSS. This is what I was told. I have been under that impres- sion since then. Mr. PHILLIPS. At some stage, Mr. Pordum and Mr. Ludera were in- dicted by a U.S. jury in that district; is that correct? Mr. FLOSS. Right. Mr. PHILLIPS. Now, after they were indicted, and I gness the indict- ment on its face said they were taking money in relation to the dome stadium, action in relation to the dome stadium; is that correct? Mr. FLoss. Maybe Mr. Wolf would know. There were several charges and I think they were only convicted on one of them. Mr. WOLF. Maybe I am wrong on this, but it is my understanding that corroboration was not necessary for the conspiracy charge under the Federal law. And that although there were a number of articles in the indictment, the only one that they were in fact convicted of was the conspiracy aspect of the Federal law, accepting or giving bribes, conspiracy to accept or give bribes, or something like that. Mr. PHILLIPS. Well, in any event, it was in relation to some facet of the dome stadium; is that correct? Mr. FLOSS. Yes. Mr. WALDIE. At this point I think we ought to have the indictment put in the record. I don't know what they are talking about and the witness doesn't know what they are talking about. Mr. PHILLIPS. The witness scheduled is late. Mr. WALDIE. Will the indictment be placed in the record and the conviction? Mr. PHILLIPS. The conviction was for Federal crime and they were sentenced and are in jail now. Mr. WALDIE. What Federal crime? Mr. PHILLIPS. I don't know. Conspiracy in aid of racketeering. Mr. WALDIE. As a minimum, we ought to have an indictment and conviction as part of our record before we speculate to the extent who was involved. I gather the premise we are making here was Sport- service was somehow or other involved. Chairman PEPPER. I am sorry, we have to go to the floor and vote, and we will take a short recess. (A brief recess was taken.) Chairman PEPPER. The committee will come to order, please. Mr. Counsel, would you care to go ahead. PAGENO="0138" 1148 Mr. PmLLIPs. I believe when we were interrupted, you were being asked questions about this development of the dome stadium and sub- sequent events which took place at the legislature. And I was asking you essentially, after the indictment of Pordurn and Ludera, did they continue to serve on the legislature and vote in relation to the dome stadium issue? Mr. FLOSS. Yes, they did. I understand there was some technicality that they could hold office until they were sentenced. And, of course, that followed after the conviction. They did serve on the board until the day that they were actually sentenced. And in that intervening time between the conviction and the clay of sentencing, they did vote on the stadium's demise. Mr. PmLLIP5. Were the votes that close, where those two votes were significant? Mr. FLOSS. Yes. Mr. PHILLIPS. In other words, if those two men hadn't voted, the votes would have turned out the opposite way? Mr. FLOSS. There wouldn't have been a prevailing site~ because the rules of the legislature, there must he 11 votes for something. If they no longer held their seats, we still have had nine in favor. It was just that they voted against it. But if they had been replaced, we might have had two votes for it. Mr. WOLF. To emphasize what Mr. Floss has said, after the demise of the dome stadium, the Erie County Legislature voted to bond th.e county to the extent of approximately $23.5 million for the, construc- tion of an open stadium. Our rules require a two-thirds vote for bonded indebtedness. And to the best of my recollection, without those two votes, there would not have been a two-thirds vote. The demise was predicated on the acceptance of the alternative, which was a $23.5 million open stadium. Mr. PHILLIPS. I see. So that these votes, after the indictment, were critical to at least the demise of the stadium? Mr. WoLF. Yes. Mr. PHILLIPS. Was any issue made of the fact that these meii were voting on a subject about which at least they were charged with having received bribes? Mr. WOLF. We asked bond counsel for clarification and although it may be peculiar, in the State of New York an individual who holds public office is still entitled to vote, even after conviction, during the period of time when he could appeal, up to the period of time he is sentenced for the crime he has committed. Mr. PHILLIPS. What troubles me is he is allowed to vote on a subject matter about ivhi~h his propriety is questioned. Mr. WOLF. It bothered us, Mr. Phillips. Mr. FLOSS. We argued against, it fell on deaf ears. Mr. WALDIE. May I interrupt. Lest you be concerned you are unique, we permit members to vote in the Congress of the United States after indictment and conviction, and after sentencing. So we probably would be ill grace to criti~ize you overtly much for that result. Mr. PHILLIPS. The point I wanted to make. they were votini~ about the very issue about which there was some allegation they had taken PAGENO="0139" 1149 money, which it would seem to me, at the very minimum, conduct would require on their part to abstain-the very minimum of con- scionless of public opinion and responsibility would require they ab- stain-f roin voting in relation to a matter which they particularly had accepted money. Mr. WOLF. Here you are drawing a distinction, justifiably, between an ethical and moral situation versus what their legal rights were. They elected to exercise their legal rights, as our bond counsel advised, and vote. Mr. PI-IILLIPs. I think you told us essentially that the. labor unions somchow were involved in `this venture to obtain a dome stadium? Mr. WOLF. We had a unique experience. Now, recalling back, the legislature `of the county of Erie voted 19 to 0 to enter into an agree- ment with a private company for the construction of a dome- stadium and a lease to that private corporation, providing that corporation proceeded with a peripheral development in the neighborhood `of $200 to $300 million. Now, the county, again remembering that we have a two-thirds vote requirement for bonded indebtedness but only a majority to pass oii, say, a lease, had at an earlier instance when the carrot of a majot league football franchisewas in front of us, adopted a $50 million bond resolu- tion, two-thirds vote. Thereafter, the county, 19 to 0, legislature approved the Kenforci concept and thereafter we hired an architect and proceeded with specs, et cetera, put. this out to bid. Now, w~hen we put it out to bid, it came in very, very substantially above the projected $50 million figure. Primarily `because one con- tr'Lcto1-~tnd e e b eq.k om coiiti icts down ~e ~ nei il he ting, et cetera-the general contractor came in 100 percent over the. l)Iidgeted figure, the architect said the general contract should come. in for' about $17 million, it caine in about 34 million, which threw this thing into a tizzy. Now, then, orga-i~izeci labor within our community, the construc- tion tradles people, lullS the major contractors within our community, offered to the county, if given the opportunity and if the county leg- islature. would ii~ci~ca-te its baSic. approval, to joint venture this at- a figure which would, if be- no profit. would he a minimum profit. - In other words, as a public- service to a community, organized labor would g'o in and lay 800 bricks a. day instead of 400 bricks. et cetera. And the-v were convinced they co~il d biul d tI ii s s~ad hum within the. budgetcdl $50 million figure. But. they were never given the oppor- tunity. This is a. unique offer, I am sure von gentlemen realize, from labor and management to a community. But they were never given that opportunuty to coniplete- that offer because the in aj oritv, although that same majority, 19 to 0 had voted, in favor of the concept. a majority would not accept. a co-ntinuat~on of the dome stadium concept. Mr. Pl-m~LTPs. Did tl~ere come a. time wlien a- man by the name of Wi1son. who owns a team in that urea. played a pert. in this s~t.iintion? Mr. `WoLF. Well, somewhere. along the. line it. became obvious to the community that the football franchise would not continue in our county using a WPA-p-roject stadium, which was iuther diiap~dated. PAGENO="0140" 1150 As a matter of fact, it had coverage in Sports Illustrated, but that is something else. And Wilson contended that the league requirements necessitated the construction of a new stadium, I believe with a mini- mum capacity of 55,000 seats. As a result of this, it certainly played a lart in our stadium dilemma, forcing, I am sure, many people to vote for the open stadium which we now have nuder construction in Orchard Park, on the premise that if the county did not build a new stadium, then Mr. Wilson wouldn't continue retaining his franchise in our area. Mr. FLoss. I would like to go further, because you are asking a question of what influenced. At the time we were trying to get every- thing pulled together and trying to build this dome, Ralph Wilson was making statements that he would not play in the dome stadium because he would not deal with another businessman as such. That he only would deal with the municipality and if the county did not build the stadium and run it themselves, he was going to move to Seattle or some other place. This was constantly cropping up in the papers to put pressure on the legislators. Again, this helped those fellows and sustained those men who were voting now against the dome stadium, because they had, you know. a good public opinion here, that we are going to lose the. Buffalo Bills. if we proceeded under the Keriford program. And it was Ralph Wilson who used this leverage of rattling the chain-"I am going to leave." Mr. PHILLIPS. You say Mr. Wilson used his franchise to exert lever- age on a legislature to vote in the way that he would profit by; is that correct? Mr. FLoss. He constantly kept that pressure up, yes. Mr. PHILLIPS. Did you ultimately build another stadium in which he received `some type of contract? Mr. FLoss. The other side, we might say, did finally vote to build an open stadium to his specifications, gave him 100-percent control throughout the year. And the lease agreemeut doesn't bring in half of what the Kenford program would have, to the county. We have ~far less to show for it. Mr. PHILLIPS. You say the county did enter into a lease with Mr. Wilson and you say this lease was particulai~ly beneficial to Mr. Wilson? Mr. FLoss. Absolutely. Mr. PHILLIPS. Would you tell us the provisions you think were beneficia.l to Mr. Wilson? Mr. FLoss. No. 1, it is the first time we have ever seen a lease where the higher the volume, the least percentage. He starts at 8 percent and ultimately goes down to 2 percent. Whereas the Kenford was 14 per- cent, going up to 25 percent. Mr. PHILLIPS. In other words, the lease you originally planned with the group that was going to build the stadium, the Kenford group, as you call it. started at 14 percent and would go up to 25 percent? Mr. FLoss. Escalated to 25 percent. Mr. PHILLIPS. You say the Wilson contract starts at 8 percent and goes down to 2 percent. Mr. FLoss. Regressively. Mr. PHILLIPS. What is the logic behind that? It doesn't seem too logical to me. PAGENO="0141" 1151 Mr. FLOSS. You asked if the lease was favorable to Mr. Wilson and I am explaining why it is. Why he was given that lease, Mr. Wolf and I cannot understand today, but it is like many other things we don't understand. Mr. PHILLIPS. Were there any other provisions in that lease? Mr. FLOSS. Yes. The county's share of the gate is only on the home games that the Buffalo Bills play in the stadium, there being just about 10 in the year. All other events that he promotes throughout the balance of the year, stock car races or whatever, the county does not share in the gate. Mr. PHILLIPS. In other words, the county doesn't share in anything but the 10 home games of the Bills? Mr. FLOSS. As far as the dates go; that is correct. Mr. PHILLIPS. The stadium can be used 365 days during the year by Mr. Wilson for his own benefit and advantage? Mr. FLoss. That is correct. Mr. PHILLIPs. How was lie able to negotiate such favorable terms? Mr. FLoss. Again, we would like to know, too. We just don't. under- stand. The very people that voted for that lease were the ones crying they were looking out for the taxpayer by voting against the Kenford lease. Which was far more favorable to the county. Another thing in the lease, because the township, if they placed this new open stadium and did not want the stadium placed there, they threatened to put a head tax on it, admissions tax. So they made another concession to Mr. IVil son, that any tax by a local municipality that was imposed on admissions would be deducted from his percentage to the county. M~. WOLF. His rental. Mr. PHILLIPS. In addition, the community was involved in the application for a baseball franchise. Could you tell us a little about that, please? Mr. FLOSS. That is how the whole thing began. Mr. PHILLIPS. And you never got the baseball franchise? Mr. FLoSS. That is the one that went to Montreal. Mr. PHILLIPS. Do you know whether or not Sportservice had any interest in the Montreal team? Mr. FLOSS. I would have no knowledge. Actually, I am not a sports- man. I never follow it. Mr. PHILLIPS. There came a time when the baseball authorities awarded a new franchise to Montreal and they didn't give it to Buf- falo; is that correct? Mr. WOLF. That is correct. Mr. PHILLIPS. Who was promoting the baseball franchise for Buf- falo, the Kenford group or somebody else? Mr. FLoSS. That was Max & Sweatos. Mr. WOLF. The Knox family of Buffalo, I believe, promoted pri- marily through their attorney, Mr. Sweatos. That goes right back, you are going back a complete circle, back to the origination of when we started to discuss a dome stadium. See, these people came to the county and said, Look, unless you pass a $50 million bond resolution author- izing the construction of a dome stadium, we will never have a fran- chise for major league baseball in Erie County. PAGENO="0142" 1152 In other words, that was a prerequisite to us, or that group, going tO the National League and attempting to secure a franchise. Mr. PmLLIPs. Then you did attempt, apparently, to obtain a franchise? Mr. WoLF. These individuals attempted to obtain a franchise and the county helped to the degree that the county passed a letter of intent and a bond resolution indicating that if a baseball franchise was awarded to the Buffalo group, placed in Buffalo, then we would constrnct a dome stadium. Mr. Pjiii~r~n~s. Let me just ask the final question. After all of this- and we only have covered a small portion of the difficulties that went back and forth as I know this has been aproblem to you gentlemen for a number of years-ther~ were a number of votes and a number of battles we Ii ave gotten into all of the details on, but would it be your view that a community like Buffalo would be advised to try to get in the stadium business or maybe do without a n~aj or league team? Mr. FLOSS. The team, itself, isn't that important, but I think the con- cept in our particular geographic area was important. At the time I was chairman of the Industrial Development. We know our employ- ment base has been decreasing in New York State because we just don't get back the money from the Federal Government we should, our shareS I mean. We have to tax and we are taxing industry out. I felt that here is a generator of new dollars, we are right on the Canadian border~ and we have within 1-day travel of that area almost half of the Canadian population, and close to 40 percent of the United States population. This would have been a great generator of a new industry-tourism-and this is what I thought was so great about it. I thought the concept was good. Many of us worked haid to do it. But the team, itself. I didn't think was that important. Mr. PHILLIPS. Do you think the distribution of franchises should be something that should be supervised or do you think the present method for awarding franchises is adequate to protect a community like yours? Mr. FLOSS. I think the community should be protected because I can see that each time it would be prior to an election, the owners of these franchises put themselves in the position of, you know, announcing he isgoing to move, and so forth, to get better terms. So I think it is a very dangerous thing where a man can control votes in this ~vay, sway public opinion to his advantage and to the disad- vantage of a fellow trying to do his job in an elective office. Mr. PHILLIPS. Thank you. Chairman PEPPER. Mr. Waldie. Mr. 1VALDIE~ Mr. Wolf, the scope of this inquiry is to determine the extent of infiltration of organized crime into the athletic world. In all of the recitation that you have given the committee have you come across any intervention in these decisions on the part of orga- nized crime? Mr. WOLF. Not myself, and I know of no situation where it may have existed. Mr. WALDIE. Mr. Floss, you mentioned in your view Sportservice had engaged in bribery of members of the legislature. That is correct, is it not? PAGENO="0143" 1153 Mr. FLOSS. I stated Mr. Cottrell said that he was actually con- fronted by Sportservice in that they wanted the franchise or they wouldn't get the votes. I knew the votes went the other way and I con- cluded this then was correct and this is why the voters started to vote against it. Mr. WALDIE. But based upon that analysis, it is your conclusion that Sportservice engaged in bribing legislators? Mr. FLOSS. It was a reasonable answer, in my thinking; yes. Mr. WALDIE. Aside from that incident, are you aware in any of the stories that you have related to the committee of any intervention by organized crime in any of these activities? Mr. FLOSS. No; not personally. Mr. WALDIE. One final question: Who is Mr. Cottrell? Mr. WOLF. Mr. Cottrell is the promoter of Kenford Co. that offered to construct the peripheral and to lease the dome stadium in the County of Erie. The alternative stadium to the one that was constructed. Mr. WALDIE. Is that C-o-t-t-r-e-l-l? Mr. WOLF. I believe that is correct. Mr. WALDIE. And, Mr. Floss, it is your testimony that Mr. Cottrell told you that Sportservice had purchased votes in the legislature? Mr. FLOSS. No; I think, to be exact, Mr. Cottrell said that the Sport- service controlled votes and that they would release those votes if they would be allowed to be the concessionaires in the dome stadium and that lie needed the concessions himself to make payments to the county. And he said this offer came, actually, right through the executive of the county. Mr. WALDIE. The offer from Sportservice? Mr. FLOSS. Yes; you can call it an offer if you want to. Mr. WTALDIE. Who was the executive of the county? Mr. FLOSS. John Tutuska was the executive at the time. Mr. WALDIE. Would you spell that? Mr. WoLF. T-u-t-u-s-k-a. Mr. WALDIE. So that I understand that: It was Mr. Cottrefl's recita- tion to you that Sportservice had made the offer that they would sway the votes necessary to pass the matter in the direction that they wanted it, if they got the concession. And that offer was made to Mr. Tutuska? Mr. FLOSS. Through someone, either him or whoever was represent- ing him at the meeting the day I said I recall certain names. There are others I do not. Mr. WALDIE. Mr. Tutuska was not at this meeting? Mr. FLOSS. Either he was or whoever was representing him. Mr. Boussard could have. Someone confirmed the fact, the statement Mr. Cottrell made. Whoever was there, either the executive himself or his representative confirmed in the presence of all of us the statement that Mr. Cottreli made. Mr. WALDIE. I have no further questions, Mr. Chairman. Chairman PEPPER. Mr. Wiggins. Mr. WIGGINS. Mr. Chairman, my questions are only for the purpose of straightening out the cast of characters. Who is Mr. Walker? Mr. FLOSS. The engineer. Mr. WOL1'. Architect. PAGENO="0144" 1154 Mr. FLOSS. He is the engineer in joint venture with the architect. The county contracted with him to design and engineer the dome stadium. Mr. WIGGINS. Am I correct in my understanding that Mr. Walker played a role in this bribery coiiviction? Mr. FLOSS. According to his testimony, yes. But he received immu- nity because he became a State witness. Mr. \`VIGGlNS. Can you relate, if you know, the substance of his role in this bribery? Mr. FLoss. I didn't attend any of the trial. Mr. WIGGINs. What is your understanding of it? Mr. FLOSS. My understanding is that in order, you see, for the architects to receive fees, they have to progress at certain levels, and each level would require the legislature to accept the plan first and then first in the schematic, and then preliminary, and then the final. It is my understanding that, each time he required an approval, the two men who received bribes from him would vote in favor of the next step. And then they would go along for a few months and be voting in the negative, and then the next step, you see. This is my understanding of it. In this way, of course, he would receive portions of his fee. Mr. WIGGINs. Well, now, you actually got to the stage of paying an architect in the construction of a dome stadium? Mr. FLOSS. Oh, sure; we have over $2 million paid. We Probably right now have expended $5 million or more. Mr. WIGGINS. On a dead horse? Mr. FLoss. On a dead horse, and they are building another one for $23 million, open. Mr. WIGGINS. I gather it would be in the financial interest of the architect and his engineer to see that their dome stadium was con- structed? Mr. FLOSS. Financial and the matter of prestige, too. Mr. WIGGINS. And if the architect was involved in a bribe his motive would be to construct the stadium and be sure it be constructed? Mr. FLoss. That is correct. Mr. WIGGINS. Is it your understanding, gentlemen, the money either was tendered or paid to these two legislators? Mr. Fr~oss. Pordum and Ludera. Mr. WIGGINS. Is that correct? Mr. FLoss. Right. Mr. WIGGINS Now, they voted against the stadium, didn't they? Mr. FLOSS. They were voting against the stadium consistently, ex- cept on these certain times they would throw their votes with the nine voting for the stadium. And then we accepted the schematic and then they would vote negative again on any other progress, uhtil another period when they voted their two totes with the nine of us to again approve the preliminary ptans, and then again the final plans, and then again the throwing out of the bids, the final phase. So there were four times these fellows, these two particular men who were voting in the negative on all other matters, did vote in those four steps in favor. According to the trial these are the four times that they received payment. PAGENO="0145" 1155 Mr. WIGGINS. In summary, the votes of Mr. Ludera and Mr. Pordum were consistent with at least them accepting consideration for this leg- islative action? Mr. FLOSS. Yes. Mr. WIGGINS. Consistent with them taking a bribe; is that correct? Their votes were consistent with that? Mr. FLOSS. Yes. Mr. WIGGINS. Who is Mr. Abgott? Mr. FLOSS. He is presently a legislator. He has been as long as Mr. Wolf and I. Mr. WIGGINS. Was Mr. Walker the one w~ho allegedly paid money, or offered the money to the two legislators? Mr. FLOSS. I understand he is, yes. Mr. WIGGINS. What is the connection, if any, so far as you know, be- tween Spoi~Lservice and Walker? Mr. FLOSS. I don't know of any. I don't personally know of any. Mr. WIGGINS. I would gather that it was in the interest of Sport- service that a stadium be constructed and that they have some soi~t of a contractual arrangement to handle the concessions at the stadium. It would appear to me to be in their financial interest. Was there any agreement, of which you are aware, guaranteeing to Sportservi*c.e that they would become the concessionaires in the new dome stadium? Mr. WOLF. To the contrary. It was obvious that the dome stadium, if built, would be operated by Mr. Cottrell and he wou~ld handle his own concession business, It was a closeout if the stadium was built, a*s far as any outside concessionaire. Mr. WIGGINS. Well, the question occurs: Why was it so obvious that the developers of the stadium would handle their own concessions rather than to contract with an organization such as Sportservice? Mr. WOLF. He made it quite clear that he planned to do it himself, and to do it through his own companies. He made it quite public and quite clear. Mr. WIGGINS. Was that made known from the outset? Mr. WOLF. That is the impression I had all the way through. This would be his total package. Mr. WIGGINS. Mr. Floss, is that also your understanding, that from the outset the developers would handle their own concessions? Mr. FLOSS. Well, it was my understanding that we were leasing this entire facility to the Kenford group, Mr. Cottrell, and what he did within it and how he managed it was up to him. And the day he made the statement of, you know, the reasons why we weren't get- ting the votes, he said, "I, in no way, would let them come in because I need all of the profit from all of the activities to pay the county what I have agreed to pay them." Mr. WIGGINS. Well, now, that state of the record would suggest to me that it would not be. in the interest of Sportservice to see that this deal went through, that perhaps an alternative deal would be in their interests, one in which they could participate. Do they participate in the one that you are now constructing? Mr. FLOSS. Well, there is no concessionaire been agreed upon yet. In fact, we just started the construction 2 months ago. It is not cx- pecteci to be built until 1975, so it is a little presumptive to talk about that right now. S1-O6S--73--pt. 5------1O PAGENO="0146" 1156 Since we now have a construction strike back home, there is no work being done. Mr. WIGGINS. The problem, and perhaps you can help me with it, I would like to get cleared up, if possible while I still have the micro- phone, is: rfhere has been suggestion of some role played by Sport- service in all of this, and I got the feeling it is kind of a dirty role. That may be incorrect, but that is the impression I have received. I do not understand from your testimony that Sportservice would profit from the events you described. Quite the contrary, they would be the loser; would they not? Mr. FLoss. Well, see, they have the concessions in the present fOot- ball stadium. That is the only sport in Buffalo right now, the only major sport, other than hockey, which is much smaller. They have been drawing great crowds, 45,000-48,000. If the dome is built and Wilson moved out there, in spite of the fact he said he wouldn't, they would then lose the business they are presently conducting. So when the dome met its demise, at least it saved the day for a while. Mr. WTIGGINs. `Well, I guess the question for you to answer is: Do you have any evidence that Sportservice, or Emprise, or its agents, were in any way involved in the bribe transaction which you described? Mr. WOLF. I have none. Mr. WIGGINS. How about you, sir? Mr. FLOSS. No. Mr. WIGGINS. Thank you. Chairman PEPPER. Mr. Steiger. Mr. STEIGER. I just have one question for each of you gentlemen. Did you ever get a campaign contribution from Sportservice, Em- prise, or the Jacobses? Mr. WOLF. No, sir. Mr. FLOSS. No, sir. Mr. STEIGER. Were you ever offered one? Mr. WOLF. No, sir. Mr. FLOSS. No, sir. Mr. STETGER. Thank you. No further questions. Chairman PEPPER. Mr. Winn. Mr. WINN. Well, I would like to follow up on Mr. Wiggins' line of thinking, if I may. I would like to ask you, on the present stadium, where the football team plays, who has the concessions for that stadium? Mr. WOLF. The present stadium is the WPA-project building that is in the core of the city of Buffalo. That franchise, or concession busi- ness, I believe, is held by Sportservice. Mr. WINN. `Would there be the possibility of a carryover contract to the new dome stadium? We have heard testimony that Sportservice signs long-terru contracts and this has been true from one example that I know, from the old Philadelphia A's to the then Kansas City A's, and then to the now Oakland A's. Mr. FLOSS. Well, the present stadium is located within the city of Buffalo. Mr. WINN. Who owns that? Mr. FLOSS. The city owns that. The city contracts and the lease with Wilson has been on a year-to-year basis now. PAGENO="0147" 1157 Mr. WINN. Does the city also let the contract t.o the concessionaire? Mr. FLOSS. Right. Mr. WINN. Two separate contracts, or does Wilson let it? Mr. FLOSS. I don't know that involvement, but the new county sta- ditini, of course, would be under the county auspice.s and a new ball game. Mr. Wixx. Are there any of the same ownerships? If the city of Buffalo owns the present stadium, then it is possible that they entered into the contract with Sportservice; right? Or it is possible, because you don't know that Wilson sublet the concessions to Sportservice? Mr. WoLF. Your question is interesting from that standpoint. I can't recollect what the county's lease arrangement is with Mr. Wilson on the concession, other than we share in some way the amount that the concessionaire pays. Now, Mr. Wilson has a lease that I think is beautifully written from his vantage point~ and I wouldn't be at all surprised if there was some type of built-in veto power-as example, the concession contract, but I am speculating-that would in one way or other require Wilson's approval on the concessions. Mr. WINN. Wilson's approval on the concessions that he now con- trols or he is now working with; right? Mr. WOLF. Well, what I am saying-maybe I- Mr. WINN. I think I read you, because I think I know how this thing is going to work. I am speculating, too, but I think in your new dome stadium you are going to see Sportservice be the concessionaire, some way or the other. I-low they are going to do it, I don't know. Mr. WOLF. Let me, if I may, straighten one thing out. The dome sta- dium is a defunct proposition which would have been privately man- aged, operated, et cetera. The dome stadium. Mr. WINN. All right, who owns the dome stadium, the county? Mr. WOLF. It is defunct. It never got built. Mr. WINN. What are you building now? Mr. WOLF. Open stadium. Mr. FLoss. And it is being leased to Mr. Wilson, lock, stock, and barrel. Mr. WINN. There is still a good possibility Mr. Wilson could carry that same contract, same arrangements, over with Sportservice? Mr. WOLF. There is a very good possibility. Mr. WINN. That is what I am thinking. One more question, if I may. Do you know of any financial partici- pation in the Buffalo Bills and Mr. Wilson's enterprise there, any financial stockholdings by Sportservice in any way? Mr. WOLF. No; I don't. But let me say this: I have asked time and time again when we were negotiating with Wilson, that he prove to us his net worth, because when you have a lease, the lease is only as good as the lessee, and that he prove to us who the major stockholders of his corporation were. I never got support from a majority of my colleagues for that re- quest. Mr. WINN. He never did furnish that information to you? Mr. WOLF. No, sir. Mr. WINN. But have you heard of any rumors, or do you know of any information, where Sportservice is one of the stockholders in the Buffalo Bills, or in the Wilson enterprises? PAGENO="0148" 1158 Mr. FLoss. I have heard it rumored. Mr. WINX. I have heard rumors, too. Thank you very much, Mr. Chairman. Chairman PEPPER. Gentlemen, just two or three questions: Now, both of you, are you presently a member of the legislature in your county? Mr. WOLF. Yes, sir. Mr. FLOSS. Yes, sir. Chairman PEPPER. So you are pretty well familiar with the people in your area, I am sure. Do you know, of your own personal knowledge, or is there what you would judge to be a substantial body of opinion in the Buffalo area, that Sportservice has any connection with any aspect of organized crime? Mr. WOLF. Sir, the only implication where that has come into play is as of the time this committee started their current investigation and the reports of this committee's activities in our paper. Chairman PEPPER. Something of the investigation and the hearings of this committee have been in your local paper? Mr. WOLF. Yes, sir. Chairman PEPPER. Where there were implications, you thought you observed in the newspapers. That is the only information you have on it. Is that your answer, too, Mr. Floss? Mr. FLOSS. Yes, sir. Chairman PEPPER. One other question. What, in general, is the repu- tation of Sportservice in the Buffalo area? That is where the Jacobses, who own Sportservice, live; isn't it? Mr. WOLF. Shrewd, calculating. Chairman PEPPER. I say, what is the reputation of Sportservice generally in Buffalo, in the Buffalo area? Mr. WOLF. Shrewd, calculating businessmen, who never seems to make a bad deal for themselves. Chairman PEPPER. What do you say, Mr. Floss? Mr. FLOSS. Well, I never go to spectator sports. I fly my own plane, run my own boat, and hunt and fish, but I don't go and watch anybody else do things. All I have ever heard when some of these things are coming up, people have not always been satisfied with the prices, such as in the auditorium. The prices go sky high when they have control, you know. I have heard people disturbed about it. Chairman PEPPER. Any other questions? Well, gentlemen, we thank you very much for coming and giving us the information you have. Will you call the next witness. Mr. PHILLIPS. The next witness is Mr. Charles Burr. Chairman PEPPER. Mr. Burr, will you come forward, please. STATEMENT OP CHARLES BURR, VICE PRESIDENT, EMPRISE CORP., BUFFALO, N.Y.; ACCOMPANIED BY ALVIN M, GLICK, COUNSEL Chairman PEPPER. Are you accompanied by your lawyer? Mr. GLICK. Yes. I am Mr. Burr's attorney. My name is Alvin M. Glick, an attorney from Buffalo, a member of the law firm of Pal, Siemer, Glick, Tuppen & Maloney. Mr. Phillips has my card. PAGENO="0149" 1159 Chairman PEPPER. We are pleased to have you. Have you read the rules of the committee with reference to the role of counsel in these hearings? Mr. GLIcK. I have not, sir. Chairman PEPPER. The gist of it is that counsels are welcome to advise their clients. They are free to give their clients any legal advice their clients may request of them. That is the role of the attorney in the hearing. If your client has any legal question to ask of you, you are, of course, at liberty to give him your advice. Mr. GLIOK. Thank you very much. Chairman PEPPER. Go ahead, Mr. Phillips. Mr. PHILLIPS. Mr. Burr, could you tell us when you first became associated with Emprise? Mr. BURR. With the Emprise Corp., in November of 1970. Mr. PHILLIPS. Could you tell us what you did prior to that? Mr. BURR. How far back, sir? Mr. PHILLIPS. Well, just immediately prior to that. Mr. BURR. Prior to that I was with the Buffalo Sabers Hockey Club. Mr. PHILLIPS. It is my understanding, Mr. Burr-correct me if I am wrong-that while you were on the payroll of Emprise, you were also on the payroll of the Buffalo hockey club; is that correct; that these jobs coexisted at the same time? Mr. BURR. No. I was not actually-while I was on the payroll of the Buffalo Sabers, I did some consulting work for Emprise Corp. on a retaining basis. Mr. PHILLIPS. Could you tell me when you first went to work with the Buffalo Sabers? Mr. BURR. In March of 1970. Mr. PHILLIPS. All right. Prior to March of 1970, could you tell me what you did? Mr. BURR. Yes. I was associated with Buffalo Raceway, which is a subsidiary of Emprise Corp. I was a director of public relations for Buffalo Raceway. Mr. PHILLIPS. So you worked for a subsidiary of Emprise prior to 1970? Mr. Burnt. Right. I worked for the track. Mr. PHILLIPS. Could you tell us how long you had worked for that track? Mr. BURR. I worked for the track since 1968. Mr. PrnLLIP5. And just briefly, was there a time when you worked for someone else other than Emprise? Mr. BURR. During that period between 1968 and 1970? Mr. PHILLIPS. No, prior to 1968. Mr. BURR. Yes. I was in television sports, an announcer in Boston in 1967. 1 was the general manager of the Miami Dolphins in 1966. And from 1960 to 1966, I was the assistant general manager and director of public relations for the Buffalo Bills. Mr. PHILLIPS. Who are the Buffalo Bills? Mr. BURR. The Buffalo Bills are now members of the National Foot- ball League. When I worked with them they were members of the American Football League. Charter members. The league began play- ing in 1960. I went with the Bills immediately. Mr. PI-IILLIPs. Can you tell me who owned the Bills at that time? PAGENO="0150" 1160 Mr. BuRn. The Buffalo Bills were owned then, as they are now, by Ralph C. Wilson, Jr. Mr. PHILLIPS. So Mr. Wilson has had the Bills since 1960? Mr. BURR. Yes, sir. Mr. PmLLIP5. And you went to work for him in 1960 and you stayed with the Bills until 1968? Mr. BURR. No. I stayed with the Bills until February of 1966, when I accepted employment with the Miami Dolphins, a new franchise in the American Football League, as general manager of that team. Mr. PHILLIPS. And then you left the Dolphins? Mr. Bunn. I left the Dolphins, because of a matter that is still in dispute, in 1967 and went back into media broadcasting with channel 7 in Boston, Mass., as sports director. Mr. PEJILLIP5. Now, you say there was some dispute about your leaving the Dolphins? Mr. BURR. There was a dispute in the sense the owner and I did not get along. Mr. PHILLIPS. Then you went to work for the Buffalo Raceway? Mr. BURR. Yes. I did. Mr. PHILLIPS. How did you come in contact with the Buffalo Race- way or with Emprise personnel? Mr. BURR. Well, in 1967, while I was in Boston, in the vernacular, I flunked the battle of the ratings. And after 10 or 12 months, my show was taken from me because I just did not build ratings that compared favorably to the other two stations, and I was going to become a street reporter. I felt very strongly that this was not my particular cup of tea, and my family and myself had only been settled in Boston a year, and as long as I had lost the show, I wanted to go back to Buffalo, which was my home town. At or about the same time I received a call from Mr. Stanley Phillips, who is a certified public accountant who, while not on the Emprise payroll, is associated with the racetrack interest. He said there was an opening at Buffalo Raceway as director of public rela- tions. Mr. PTTuJJPs. IFTed von known Stanley Phillins prior to that time? Mr. ~ No. T b~T not known Stanley Phillins prior to that time. Mr. PIHLLIPS. So that was a bolt out of the blue. I guess? Mr. BURR. In a sense it was to me, but I had been recommended by a third party to Mr. Phillips. Mr. PHILLIPS. Who was that? Mr. BURR. The third party would hare been Jack Horigan. who is now the vice president in charge of public relations for the Buffalo Bills, and who actually took my ~ob in 1966 when I went to Miami, or one of my jobs. Mr. PHILLIPS. So when you left there. ~ne of the fellows who stayed on behind, discussed von with Stanley Phillips and said you were a good msn and von would h~ auailahie. pos~iblv? Mr. BURR. He thought I might he available, yes. Because I think I had informed him that it looked like I was goimr to be out as sports director in Boston, and that I would certainly like to come back to Buffalo. Mr. PHILLIPS. There came a time when von went hack to Buffalo, and you got. involved with the Buffalo Raceway. I think that is the first step; is that correct? PAGENO="0151" 1161 Mr. BURR. Yes, that way my return to Buffalo, my first einp~oyment there. Mr. PHILLIPS. Who did you report to while you were at Buffalo Raceway? Mr. BURR. I reported directly to the general manager of the track, Mr. Jack O'Keefe. Mr. PHILLIPS. And did he repoit to Mr. Jacobs? Mr. BURR. Well, at that time. Mr. Phillips, Mr. Lou Jacobs was still alive. I don't know whether Mr. O'Keefe reported to Mr. Jeremy Jacobs, or Mr. Lou Jacobs directly. Mr. PHILLIPS. You had no knowied~re of that a.nd you really didn't work for them, you worked for Mr. O'Keefe? Mr. BURR. I worked for Mr. O'Keefe. I worked at the racetrack; ves~ sir. Mr. PHILLIPS. You had no dealings with the top management of Emprise at all? Mr. BURR. No. Mr. PHILLIPS. Now did there come a time when you started to work for the Buffalo Sabers? Mr. Bi:nui. Yes, sir. Mr. PHILLIPS. And what are the Buffalo Sabers? Mr. BURR. The Buffalo Sabers are a hockey club and franchised in the National Hockey League. They are what we term in the trade an expansion club. They ca.me into being in 1970. Mr. PHILLIPS. Who owns the Buffalo Sabers? Mr. BURR. The Buffalo Hockey Sabers are owned principally by Northrup and Seymour Knox. There are other minority stockholders within the organization. Mr. PHILLIPS. How did you come to work for them? Mr. BURR. Well, I had known Mr. Knox during my years with the Bills, and at the TJniversity of Buffalo. I had known Mr. Knox for a long period of time. Casually, not intimately. I believe he knew of my work. He was looking for two things to start his franchise: A person who could handle press and public relations for him, and also one who had had administrative experience. And knowing the job was onen, or that they would be looking for someone along those lines, I made application, and after a proper time of interviews and recornmenda- tions, I was hired to do the job. Mr. PHILLIPS. And you left the Buffalo Raceway then? Mr. BURR. I had not left the Buffalo Raceway until after I was hired by the Sabers. Mr. PHILLIPS. You began full time with the Sabers? Mr. Brnn. With the Buffalo Sabers; yes, sir. Mr. PHILLIPS. Then you started doing consulting work for Ernprise. is that correct? Mr. BURR. Well, yes, I think that is a fair statement. Mr. PHILLIPS. Would you clarify it if I am not stating it properly? Mr. BURR. I believe you are stating it properly, sir. While I was with Buffalo Raceway, just before I had accepted the lob with the Sabers or before it had been offered to me. I was asked as perhaps the only available person, by Max Jacobs, to attend a hearing that was being held in, I believe in Albuquerc~ue, N. Mex~, concerning licensing of prospective owners of Rudioso Downs. Mr. Jacobs asked PAGENO="0152" 1162 me to more or less audit the hearings and report back to him what went on. And to that extent, while I was still with the track and before I had taken the job with the Sabers or reported for duty, I actually did do some work for Emprise Corp. Mr. PHILLIPS. Were you paid directly for it, or they just paid you through the track? Mr. BURR. I was paid through the track for that particular job. Mr. PrnLLIrs. Was that an additional payment or the same salary? Mr. BURR. No, I was on the payroll. Mr. PHILLIPS. You were on the payroll of the track? Mr. BURR. Right. The track was not operating at the time, and life, I guess, wa~s a little bit dull, and Max felt that I was available and could go, and I did. Mr. PHILLIPS. You say you went to work for the Sabers, and I take it you were a full-time employee with the Sabers? Mr. BURR. Yes, I was. Mr. PHILLIPS. And then you say you did some consulting for Emprise? Mr. BURR. Right, on a limited scale. Mr. PHILLIPS. Would you tell us the extent of that consulting? Mr. BURR. If memory serves me, my work with Emprise Corp. dur- ing the period of time I was with the Sabers was confined almost en- tirely to issuing statements to the press in rebuttal of statements that may have been made that were derogatory to Emprise Corp. Mr. PHILLIPS. Where were you working at the time? Mr. BURR. I was working out of the Buffalo Sabers' offices. Mr. PI-IILLIPS. Were you carried as vice president of Emprise? Mr. BURR. No, indeed; I wasn't. Mr. PHILLIPS. Were yOu ever described as the vice president of Emprise? Mr. BURR. You mean while I was with the Sabers? Mr. PHILLIPS. At any time. Mr. BURR. No, I don't believe so. I was not a vice president at that time. Mr. PHILLIPS. Are you a vice president now? Mr. BURR. I am a vice president of Emprise Corp. now; yes, sir. Mr. PmLLIP5. Is that just for nominal purposes, or do you have any executive responsibility as vice president? Mr. BURR. I have responsibilities in line with policy decisions; for public relations, essentially. Mr. PI-ITLLIPs. When did you become vice president? Mr. BURR. November of 1670 is when I reported back to Einprise as a full-time employee. I did so with the title and responsibilities I now carry. Mr. PHILLIPS. Did you terminate with the Sabers at that time? Mr. BURR. Yes, I did. Mr. PHILLIPs. November of 1970 is the starting date of your full- time employment with Emprise? Mr. BURR. Emprise Corp. Mr. PHILLIPS. And prior to that time, you say all you did for Em- prise was to issue press releases: and you really did that while you were operating out of the Buffalo Sabers' office? Mr. BURR. Yes, principally. I think that would be a fair statement, yes. PAGENO="0153" 1163 Mr. PHILLIPS. Were you paid for that, or was that just gratuitous? Mr. BURR. I was paid. Mr. PHILLIPS. How were you paid? Mr. BURR. I was paid by the hour. Mr. PHILLIPS. Were you paid by cash or check? Mr. BURR. I was paid by check, I believe. Mr. PHILLIPS. Who paid you the check? Mr. BURR. Emprise Corp. Mr. PHILLIPS. Who at Emprise? Mr. BURR. I believe all of the Emprise checks were signed by Dorothy Bruckman. Mr. PHILLIPS. Dorothy Bruckrnan actually gave you the check? Mr. BURR. Yes; I believe so. Mr. PHILLIPS. How much did you bill them per hour? Mr. BURR. $15 per hour. Mr. PHILLIPS. Then there came a time when they decided they needed a vice president for public relations? Mr. BURR. Well, actually, the decision had been made prior to that time. Coincidentally or not, at about the time I accepted the Buffalo Sabers job, Jerry Jacobs approached me and asked me whether I would be interested in coming to work for Emprise Corp. as a full-time em- ployee-at the mother house, as we call it. Emprise, at the main office. And I said I would like very much to do so, but I am committed now to the Buffalo Sabers and I just cannot do it. And we did discuss it and it was decided at that time that I could not accept the offer. Actually, it had not been an offer, it had been an in- quiry by Jerry as to whether or not I would be interested. I told him yes, but I would be unable to take it. Mr. PHILLIPS. Why were you unable to take it? Mr. BURR. Because I had made a commitment to the Knoxes to take a job with the Buffalo Sabers. Mr. PHILLIPS. Were the Knoxes aware you were doing the part-time work? Mr. BURR. Yes, they were. Mr. PHILLIPS. And they had no objection? Mr. BURR. No; because they knew that when I left to go with the Sabers, there were certain areas that I still-they still realized that I was under obligation to Jerry to finish. We were under some attack at that time and there was no one else there to more or less handle the public relations aspects of the problems that were involved. Mr. PmLLIPs. Did there come a time when you refused to answer questions put to you by the Buffalo grand jury? Mr. BURR. No, sir. I answered every question fully. Mr. PIIILLIPS. Did you claim your privilege at any time during that proceeding? Mr. BURR. Yes, I did. Mr. PHILLIPS. Well, when I just asked you that question~ were you trying to mislead me? Mr. BURR. No, sir; I was not. Mr. PI-TILLIPS. Did you refuse to answer questions put to you by the Buffalo Grand Jury and claimed the answers would tend to incrimi- nate you? Is that correct? Mr. BURR. That is true as far as you go. PAGENO="0154" 1164 Mr. PHILLIPS. Would you tell me about the events that led yon UI) to believing that yours answers would incriminate you before the grand jury? Mr. BURR. I never believed my answers would incriminate me, sir. Mr. PHILLIPS. So when you said to the grand jury you thought your answers would tend to incriminate you, you were lying to the grand jury? Mr. BURR. No, sir; I was not. I was advised by counsel to claim inlmunit~ the clay before I went before tile grand jury. Arrangements were macIc with the district attorney to grant me immunity the day before I went before the grand jury. The proviso was made should he not see fit to grant that immunity, I would testify. I\fr. PHILLIPS. That you would testify? Mr. Bru~~. That. I would testify. Mr. PHILLIPS. You asked for tile immunity but you were going to testify anyway? Mr. BURR. Right. Mr. PHILLIPS. Were you asked to sign a waiver of immunity? Mr. Bum~. I believe I was. Mr. PHILLIPS. And you declined to do that? Mr. BURR. I declined to do so. Mr. PHILLIPS. And when you went to the grand jury, you refused to answer questions on the grounds they may tend to incriminate you; correct? Mr. BLTRR. I refused to answer the questions because it had been pre- vionsly agreed that was what I was to do. I would gain tile immunity and then would testify. I also stated through my attorney that should they dedine. to grant me. immunity I would also testify fully and truthfully. Now, I am not an attorney. Tile reason this was done was because I had 1 day's notice, I did not even have an attorney. My attorney, Mr. Glic.k, who knew nothing of the background and knew not where this would lead, wave us his best advice and counsel that I should pursue thjs CourSe, and he made the arrangements with Mr. Dillard. Mr. PHILLIPS. Did you ask for an adjournment to consult with our attorney? Mr. BURR. During the course of the proceedings, there was one ques- tion I believe I did. not fully understand. Mr. PHILLIPS. I am asking: Before you a.ppeared, before you went. into the. grand jury- Mr. Bimn. No,sir. Mr. PHILLIPS (continuing). Did you ask an adjournment so you could. consult more fully with your attorney? Mr. Bunn. No, sir; I did not. Mr. PHILLIPS. All rieht. Did there come a time when you were given some assignment by Jeremy Jacobs or anyone else at Emprise in rela- tion to discussing tile dome stadium with anyone? Mr. BURR. No, sir. Mr. PHILLIPS. You never had any such assignment? Mr. Bunn. No, sir. Mr. PITILLIPS. Did Von ever discuss the dome stadium and tile Em- prise interest in the dome stadium with Mr. Cottrell? Mi. BURR. Yes, sir. PAGENO="0155" 1165 Mr. PHILLIPS. Did you do that on your own? Mr. BURR. Yes, sir. Mr. PHILLIPS. Were von vice president at the time? Mr. BURR. No, sir. Mr. PHILLIPS. `What were you at the time? Mr. BURR. I was employed by the Buffalo Sabers Hockey Club. Mi. PHILLIPS. And TOll took this on your own, I take it? You just spontaneously went to Mr. Cottrell about the Emprise interest; is that correct? Mr. BURR. No, sir: I did not. Mr. PHILLIPS. What did you do? Mr. BURR. Mr. Phillips, I did not even know Mr. Cottrell at the time. I was approached by Mr. Jack Guthrie. Mr. Jack Guthrie. had been. while in Buffalo, a friend of mine. He was also a vice presideiit of an advertising agency which represented at the time Kenford Corp. 1-Ic was very interested, as I was, personally, in seeing that a dome stadium would be erected. I was always an advocate of a dome stadium. personally, and have been and still am, under the right circumstances, as a matter of fact. Mr. G-uthrie asked me-or he didn't. ask me-he stated to me it would be a good idea if Eddie. Cot.trell and Jerry Jacobs could get together and. he said "If von can get Jerry to agree to a meeting, I can get Eddie Cottrell ." I said. "Okay, I will try." Mr. PIULLIPs. Did yoii'ao to Mr. Jacobs ? Mr. BURR. Yes. sir: I did. Mr. PHILLIPS. What did you say to Mr. Jacobs? Mr. BURR. I said, "Eddie Cottrell wouTd like to meet with you." Mr. PHILLIPS. `What did Mr. Jacobs say? Mr. BURR. He said. "If lie would like to meet with me, I w'ould be happ to meet with him." Mr. Pnn~.I~IPs. `What did von do then? Mr. Bnun. I reported back to Mr. Guthrie that such a meeting could be arranged. Mr. Piiijjjps. And did Mr. Jacobs and Mr. Cottreil meet? Mr. BURR. To the best of my knowledge. they did. Although I don't know the (late of the meeting. and I don't know to what purpose or where it was held. Mr. PHILLIPS. Did you ever meet with Mr. Cottrell? Mr. BURR. Did I ever meet with him, prearranged? Mr. PHILLIPS. Yes. Mr. BURR. I think on one occasion. at. the request of Mr. Guthrie, I did meet with Mr. Cotti'ell. and Mr. Guthrie, in a prearranged meeting of short duration. Mr. PHILLIPS. WThat were von doing there? Were you there on be- half of Emprise? Mr. BURR. No, sir: I have never been- Mr. PI-TTLLIPS. Did you ever ask Mr. Cot.treil to go along audi give Ernnrise the concessions at the stadium? Mr. BURR. No, sir; I never asked Mr. Cot.t.reli to do that. Mr. PHILLIPS. You know. Mr. Burr, that your conversation was recorded. I don't want to mlsieadl you. I don't want you to commit PAGENO="0156" 1166 perjury or have any problems. You know when Mr. Cottrell spoke to you, your conversation was recorded by agents of the FBI, in coopera- tion with Mr. CottrelL `We are here to get candid and frank answers. We are not here to have witnesses before the committee get themselves in criminal difficulties. Do you understand that? Mr. BURR. I have testified hef ore the Buffalo, or the holdover grand jury of Erie County, to the effect, to the very best of my knowledge, I have never said to Mr. Cottrell in any capacity with Sportservice or individually, that "You had better give Sportservice the concessions." Now, during the course of our conversation, of meetings that were not prearranged, it is very possible-and I said this to District Attor- ney Dillon, it was my understanding in setting up this meeting that Cottrell needed financial help. And that is why they came to me, because they knew I had worked and had done some work with Jerry and I had a personal acquaintance with him. During the course of one or more of the conversations it may very well `have come up. I may very well have said, as I testified before the grand jury, "If you expect some help from Jerry, certainly lie is going to expect that he is going to get consideration for the concessions." But at no time-and if this is a tape, I would suggest it be played- at no time did I ever, as has been reported to me, state to Mr. Cottrell or to anyone else that, "If Sportservice doesn't get the concession, there will be no dome, because we have the votes to kill it." Mr. WALDIE. May I interrupt a moment? Could counsel describe the circumstances under which the conversa- tion was recorded, who asked it be recorded? Mr. BtmR. If you are addressing me, I can't hear you. Mr. WAr~rIE. No, I am not addressing you. I am addressing the. Chair. Can counsel describe the circumstances under which the conversa- tion was recorded; why the Federal Bureau of Investigation was in- volved in it; what the transactions were the FBI was interested in, in this conversation? Mr. PHILLIPS. Certainly. It is my understanding from talking to the witnesses, Congressman Waldie, that a prior statement was made to Mr. `Cottrell, in the nature of what he thought was a threat, that if lie did not go along with Sportservice as his concessionaire, that this venture would be killed, that Sportservice had the votes to kill it. That he became concerned about this and the other conversa.tions with a man by the name of Walker, that bribes were being paid to legislators in the Buffalo Legislature, that all of these activities were criminal in their nature. Mr. Cottrell went to the U.S. attorney's office, advised them of the nature of the facts, and so forth, and an investigation was conducted in relation to the matter, and ultimately certain indictments did come down as a result of that. As a result of that, Mr. Cottrell worked with the FBI in recordmg the conversation he had with Mr. Burr. The FBI has made the tran- script available to us. Mr. WALDIE. Will Mr. Cottrell be before. the committee? Mr. PI-IILLIPS. Yes. Mr. Cottrell was scheduled to be here today but he is ill with a throat infection. He is at the doctor's today, trying to see if he can get relief that will enable him to be here tomorrow. Mr. WALDIE. No further questions. PAGENO="0157" 1167 Mr. GLICK. Mr. Chairman, may I ask a question? Chairman PEPPER. Yes. Mr. GLIOK. May I ask Mr. Phillips if he has personnally heard this alleged tape? I realize it is little unorthodox for me to ask you a question. Mr. PHILLIPS. No, I haven't heard the tape. I have a transcript. Mr. GLICK. You read a transcript of the alleged tape? Mr. PHILLIPS. Yes. Chairman PEPPER. Would you go ahead with your questions. Mr. PHILLIPS. I yield to Mr. Steiger at this time. Mr. STEIGER. Thank you, Mr. Chairman. Mr. Chairman, I think at this time I would move that the transcript referred to and described by counsel be placed in the record, since I am going to refer to it. Mr. WALDIE. Mr. Chairman, I would suggest that you go ahead and refer to it, but before acting on that request, I have only scanned it, and there are names mentioned in it on an off-the-cuff manner that seem to me to require some consideration as to whether we want to bring them into this inquiry, where it does not seem to have any rel- evance to the issue. Mr. STEIGER. I recognize the concern of the gentleman. As far as I am concerned, the gentleman may review the manner with the stipula- tion that any extraneous names be removed. I would trust the gentle- man's judgment in that manner, with that stipulation. Chairman PEPPER. I suggest, if the gentleman from Arizona would be agreeable, that as Mr. Waldie suggests, go ahead and make any ref- erence you want and we defer the actual submission of the document in the record. We may be having a meeting about another matter and we can discuss this. Mr. STEIGER. Fine. I don't want to belabor the committee. I think the great bulk of this is pertinent. I recognize that there are some t.hings which are not pertinent. I would say at the time of our meet- ing, if we could remove those things- Chairman PEPPER. All right. Mr. STEIGER. Fine. Mr. Burr, the conversation we are talking about was alleged to have occurred at the Round Table Restaurant in Buffalo, N.Y., on October 22. Were you ever in the Round Table Restaurant? Mr. BLTRR. Yes, sir; I have been. Mr. STEIGER. Do you think you were there on October 22, 1970, with Mr. Cottrell? Do you recall? Mr. BURR. It is possible; yes, sir, Congressman. Mr. STEIGER. OK. You did mention that you had a previous meet- ing with Mr. Cottrell in the presence of another gentleman. This is not that meeting. In order to refresh your memory: apparently you are at the restaurant with Mr. Cottrell and there are some people who do come up and just greet you, but there was nobody apparently in attendance other than yourself and Mr. Cottrell. Does that refresh your memory? Mr. BURR. I don't believe in all of my meetings that were not pre- arranged, the chance meetings, that we were ever alone for any length of time. I can recall Mr. Guthrie being with us, and other people, PAGENO="0158" 1168 the names of whom escape me at the moment. But we never met, with that one exception, under prearranged circumstances. Mr. STEIGER. Well, of course. So what you are telling us, on the record and under oath, is that to the best of your knowledge, you didn't meet with anybody else, you didn't meet without somebody present, but von wouldn't be absolutely certain? Mr. BURR. To the best of my knowledge, yes. Mr. STInGER. Incidentally, I share counsel's desire, I am not at- tempting to trap you. Mr. BURR. I appreciate that. Mr. STEIGER. I am not interested in that situation. You do have the transcript of the conversation that was supposed to have taken place? Mr. GLICK. No; he does not, Congressman. `We have never seen it, never heard of it until yesterday. May we have a copy of the tran- script, Mr. Chairman? Mr. STEIGER. I would defer to the Chair. I think since it is going in the record- (Discussion off the record.') Mr. STInGER. Mr. Burr, while they are deliberating what to do with this I will continue. In this conversation you are discussing the situation in the Erie County Le~rislature with regard to the dome stadium. In effect, what you are telling Mr. Cottrell is that you are not empowered to speak for Mr. Jacobs. that you cannot commit for Mr. Jacobs. In effect, what you are telling him, and he is telling von, is that he would prefer to deal with Max Jacobs, and you are telling him that you are sym- pathetic but you say that if there is going to be an arrangement made, it has to he made with Jerry because he has the authority. Does that seem in line with the facts as you knew them at that time? Without askng you to recall the specifics of the conversation? Mr. BURR. I do not recall ever having a conversation with Mr. Cot- trell as to which of the individuals he would deal with, if he were to deal with Sportservice or Emprise. Mr. ST~JGER. You don't ever recall having that? Because we have here several pages of this testimony in which you discuss the relative ease of dealing with Max as opposed to dealing with Jerry. You don't recall that? Mr. BURR. I don't recall it. I wouldn't necessarily rule it out, though. Mr. STEIGER. But you agree. as a conclusion, it is easier to deal with Max than Jerry? Unless you care not to respond to that. Would you care to? Mr. BURR. No, I don't think I would care to respond to that. Mr. STEIGER. I must say, I agree with you in your decision not to respond. Incidentally, isn't it true that your original employment, that you referred to, involved my testimony in New Mexico and your travel- ing with me back to Chicago? `Was that part of your assignment? Mr. BURR. Not to travel with you back to Chicago. Mr. STEIGEI~, That was just a coincidence: right? Mr. BLTRR. That was just a coincidence. I believe, if memory serves me, we met at the airport counter, both traveling on the same airplane. PAGENO="0159" 1169 Mr. STEIGER. As I recall, we ended up sitting si(le by side in the pla1~e, with nobody else in that particular section of the aircraft. Mr. BURR. That is correct. Mr. STEIGER. It is a remarkable coincidence, looking back. We had a chance to have a warm and friendly conversation. Mr. BURR. Yes, sir; we did. Mr. STEIGER. You do good work, I will say that. Chairman PEPPER. Excuse me. In response to the request of counsel, we have always tried to pro- tect people who might be mentioned in documents who are not in a position to respond. Unless there was to be such a detailed use of the transcript that your client would be at a disadvantage in responding, without having access to it, it is the disposition of the Chair at the present time, to hold that we would not grant your re- quest to exhibit to you the document-that is, to place in your hands the transcript that we have-because we have not made it public, ourselves. It has only been the basis for investigation by the committee. So I think whether we would wish to grant your request would de- pencl upon the degree of detail which might be resorted to by any one of the committee who might be questioning your client about this. Mr. GLIcIC Thank you, Mr. Chairman. And I trust and I know the Chair recognizes the transcript of an alleged tape may in fact be a transcript of somebody else entirely, and not of Mr. Burr. Chairman PEPPER. Yes. But we will proceed. Mr. STEIGER. Thank you. Mr. Burr, again, maybe to perhaps refresh your memory on this matter, this again is alleged to have taken place October 22, 1970. I believe from your previous responses to counsel, at that time you were employed in sort of a joint capacity. Mr. BURR. Not in a joint capacity. I believe by this time I was no longer employed in any way, shape, or form, even on a consulting basis, by Emprise. As a matter of cold fact, October 22, 1970, would have been right at the start of the Buffalo Sabers' first season and L at that urecise moment, was. in the vernacular, up to my ears in Buffalo Sabers- connected work. Mr. STEIGER. With that in mind, I would ask you to recognize that in a response to Mr. Cottrell, in which he said, "He looked at us like we were out of our mind"-referring to ~Terry Jacobs' response to an offer-and you said to him "He is paying me $7.500 a year and I am not doinc a thing for him." Mr. BURR. I be~ your pardon? I said that to Mr. Cottrehi? Mr. STEIGER. Yes. It is alleged. The reason I mention this is be- cause if it is factually incorrect you ever received $7~500 from Mr. Jacobs for anything, why there is a good chance that some of this of.her information is incorrect. Do you recall at any time you received $7.500 a year which you felt you were not earning? Mr. BURR. No, sir. Mr. STEIGER. I see. Well, then, you go on and describe an arrange- ment and- Mr. WALDIE. Mr. Chairman? Mr. STEIGER. May I go on? PAGENO="0160" 1170 Mr. WALDIE. I don't think you got a response to your question. You said, "Did you receive $7,500 for which you did not render services?" And you said, "No." Did you receive $7,500? Mr. BtmR. No, sir. I never received $7,500 in a lump sum from Mr. Jacobs, nor was I ever employed at a salary at any time by Emprise Corp. that approximated $7,500 per year. Mr. STEIGER. All right. I will go on. And you described this arrangement to Mr. Cottrell in this fashion: "I got other things. My deal, in order for me to go, was for Seymour to keep me until such time as he had to relieve me. Jerry would pay half my salary. And he has offered me over and above what I was making when I was with Seymour." I would assume, if this was correct, that was Seymour Knox. And "Seymour would pick up the rest of it, and that salary was $16,000 a year to go with Jerry. I am not doing anything for Jerry for the last"-and then it is indecipherable-"and he is paying me $7,500 a year." I would assume then the $7,500 you refer to there is his share of the $16,000 salary you were earning. Does that make sense? Mr. Bcmu. You have made it more clear to me. Under the arrangement that was ultimately made with the Buffalo Sabers and with Jerry Jacobs for me to go back to Emprise Corp. bear in mind Jerry had offered me considerably more money than I was making with the Sabers. I believe the salary figure quoted is a little bit inaccurate. But nevertheless, it is close enough. At that time it was arranged that I would stay with the Sabers until such time as we had secured a replacement thiat they considered adequate and had an opportunity to break him in. And I, at the time, pointed out to Nordie Knox, while I was de- lighted to stay, I didn't feel I could afford, with two kids ready to go to college, one in and one ready to go, that I could afford to con- tinue with the same salary the Sabers were paying me during that interim period. So Nordie says, "OK, if Jerry will pay half of it, I will pay half of it." So he, in effect, gave me a raise. But I am reluctant to state, but I must, that Jerry, while he agreed to it, I have yet to see any extra money from him. Mr. STEIGER. I have no comment on that. Now, Mr. Burr, the r'~st of this conversation was kind of an expres- sion that if only Jerry and Mr. Cottrell could sit down as you and Mr. Cottrell were sitting down, possibly something could be worked out. And you make several references in the course of that conversation to the stadium, what is going to happen to it, and then the conversa- tion goes something like this-and I am going to read here verbatim to attempt to refresh your memory, just briefly: I will go back up to where Cottrell is saying, he said: Jerry was very close friends with Ahgott, is that right? Chuck. Yes. Cottrell. So am I. Jerry or you can produce any time. Right? Chuck. We can produce him under the right circumstances. I'll tell you and I told you before that- PAGENO="0161" 1171 And then it is indecipherable. "I don't think anybody got to Al." I am going to stop there and ask: I believe Mr. Abgott's name is "Al" or Alvin"? Mr. BURR. Al Abgott. Mr. STEIGER (reading): I don't think anybody got to AL I don't think Al, you know, could be bought off. I have known this guy. I could be wrong, in fact I have been wrong several times. Ed. Do you think anybody is bought off here? Chuck. I work closely with him. Jerry worked closely with him. Ed. Do you think anybody has been bought off here? Chuck. Bought off? Ed. Who has been bought? Chuck. I don't know, but I would guess that- and it is indistinguishable Which I guess can be very fortunate. Ed. For whom? All right. Does that help refresh your memory about this particular meeting, at all? Mr. BURR. No, sir; not to any great degree at all. Mr. STErnER. All right. I am going to refer to another specific area of the conversation that I think is germane. And I am quoting Chuck in that matter, I am reading: They told us that the concessions were making money. They are talking about the concessions in Houston. I don't know. All I know is under the right circumstances, I'll bet everything I got Jerry would be interested. If something came up, Jerry is willing to put up $12 million in capital for the building of this (off-color expression). The legislature ought to take a long, hard look at it. Get a lot of people off the hook. Then we go down here and Mr. Cottrell says: Let's not ask, let's not ask them to put up the dough. Let's get back to putting up the vote. And you say: We can get the vote. I guarantee we will get you the vote if Jerry can go with the deal you guys make. Again, Mr. Burr, did you ever make such a statement? Mr. BURR. I don't recall that I ever made such a statement. Mr. STEIGER. All right. Is it true that you thought Jerry could deliver the vote if the deal were right? Mr. BURR. No, sir; I had no knowledge whether Mr. Jacobs could deliver the vote. Mr. STEIGER. Do you think so now, in retrospect? Mr. BURR. I have no opinion one way or another. Mr. STEIGER. But you expressed an opinion here in October 1970. Have you forgotten that opinion? Mr. BURR. I don't believe I expressed an opinion. Mr. STEIGER. Are you telling us~- Mr. BURR. Mr. Steiger, what I am telling you is I have no recollec- tion of what you are reading me from the transcript, at this moment. Mr. STEIGER. You make reference in here to "the judge." There are a whole series of references to "the judge," the gist of which are "Jerry wants to squeeze the judge out." 81-068----73-pt. 3-11 PAGENO="0162" 1172 The judge apparently has something to do with the dome stadium. Do you know who the judge could be? Mr. Buiui. I would suspect the reference there is being made to Judge Roy Hofheinz, the owner of the Houston dome stadium. Mr. STErnER. Again, as a result of this conversation, it becomes apparent Mr. Cottrell feels a very strong loyalty to the judge. Is that a reasonable proposition? Was he an employee of the judge? Mr. BURR. Yes. I do not know whether or not he was an employee, or in any sense, perhaps-I don't believe he was an employee. Mr. STEIGER. Would he have a reason to have a strong loyalty to the judge? Mr. BURR. It is my understanding-well, I really can't say, because I have no firsthand knowledge whether he would have reason to have a strong loyalty to Judge Hofheinz or not. Mr. STEIGER. All right. Anyway, the synthesis of the involvement of the judge continues. This is quoting from Mr. Burr: If you and the judge and Jerry could get together, Jerry doesn't want any publicity. He doesn't even want to have his name on the ownership. Do you ever recall suggesting that kind of an arrangement? Mr. BURR. No, sir. I don't believe that I did. Now, if I could qualify. From portions of this transcript, there was an area in there, in which it was stated, something to the effect that $12 million was involved. Mr. STEIGER. Excuse me. I will simply tell you that was your refer- ence to the fact that Jerry was willing to put up $12 million in cash to see the dome constructed. Mr. BURR. I see. All right. I think that reference is in error. What the reference was to, and would have to be, was to my personal knowl- edge that Sportservice, years before, had advanced some $12 million that guaranteed to St. Louis, that guaranteed the construction of Busch Stadium. These were advanced receipts guaranteed against con- cessions over, I believe, a 30-year period. That was what that reference may have been to, if indeed that is the `transcript and an accurate one of the conversation I had with Cottrell. Mr. STEIGER. So that you don't recall ever suggesting that every- body could stay in and Jerry could put up the 1noney, as long as he got the concessions, and he didn't even have to have his name on the ownership? You don't recall making that suggestion? Mr. BURR. Heavens no. Mr. STEIGER. And that offends you, the idea you would make a suggestion like that? Mr. BURR. I wouldn't have no authority to make the suggestion. Mr. STEIGER. You make it clear, it is just a suggestion. You have no authority. Mr. BURR. And I certainly never made any such suggestion. Bear in mind that I never approached, in behalf of Jerry Jacobs or myself, Mr. Cottrell. I was approached through an agent of Mr. Cot- trell's to arrange a meeting, if possible, between Jerry Jacobs and Mr. Cottrell. Mr. STEIGER. You think this might have been that meeting? Mr. BURR. I beg your pardon? Mr. STEIGER. Do you think this transcript might have been the result of that meeting? PAGENO="0163" 1173 Mr. BURR. I have no idea. And I have very little, in fact no recol- lection of the particular meeting between Cottrell and I in question here, nor do I have any recollection of the testimony in the transcript as you have read it to me. Mr. STEIGER. Let me ask you one more question about your conversa- tion with Mr. Cottrell. Following up the offer to have Jerry and the judge in and Mr. Cottrell in, and leaving Jerry anonymous, all lie wants is to make sure he has got those concessions. "Supposing you come in?" Mr. Cottrefl tried to interrupt you and you say, "concessions" and the blank is another expressive adjective- "at a bid that is not competitive with ARA." "Mr. Cottrell: No bid. We don't need a bid. 1-Ic don't have to bid. We never had a bid." And you say, "Tell me what you want from Jerry." And he said, "All we ever talked about was being competilive. If he could be con'ipetiitve. I mean, he knows the figures. His own conces- sion man wrote them down. Jack Sander." "Yes, I think it was Jack." Do you recall that dialog at all? Mr. BURR. No, sir; I can't honestly say I recall that dialog at all. But certainly, I don't think I would have been out of line if I had said to Mr. Cottrell, as I am sure I said, if you wish to have Jerry Jacobs or Emprise to be involved in any way, shape, or form, in con- struction of the dome stadium, certainly he is goiiig to seek the concessions. I don't think that would be out of line, to begiii with. Mr. STEIGER. All right. Then you make a final, near final state- ment. Mr. Cot.trehl says: "If he is not involved in it, what is going to happen to it?" Referring to Mr. Jerry Jacobs. And you said, "There won't be a dome. I don't think there will be a dome without Jerry Jacobs. I think Jerry Jacobs"-and again it becomes indecipherable-and you qualify it and say, "I could be wrong, 100 percent wrong." And then Frank conies up. Mr. BURR. That was a personal opinion. And I do believe more than once I have said that to Cottrell, that there wouldn't be a dome unless somebody was going to come up with a financial proposition that would be acceptable to the legislature. Mr. Cottrell has yet to come up with an acceptable financial proposition. Mr. STErnER. I will repeat this because you indicate you might re- call this part of the conversation, and I want the record to be accurate. "There won't be a dome. I don't think there will be a dome without Jerry Jacobs." Not without the legislature. Do you equate in your mind Jerry Jacobs and the legislature? Mr. BURR. No, because I was under the impression when I talked to Mr. Cottrell, he needed financial help. Mr. STEIGER. All right. Mr. BURR. And that financial help could conceivably have come, as it had in the past, from Sportservice Corp., in the form of loans or pos- sibly in the form of guarantees against concession revenues. Mr. STEIGER. And you don't have any recollection of the fact Mr. Cottrell made the point, very obviously, he didn't want money, he wanted two votes? PAGENO="0164" 1174 Mr. Burnt No, sir; we never discussed the legislature. As a matter of cold fact, while we were in this right now, as I testified before the Erie grand jury, I only know personally, one member of the legis- lature, and that is Mr. Abgott. I have never met anybody else. Mr. STEIGER. And you don't know whether or not Mr. Jacobs knows any of the other members, or not? Mr. BURR. I have no knowledge. Mr. STEIGER. And you would not be in a position to recite that. So what you are saying is that while you are not sure about the rest of this transcript, you know that part is inaccurate; is that correct? Mr. BURR. I beg your pardon. Mr. STEIGER. What you are telling this committee, on the record and under oath, is that while you don't recall the specifics of this, you know that that part of the transcript which I read to you, in which we talked about delivering the two votes, in which we don't want the money, we just want the votes, you know that was not accurate? Mr. BURR. I know that is not accurate. Mr. Sa~rGER. All right. The only thing you can remember then is that you didn't ever say that, and I assume you are saying that because you never said that in your whole life-that you could deliver the votes? Mr. BURR. You lost me, Congressman. That I could deliver the votes? Mr. STEIGER. Right. Mr. BURR. I couldn't deliver a vote for a dogcatcher. Mr. STErnER. That Jerry Jacobs- Mr. Burnt I don't know that Jerry Jacobs could deliver a vote for dogcatcher, either. Mr. STEIGER. So you never told anybody he could deliver that vote? Mr. BURR. No, sir. Mr. STEIGER. I have one more question. You went to a television station. You, Mr. Burr, went to a television station in Buffalo, WGR, sometime in April of this year-I hope you memory is that good-and you talked to a man named Sid Hayman. Do you know Mr. Hayman? Mr. BURR. Yes, sir; I do. Mr. STEIGER. Who is Mr. Hayman? Mr. BURR. He is the new director channel 2, WGR, Buffalo, N.Y. Mr. STEIGER. You suggested to Mr. I-layman that they invite me to debate with an alleged member of the bar of Ohio, named. Lindhorst, or Lindstrom, and Mr. Weiss on his station. Do you recall that conversation? Mr. BURR. I do not recall whether I suggested that to him, or whether Mr. Hayman suggested it to me. Mr. STEIGER. Do you recall a conversation in which the possibility was discussed? Mr. BURR. Yes, sir. Mr. STEIGER. Do you also recall Mr. Hayman thought it was a good idea, at any rate? Mr. BURR. I believe he thought it was a fine idea. Mr. STEIGER. You were aware he contacted me? Mr. BURR. Yes, sir: I believe I am aware of it. Mr. STEIGER. You are aware I agreed and the only stipulation I had was the Jacobses also appear. They could have as many lawyers as they PAGENO="0165" 1175 would like, but they both be present at that so-called confrontation? Do you recall that? Mr. BURR. Yes; I believe I recall that, too. Mr. STEIGER. Do you recall, after having discussed it with Mr. Jacobs, what you then told Mr. Hayman? Mr. BURR. I believe I told Mr. Hayman that Mr. Jacobs would not appear. Mr. STEIGER. What was Mr. Hayrnan's reaction? Mr. BURR. He asked me why. Mr. STEIGER. And what. did you. tell him? Mr. BURR. I told him because the fulcrum of the whole situation had taken place in Cincinnati and Mr. Jacobs was of the opinion that since the original debate had been scheduled for Cincinnati between you and Mr. Lindhorst it should take place in Cincinnati with the original principles involved. Mr. STEIGER. So when you offered, when you suggested. that it would be good for me to appear in Buffalo, you did so without the authority of Mr. Jacobs is that correct? Mr. BURR. I don't believe I suggested it would be good for you to appear in Buffalo. I agreed I would ask Mr. Jacobs, and from a public relations standpoint, I would certainly have no objections. Mr. STEIGER. Did you hear Mr. Hayman tell me that in the event the Jacobses turned me down, he would consider that newsworthy, since they had made a great deal in Cincinnati, since you had put out some press releases alleging I hadn't shown imp for Lindhorst? Mr. BURR. He may very well have told me that. Mr. GLIOK. Excuse me, Mr. Chairman. Is this pertinent- Mr. STEIGER. Yes, it is, as a matter of fact, Mr. Counsel. Mr. GLICK (continuing). To the committee? Chairman PEPPER. The rule of relevance is not strictly applied in these hearings. We are engaged in a general inquiry as to this subject of whether there is any organized crime in sports, particularly horse- racing. So the question will be permitted. Mr. STEIGER. Mr. Burr, are you aware of the fact that Hayman not only never did make any announcement about the unwillingness of the Jacobses to appear, but expressed a great reluctance to the fact he would not be able to do that? Or great disappointment he would be unable to make the announcement because he felt it was newsworthy? Mr. BURR. I am not even aware he didn't make such an announce- ment, to tell you the truth. Mr. STEIGER. You are not aware he didn't make such an announce.- ment. You would not have known if he made such an announcement? Mr. BURR. Not Necessarily. I may not have been in town at the time. Mr. STEIGER. As a public relations man, you were not advised as to what goes no, particularly between Emprise and Steiger? Mr. BURR. Mr. Steiger, there are many things that transpire, as we operate in so many areas, that I am not aware of. I would assume perhaps I should be aware of anything that happens in our home- town, but I am not particularly aware of whether Mr. I-layman did make an announcement, air announcement. to the effect there would be no debate or whether he did not. In fact I am not even sure he made an announcement originally there may be debate. PAGENO="0166" 1176 Mr. STErnER. To the contrary, ~0U know he did not make an an- nouncement there would be until he had had approval from the Jacobses isn't that so? Mr. BURR. I would assume that. But I don't know it to be a fact. Mr. STErnER. My whole point is, at least Mr. Hayman feels that the station must in no way antagonize Emprise. And you, as the publ1c relations arm of Emprise, I would assume would be in part responsible for making it clear to the station and the newspapers in that com- munity what would happen to them in the event they publish any- thing, factual or not, that refers to Emprise; is that true? Mr. BURR. If you are saying to me, Mr. Steiger, that the media in Buffalo, N.Y., are fearful of Emprise reprisals should they- * Mr. STUIGER. That is exactly what I am saying. Mr. BURR (continuing). Publish anything detrimental. I must take issue with you. And on the subject of WGR, literally, over the past year and a half, we have been taken apart, our hair parted down to our elbows by editorial comment by that station. They have run them freely. The Buffalo Evening News and the Buffalo Courier-Express have printed the news as it has happened without interference from us. Mr. STEIGER. What would be the thrust of WGR's criticism of your operation over the past 18 months? Mr. BURR. I think the thrust-I am really not prepared. I am not qualified to answer that now, because it has taken place over a period of time and it is not fresh in my memory. Mr. STEIGER. Was it a series of complaints? Mr. BURR. However, the gentleman in question is in this room today. You might want to ask him about it. He would be much better able. Mr STErnER You s'ud you h'td recollection of being taken apart by WGR over an 18-month period? Mi BURP Yes but I c'm't give you specifically under wh~tt cir cumstances and what the subject matter was on a particular show. Mr. STEIGER. Were they part of a conspiracy to destroy the reputa- tion of Emprise? Mr. BURR. Mr. Steiger, I have never stated there was a conspiracy to destroy Emprise's reputation. Mr. STEIGER. You must be the only man on Emprise's staff who hasn't said that. I have no further questions. Chairman. PEPPER. Mr. Winn, do you have any questions? Mr. WINN. Yes. Mr. Chairman. Mr. Burr, I believe you said that you are a vice president of Emprise? Mr.. BURR. That is correct, sir. Mr. WINN. And as a vice president of Emprise, do you hold any stock in Sportservice? Mr. BURR. No, sir; I do not. Mr. WINN. That is a separate entity? Mr. BURR. I hold no stock in Emprise, Sportservice, or any sub- sidiary of Sportservice. I am what is known as a working vice presi- dent, by appointment, and not by reason of stockholding. Mr. WINN. All right. Then, who owns the majority of the stock in Emprise ? PAGENO="0167" 1177 Mr. BURR. All of the stock in Emprise is 100 percent owned by the Jacobs' family. Mr. WINN. Who owns all of the stock in Sportservice? Mr. BURR. Similarly, the Jacobs' family. Mr. WINN. All right. Then you say that you worked for the Buffalo Bills and it is a little confusi.ng to me, and I believe Mr. Steiger asked a question, hut I would like to clarify it in my own mind, if I may, that you were on the payroll of the Buffalo Sabers hockey team. Mr. BURR. Yes, sir. Mr. WINN. But at the same time you became a consulting nonstock- holding vice president of Einprise? Mr. BURR. No, sir. It is not quite that complicated. I had worked for the racetrack, Buffalo Raceway, from 1968 until 1970. Toward the end of my tenure at Buffalo Raceway, just as I was preparing to go with the Buffalo Sabers, but after I had announced my resignation at the raceway, Max Jacobs asked me if I would go to Albuquerque, N. Mex. and sort of audit a racing commission hearing there. Mr. WINN. Audit one? Audit or monitor, just to listen and report back to him what took place in this hearing. 1-Ic couldn't get the tran- script of that? Mr. BURR. Well the transcripts usually are delayed, and for reasons best known to him, he wanted an immediate report. Mr. WINN. Did he ask you to personally contact anyone down there? Mr. BURR. In Albuquerque? Mr. WIXN. Yes, at those hearings. Mr. BURR. No; not that I recall. I don't recall I contacted anyone. I was accompanied-no, I went alone, but in Albuquerque Mr. Hay- man from Phoenix, Ariz., a newspaper man, met me. He sat with me in the hearings. Mr. WINN. Now, I would like for you to continue on the timing be- cause it seems to me a little vague, whether there was an overlapping of the fact you were on the payroll of the Buffalo Sabers hockey team and at the same time an employee or a consultant for Emprise. Was there absolutely no overlapping; are you telling the committee that? Mr. BURR. Yes, there was some overlapping. Mr. WINN. So then you were on the payrolls of both organizations? Mr. BURR. I suspect this to be true, yes. But with the full knowledge of my employers, the Buffalo Sabers. That was my main job. I was finishing up some work for Emprise Corp. that was to take, oh, perhaps 2 or 3 weeks, a month. I can't recall just exactly how long it would take. This was the start of some of the bad public relations and some of the bad press that accumulated as a result of the accusa- tions and allegations being made against us at the time. Mr. WINN. You told the committee that Mr. Ralph Wilson owns the Buffalo Bills, and I know that to be a fact. Do you know whether Emprise, as an organization. or the Jacobses as individuals, or any of their organization including Sportservice, own any of the stock in the Buffalo Bills? Mr. BURR. To the best of my knowledge, Mr. Winn, no one with the exception of Ralph Wilson has a single iota of stock interest in the Buffalo Bills. Mr. WINN. Do you know if Mr. Wlson has borrowed any money from the Jacobses or from Enmrise, 01 from Sportservice? PAGENO="0168" 1178 Mr. Buim. To the very best of my knowledge, he has not. Mr. WINN. He has not. All right. You said that you were a former television sportscaster, I believe. Mr. BURR. Yes, sir. Mr. WINN. What station were you on? Or channel? Mr. Buim. My last employment as a television sportscaster was in Boston, Mass., channel 7, WNAC, the RKO general station. Mr. WINN. Anywhere in your travels, or when you were acting as a vice president of Emprise, have you run across a Van Patrick? Mr. BURR. No, I have not run across him face to face. I have talked with Van a couple of times on the phone. Mr. WINN. Do you know Van Patrick? Mr. BURR. Yes, I know Van. He at one time was a sports announcer in Buffalo. Mr. WINN. In Buffaio? Mr. BURR. In Buffalo, N.Y. Mr. WINN. And he is now in Detroit? Right? Mr. BURR. He is in Detroit; yes, sir. Mr. WINN. Are you aware that some time in the last few years that Mr. Van Patrick, also a former sports announcer, went to bat, trying to secure favors for the Jacobses? Mr. BURR. No, I am not aware of that. Mr. `WINN. You are not aware of that? Mr. BURR. He is very frienthy to the Jacobses. Mr. WINN. But you don't know if he happens to be a consultant to the Jacobses in any way? Mr. BURR. No, sir; I don't know that. Mr. WINN. You don't know if the Jacobses pay him any amount of money from Emprise or any of their other organizations? Mr. BURR. No, sir; I do not know that. Mr. WINN. All right. Now, Emprise, as I understand it, is the owner of the former Cincinnati Royals? Mr. BURR. No, sir; that is not true. Mr. WINN. Emprise is not? Mr. BURR. No, sir. Jerry Jacobs personally is the owner of the Royals. Mr. WINN. They don't own that as a corporation? Mr. Bumi. Definitely not. No, sir. Mr. WINN. So that is Jerry Jacobs alone, then; right? Mr. BURR. Well, he is the principal stockholder. There are others. Mr. WINN. Do you know who the other stockholders might be? Mr. Buim. I know Max has some stock in it. I do not know who the others may be. Mr. WINN. Do you know who operates that franchise? Mr. BURR. Well, Max Jacobs is chairman of the board and is titular head of the Royals but the Royals are operated autonomously by Joe Atchinson, the general manager, and Bob Cousy, the coach. Mr. WINN. There were a lot of people, according to press reports and that is all. I have to go by, that they were pretty unhappy with the way Bob Cousy handled that basketball team when it was in Cincin- nati. Have you read or heard of any of those reports? Mr. Burnt I have read reports, but as in many cases when you have a losine~ team there is dissatisfaction expressed against the coach. Yes, I read that. PAGENO="0169" 1179 Mr. WINN. I am sure you are aware that that same team, the same franchise, and the same owners, are now moving from Cincinnati to Kansas City? Mr. Brrrrn. Yes, sir. Mr. WINN. And that after same debate, Bob Cousey was reap- pointed on a 1-year contract as coach of the Cincinnati Royals now moved to Kansas City they are having a name contest, so I can't you the new name. Mr. BURR. I believe it is the Kings, but I am not positive. Mr. WINN. I believe that is the last I heard. Let me ask you, do you know any of the stockholders of the new Kansas City Kings basketball team? Mr. Brnm. I believe the majority stockholder continues to be Mr. Jeremy Jacobs. Mr. WINN. You think that is the sole ownership? Mr. BUmI. I believe Mr. Max Jacobs has some smaller number of shares. I do not know the other shareholders may be, who, if there are any, and I assume there may still be some. I don't know. Mr. WINN. Do you know if there are any local stockholders in the Kansas City franchise that might have a part or a share of the Jacobs' holdings there? Mr. BURR. Mr. Winn, I can't answer that. I am not that familiar with Kansas City Royals' operation. But when Mr. Jeremy Jacobs testifies, I am sure he can give you that information. I am unable to answer it. Mr. WINN. Have you heard of the name Morris Shenker? Mr. Brnm, No, sir. Mr. WINN. You have never heard of that name? Mr. Bnnn. No, sir. Mr. WINN. Mr. Chairman, I have no more questions. Thank you. Chairman PEPPER. Mr. Wa.1 die, any questions? Mr. WALDrE. No. Chairman PEPPER. Mr. Wiggins. Mr. WIGGINS. Just a couple. I have just consulted with my colleague, Mr. Steiger, with respect to the questions asked by him referring to the transcript. I got the impression from those questions that part of this transcript involved the statement that your employers might be able to deliver two votes and, if so, I would like, Mr. Chairman, to read the transcript in full in that respect, so that there be no misunderstanding as to what was said a.nd what the responses were. I am going to start at the top of page 8 of the transcript: Chuck. All right. Don't you believe that anybody has been bought off? Ed. Yes. Chuck. I don't think Al was. Ed. There is 10 jamming it up. Al's one of them. Chuck. You need two votes, right? Ed. I would say probably two, yeah. Chuck. And if Al was one of them, if I could get you, Al, and Jerry together, and * * * Then the balance. of that sentence was apparently not decipherable. That is the reference, Mr. Chairrnan~ I have been able to find in this transcript with respect to two votes. And if so, I think in fairness to the witness, it should be clear there was no offer on your part in that transcript to deliver any votes, PAGENO="0170" 1180 That i.s consistent with your recollection of any conversation; is it not, sir? Mr. BURR. Yes, sir; it is. Mr. WIGGINS. Did the Jacobs brothers want this dome stadium or not? Mr. BURR. I don't believe that I have ever asked Jerry or had any conversation with relation to his feelings about the dome. I don't think he cared particularly one way or another. Mr. WIGGINS. Are you aware of any negotiations conducted by Emprise with the developers of the dome., with respect to the conces- sions, if it were built? Mr. BURR. The only possibility would have been if there was a meet- ing, and I believe there was between Jerry and Ed Cott.rell, that I may have helped to arrange. I know of no other negotiations prior to that meeting, if one had took place. Nor do I know of any other meetings except possibly one, that I have, referred to. Mr. WIGGINS. Do you know what occurred at that meeting? Mr. BURR. No, sir; I do not. I was not privy to the meeting. I was not there nor did I even question Jerry Jacobs about the meeting. Mr. WIGGINs. Are you aware that your employer, Einprise, offered to participate in the financing of the stadium? Mr. BURR. Am I aware? Mr. WIGGINS. Yes. Mr. BURR. That such an offer was made by Emprise? Mr. WIGGTNS. Yes. Mr. BURR. No, sir; I am not. Mr. WIGGINS. You may have been in the audience at the time when two county legislators testified concerning a bribe and a conviction that resulted from that, in Erie County. Do you know anything about that? Mr. BUm~. No, sir. My only knowledge of that whole situation is from what I read in the papers. Mr. Wmoixs. I wish our record to be complete with respect to any suggestion you or your employer could deliver any legislators, and I read you that portion of the transcript in which two votes were mentioned. Later on in the transcript, at page 11, there is another reference to votes, and I will read that into the record and ask you to comment on it. Preceding this dialog there is some reference to putting up money, and then the following occurs: Ed. Let's not ask him to put up the dough, let's get back to putting up the vote. And the answer is not decipherable. Ed. I mean * * ~" The balance not decipherable. Chuck. We can get the vote. I guarantee we will get you the vote if Jerry can go with the deal you guys made. Now, this, I don't- Ed. Well, why can't he (undecipherable) ARA. deal. And the dialog proceeds' without further reference to a vote. Do you have any recollection of that? Mr. Buim. No, sir. I can't comment on that because I just have no recollection of it. And it is not clear in my own mind, the continuity PAGENO="0171" 1181 has been internipted so many times. In fact, I iu~ve too little recol- lection of that I h'i~e no recollection of th"it p irticular ti'inscupt But there are portions in that transcript that I know I have discussed with Cottrell more th'in once, during the tin'ie we w crc running into onc another. Mr. WTIGGINs. It would seem tO me, sir, that if a person intends to record a convers'rtion, it is not an accidental meeting It is a staged meeting It is an agreed, `ii ranged meeting Otherwise one would not carry a tape recorder of some sort on his persOn. So if this tape has any credence at all, it would seem to me it would be an arr'inged meeting betw een you arid Mr Cottrell Doesn t that mnke'~ense to you? Mr. BURR. Ordinarily it would make sense, except that we have~ never had an arranged meeting, with one exception. It was nOt held `it the Round T'ible, as a matter of f'tct It w `is held in the Pl'17a Suite restaurant in the afternoon and Mr. Jack Guthrie, who called the meeting, or asked me to attend, was there with us. There are several `tapes supposedly made, none of which have `ever been pr oduced `ins w her e to the ~ cry best of my know ledge, `md it w ould `rppe'mr Mr Cottrell lust constantly c'rried th~~t iecorde~' `iround with him and recorded anything lie thought might be to his advantage at one time or another This is the only `iccount I c'mn gri e for it be cause we had no prearranged meetings at any time. At any, time; Mr W&LDIE Would you yield to me Mr WIGGINs Yes, I yiuld Mr. BURR. Except that one. Mr. WALDIE. I understood counsel to say that this recording and: the~u tapes w ci e FBI taken and arranged Mr P~iir LIPS Th'rt is correct Mr WALDIE Do you know, if the meetmg w `is c'isu'il as has been s'ud, how w `is it an `inged Wlio c'u ned the recoi dmg, do ~ ou know anything about it? Mr PHIlLIPS The recording de~ ice, `is I underst'mnd it, w'is given to Mr. Cottrell by the FBI agents and the FBI agents covered the meeting. That is, they observed you with Mr. Cottreil at the meeting. That is my understanding of the facts that have been presented to me. It was a prearranged meeting, Mr. Burr. Mr. BURR. At the Round Table restaurant? I beg to differ. There was never a prearranged meeting at tIre Round Table restaurant. Mr. PmLLIP5. Mr. Burr, did you on that occasion or any occasion say in substance, "We can get the vote. I guarantee we will get the vote if Jerry can go with this deal"? Did you say that, in substance, at any time? Mr. BLTRIr. No, sir. To the very best of my recollection, I did not say that. Mr. PHILLIPS. You would recall that, wouldn't you? Mr. BURR. I would like to think I would recall it. As I get older my memory- Mr. PmLLIP5. You are telling a man who is involved in a ~5O million deal you can deliver the vote that is going to deliver the $50 million deal. You would remember that, wouldn't you? Mr. BURR. No, sir; you are not even quoting accurately. I am not even saying that, if what you say is true. PAGENO="0172" 1182 Mr. PmLLIPs. I am asking you, do you deny you said that, in sub- stance? Quite frankly, Mr. Burr, denying things of this nature is grounds for perjury prosecution. I want you to be advised of that. Mr. BU1m. I understand. Mr. PI-IILLIP5. The tape is here before us. I am reading it to you. I want you to fairly understand the question. Mr. BURR. I understand. Mr. PHILLIPS. The question is: Did you say, "We can get the vote"? Mr. Burnt Sir, to the very best of my knowledge, if I said anything like that-I don't recall ever saying it-but if I- Mr. PrnLLIP5. Do you denyyou said it? Mr. BURR. Mr. Phillips, I am not going to get into an argument on semantics here. Mr. PHILLIPS. It is not semantics. I would like to have an answer. Do you deny in fact you said that? Mr. BURR. To the very best of my recollection, I do not recall say- ing it. Mr. PHILLIPs. Do you have any trouble with your recollection? Mr. BURR. Apparently. Mr. PHILLIPS. You would remember that, wouldn't you? Mr. BURR. Mr. Phillips, may I make a quick statement here? Mr. PHILLIPS. Certainly. Mr. BURR. Maybe we can clear the situation up to your satisfaction, if not exactly my own. If there were at any time reference to votes in our conversation-and I am not denying that we talked about the fact that he didn't have enough votes, I don't recall any part of the conversation along those lines, but it is reasonable the subject did come up and it would have been in reference, at least on my part, to the fact if Jerry Jacobs were to put money, or to make a guarantee. this would make it much easier for the legislators who were opposed to a dome stadium because of the heavy cost, to perhaps switch their votes, or if not only Jerry Jacobs, anybody who would come forth with the money. This was at a time when in discussions with Cottrell, I had been led to believe he needed capital in order to get this dome stadium off the ground. Mr. PHILLIPs. What I am asking is did you say that you and Jerry Jacobs-when you say "we"-had the power to deliver the votes? Mr. BURR. No, sir; I never said that. Because we never had the power to deliver the votes. Mr. PHILLIPS. Do you know Al Abgott? Mr. BURR. Yes, sir; I do. Mr. Pmr~LIPs. Who is he? Mr. BURR. Allen Abgott is a long-standing college friend of mine. I have known him for 25 years. He is in the printing business. He is also a county legislator. Mr. PHILLIPS. A very good friend of yours; isn't that a fact? Mr. BURR. A friend of long standing. Mr. PHILLIPS. Is he also a friend of Jerry Jacobs? Mr. BURR. To my knowledge, no. Not a personal friend in the sense that we refer to friendship. Mr. PHILLIPS. Did you tell Mr. Cottrell that "We can deliver Abgott 1 nder certain circumstances," under the right circumstances? PAGENO="0173" 1183 Mr. Btrnn. I do not recall telling Mr. Cottrell that. But Mr. Abgott was concerned about the cost of the stadium and Mr. Cottrell's inability to spell out the proper financing techniques. Mr. PHILLIPS. Had you talked to Abgott before you talked to Cottrell? Mr. BURR. No, I don't believe I had. Mr. PmLLIPs. Then how did you know his position before you talked to Cottrell? Mr. BURR. Mr. Abgott? I didn't know Mr. Abgott's position. Mr. PHILLIPS. You just told me Mr. Abgott was concerned about this. Mr. BURR. Mr. Abgott's concern was well-established in the media. Mr. PHILLIPS. So your only understanding of this good friend of yours, before you met with Cottrell was something you~ read in the newspapers; is that correct? Mr. BURR. I think that would be a fair statement. I never talked to Al about it. Mr. PI-IILLIP5. You never discussed the dome issue, which was an issue of major importance, with Mr. Abgott, your longtime friend, prior to meeting with Cottrell; is that correct? Mr. Bunu. I don't believe I ever discussed it with Mr. Abgott prior to meeting with Mr. CottreiL although it is conceivable I could have. But my recollection is my discussions with Mr. Abgott followed my meeting with Mr. Cottrell. Mr. PmLLIP5. Would you tell me this, Mr. Burr: Why did you say `CWe can produce him under the right circumstances" if you hadn't discussed it with him? Mr. BURR. I don't know that I said it, to begin with. Mr. PHILLIPS. Do you deny you said it? Mr. BURR. I believe at this point I would deny it. Mr. PT-IILUIP5. Deny you said it. The transcript made up by the FBI is a fabrication; is that correct? Mr. BURR. I am not saying the transcript of the FBI--what I am saying, in essence, yes, I SII~~O5O I am saying it is a fabrication, because I don't recall the conversation to begin with. Mr. WALDIE. We haven't even established the transcript was made by the FBI. Mr. PT-TIT,TTPS. We have. We have been told and it has been delivered to us by the FBI. Mr. BURR. It would seem to me, if there is such a tape, it should be played and we should hear the tape. Mr. PHILLIPS. Mr. Burr, we probably could arrange for that if we had the time. But we are trying to get answers from you. You are denying that you discussed votes at all; is that correct? Mr. BURR. Yes. Mr. PHILLIPS. You are denying you ever discussed votes at all? Mr. BURR. I am denying that I ever said that I could deliver votes or that Jerry Jacobs could deliver votes. That I am denying. Mr. PHILLIPS. So it is clear to say that when you said, "We can get the votes, I guarantee we will get you the votes if Jerry can go in this deal with you guys," that the transcript is incorrect? Mr. BuRR. I don't recall, to the best of my recollection ever having said that. PAGENO="0174" 1184 Mr. PHILLIPS. There is a difference between. "I don't recall" and `I am denying it For "I don t iecall' ~ou ciii t be prosecuted for perjury. i~ you deny, in fact, you said it, you can be prosecuted for perjury if the statement is false. Mr. BURR. I am telling you to the best of my ability, Mr. Phillips, I don't recall I ever have said it. I can't make it any clearer than that. Mr. PmLLIPs. I am asking you to be more particular. I am asking you to say that you deny that you made the statement at all. It seems to me, Mr. Burr, that is something that would be in your recollection. You are talking about delivering legislative votes. Is that something you talk about every clay? Mr. BURR. No, sir; I am not talking about delivering legislative votes. I already stated I could not deliver legislative votes. I never made any effort to deliver legislative votes. I know only one legislator. That is Mr. Abgott, and I would tell you, if you would like to hear, how my conversation with Al Abgott originated and who origmated it, and under what circumstances, and the county legislature will be more than happy to confirm this. Mr. PHILLIPS. Mr. Burr, was it your understanding that if Mr. Jacobs did not get involved in this deal, if he was not given the con- cessions, not given the financial interest, that lie was going to support the dome or oppose the dome? Mr. BURR. I have no understanding one way or the other on it. My only personal thought was that if they needed money and they went to Jerry Jacobs and said, "Can we make the same sort of deal perhaps you made with St. Louis," then the guarantee might, that Jerry might be able to give them or would be willing to give them, might be the same- Mr. PHILLIPS. Was it your understanding- Mr. GLICK. Excuse me. Mr. Chairman, Mr. Phillips isn't permitting the witness to complete his answers. Chairman PEPPER. Had you finished your answer? Mr. BURR. No, sir ;I was trying to explain, in the back of my mind, when I was discussing this with Mr. Cottrell, because I had stated I was in agreement a dome should he built, I had no knowledge of Jerry's personal preference, to this day, but realizing an arrangement had been made with St.. Louis that enabled the construction of Busch Stadium, it was not inconceivable to me a similar arrangement in Buffalo. N.Y., would expedite the building of a. dome if Mr. Cottrell would like to pursue it that way. Mr. PHILLIPS. Is it your testimony you had no prior knowledge Mr. Jacobs wanted to do that, that you did this on your own? Mr. BURR. I talked with Mr. Cottrell on my own, yes. Mr. PHILLIPs. That. wasn't the question. The question was: Was it your statement you never discussed it previously with Jacobs before you discussed it with Mr. Cottrefl? Mr. BURR. No, sir. Mr. PHILLIPS. You never knew that Jacobs wanted to get involved in this deal: that is your testimony? Mr. BURR. No, sir; I never discussed it with Jerry Jacobs. But any man with commonsense, and I like to think perhaps I may have some PAGENO="0175" 1185 remaining-recognizes that Sportservice operates out of Buffalo. N.Y., and if a stadium of one sort or other was likely to be built, it would be reasonable to me that Jerry Jacobs and Sportservice, in their own hometown, would like to participate, or might like to participate es- pecially siiice they have participated elsewhere. Chairman PEPPER. Excuse me. Mr. Burr, was it your understanding that Mr. Jacobs made a condition of his helping to build or supporting the building of the dome, his receiving a concession in respect to the dome, for the sale of things that were sold on dome premises? Mr. BURR. No, Mr. Pepper. I had no such understanding in my own mind. I did not know even if there had been negotiations involving Sportservice and Kenford Chairman PEPPER. Did the following questions and answers take place in the conversation you have been referring to here: "Ed"-rneaning Mr. Cottrell-"Well, when it cam&'-this is page G-"Weil, when it came, when it comes down to it, all I know is lie is supposed to be for it. And then secondly, in addition to being for it, he was, he wanted a concession contract."-presumably you all were talking about Mr. Jacobs. "Well, he could back away from the concession contract. There is no reason then why he shouldn't be for it." And then the next appears, "Chuck"-referring to you, I presume- "Well, if he is not going to gain anything by it, why should he be for it? Now, on page 8 appears the following: This is Chuck, purports to be you, speaking to Mr. Cottrell-"But he is not going to help you if you can't make an agreement on a concession deal. Why should he? "Ed : All right. But then, should he hurt it?" Do you recall those questions and those answers? Mr. BURR. No, sir; I don't recall those questions and answers. But it is logical to assume, in my own mind, that if Mr. Cottrell was going to ask Mr. Jacobs for some help and was not prepared to negotiate a concession deal, it seems likely Mr. Jacobs would not want to partici- pate with them. But I don't recall we ever discussed that at any of the meetings, and I certainly don't recall that part of the transcript. Chairman PEPPER. Mr. Winn. Mr. 1YINN. I just have two questions here. I am sorry, Mr. Chairman, I didn't bring it up before. But one of the previous witnesses from the legislature up there made the statement that they had asked Mr. Ralph Wilson to supply a list of the stockholders of the Buffalo Bills, and that they waited and waited. ~Tere you here when that witness testified? Mr. BURR. Yes; I was. Mr. Wixx. And we were led, at least I believe the committee was led, to believe that somewhere along the line Mr. Wilson either re- fused or did not see fit to submit a list of stockholders in the Buffalo Bills. Did you gather that from the testimony? Mr. BURR. I gather that from the testimony. I find it hard to believe. Mr. Wixx. You find it hard to believe? Mr. BURR. Because I believe there are no stockholders with the Buffalo Bills, with the exception of Ralph Wilson. PAGENO="0176" 1186 Mr. WINN. If you believe that, why would Mr. Wilson not more than gallantly come forward and say, "I am the sole owner of the Buffalo Bills"? Mr. BURR. Sir, I can't answer that. I wasn't there. Mr. WINN. Then you dispute the thinking of the prior witness; right? Mr. BURR. That there are other stockholders? Mr. WINN. No; he didn't say there are other stockholders, I don't believe. He just said when they asked Mr. Wilson for a list of the stockholders, they couldn't get an answer from Mr. Wilson. And I can't understand why Mr. Wilson wouldn't make the statement that "I am the sole owner of the Buffalo Bills," if he really was. Mr. BURR. From personal knowledge, I don't know he did re-fuse, only from what I heard of the testimony. I am really not qualified to comment on that. Mr. WINN. Then you are in disagreement with the statement? Mr. BURR. No, I am not in disagreement with it. I just don't know. Mr. WINN. It is a little confusing to those of us up here. Mr. BURR. I can understand that. If I may, the name of Al Abgott has been brought up many times here today. So there is no doubt in the committee's mind as to what his relationship was with me and is today, he is a good friend, and his relationship to me in relation to the dome stadium-and I do feel I would like to state very briefly-Mr. Abgott called me in his capacity as county legislator and wanted to know what my opinion would be as to the possibility of Jerry Jacobs participating in the construction of a stadium, similarly as Sport- service and L. M. Jacobs had participated in the St. Louis venture, Busch Stadium. Mr. WINN. Were you on the Emprise payroll at that time? Mr. Bum. No, sir. Mr. WINN. Why would he call you, Mr. Burr? Mr. BURR. I beg your pardon. I think this was when I was back with Emprise, after I had left the hockey club. Mr. WINN. OK. Mr. Bum. And he asked me at the. time whether it was my opinion, or not, whether I thought Jerry might like to participate. I said I had no knowledge; and he said he was going to bring it up on the floor of the legislature, the. possibility of going to Sportservice to get some sort of advance funding arrangement to arrange the start of a stadium. Possibly, also, the legislature had investigated the Foxboro Stadium, home of the Boston Patriots, at some time, which I believe Schaefer Beer had contributed several million dollars in return for getting its name on the facade of the stadium, Schaefer's Stadium, and he wanted to know whether there was any possibility of similar arrangement Qr ultimate type of arrangement which would have enabled the county to gain front funds. I said I did not know, but I thought that Jeremy Jacobs would be ver-v pleased to talk about any possibility to the proper representatives of the legislature. Al then reported back to the legislature, but to my knowledge noth- ing ever came of it. I do not know if anybody from the county legislature ever talked to Jerry about it. PAGENO="0177" 1187 Mr. WINN. He instigated the inquiry? Mr. BURR. Yes; he instigated the inquiry. Mr. WINN. 1-le didn't know Jerry Jacobs? Mr. BURR. I really can't confirm that he did not know him. I don't believe ho knew Jerry well. Mr. WINN. What would they call that stadium, "Sportservice Sta- dium" or "Jerry's Place"? Mr. BURR. I don't know. The suggestions were never made to me what the possibilities might be. Mr. PI-IILLIPS. May I ask when that conversation was, Mr. Burr? Mr. BURR. Beg pardon? Mr. PHILLIPS. When was that conversation you just described? Mr. BURR. I can't recall the exact date, but I think it would be- Mr. PHILLIPS, Was it before or after your meeting with Cottreil? Mr. BUIIR. I think it would have been after. Mr. PHILLIPS. It would be after? Mr. WINN. In this transcript, on page 7, it refers to a "Paul." "When Paul was alive," and then they make a statement here, he said-this is Ed-he said, "Jerry was very close friends with Abgott, right?" And you said, "Yes. So am A fe~v minutes ago you said you didn't know if Abgott knew Jerry ,Jacohs. And in this transcript you say, "Yes." Mr. BURR. No, I don't mean to mislead you there. I am sure that Jerry Jacobs and Al Abgott are acquainted, but on a close personal relationship, such as I have enjoyed with Al for years, I do not believe they are acquainted on that basis. Mr. Wixx. OK. I don't know if you are trying to mislead us, hut I think you have done a pretty good job. Mr. WALDIE. Would you yield a moment? Mi'. WINN. I would be glad to. Mr. WALDIE. On page 8 of the transcript there is othe.r conversation that hears on that question. In the middle of the page there are two empty lines between Chuck and Ed, and Chuck responds, "No, he hasn't. He doesn't know Al Abgott from a bag of beans, personally." "ED. You told me he was very good friends." "CHucx. No, I didn't say that. I am very good friends with him, Al, all I do is call up Al and ask him for this and that and advice of counsel, not on legislative matters." Does Al know Max? Mr. Bmm. Mr. Waidie, I honestly can't say whether Al and Max are acquainted at all. Mr. WALDIE. Do you have any recollection of that conversation? Mr. BURR. No, sir; I do not. Mr. WALDIE. Excuse me, Mr. Winn. Mr. WINN. I think that is a good point, Mr. Waldie. Let me follow with just another line of thinking here. Fr~m the time that you fought the battle of the ratings on your TV show, I gather you feel you enjoyed a very fine reputation, even though your ratings were slipping; right? Mr. BURR. It wasn't a question of them slipping. It was a question of never having been able to build them. But I think my reputation has been a good reputation throughout my life, yes. 81-068-73-pt. 3-12 PAGENO="0178" 1188 Mr. WINN. i-low many sports broadcasters were there in competi- tion with you for that rating? On sports alone? Mr. BuRR. In Boston? Mr. WINN. Yes. Mr. BURR. On television, three VII stations and two TJF. I don't believe the IJF carried live. I think it was just the three. Mr. WINN. So there would be three of you? Mr. BURR. Right. Mr. WINN. After you were released from that job-and I don't mean to be personal, but you can answer it if you care to-could you tell the committee what type of a financial status that you were enjoy- ing right after you lost your job? Mr. Buim. Well, actually, I didn't lose the job: I just lost the show. I was going to be put in the category of a street reporter. Mr. WINN. Street reporter? Mr. BURR. Right: it would have cost me some income, but not ap- preciably. But I just felt it was something that sports was my life and my business and I just didn't -feel I could do a competent job as a general street reporter. Mr. WINX. From there you went to the Dolphins? Mr. BURR. No, sir. Then I came to Buffalo and worked for the Buffalo Raceway. Mr. WINN. Then you could have continued to make a living after you lost your TV job, as a street reporter? Mr. BURR. Yes, sir. Mr. WINN. At less money? Mr. BURR. At somewhat less money; yes, sir. Mr. WINN. But you were faced with the problem of sending a couple of children to college, as I remember your statement. Mr. BURR. I did mention sending the kids to college, but that came at a later time, when I was with the Sabers. The problem in Boston was I had lived all of my life in Buffalo and had worked in Buffalo all of my life, until I took the job, regret- tably, with the Miami Dolphins, as their first general administrative officer, general manager, as that franchise was getting started. I was hired because I had experience with absentee management and had administrative experience with the Buffalo Bills. That did not work out. In the meantime I had moved my family to Florida and bought a home on the supposition I was going to re- main the remainder of my life there in the Miami area. `When the job did not work out, I had not been there long enough to establish the proper credentials, apparently, so I could get em- ployment at the same rate. So I had to look elsewhere. There were no other football jobs available to me down there, so I had to look elsewhere. Coincidentally, I had hired in Miami a sports announcer from the Boston station to come to Miami to be our sports broadcaster, to broad- cast our games. That left the opening in Boston and coincidentially, out of some 300 applicants-I knew there was an opening, I had some familiarity with the Boston area-I applied for the job and got it, through tapes. And when I flunked the battle of the ratings, I had only been in Boston a short period of time, I did not want to stay in television PAGENO="0179" 1189 because of the. uncertainty of the business-in other words, I had a 2-year contract in Boston with a 4-week cancellation clause is what it amounted to, and those are pretty much standard in the industry. I though it would be best for my family and myself to reestablish our roots in Buffalo where I had grown up, where my family had lived most of its life, and settle down once and for all. With four kids you can't truck them around the country forever. That is the reason I went back. Mr. WINN. But you did, during this period of time, suffer some heavy financial expenditures then in moving your family down to Florida and then backup? Mr. BURR. No, I was reimbursed for moving my family to Florida by the Miami Dolphins. They moved me down there. I had certain expenses still under litigation which I have never been reimbursed for by the Dolphins. Mr. WINN. I am just wondering in my own mind if a fellow who has enjoyed a good reputation as a sportscaster and as we have heard other people discuss at these hearings, could be used or their reputa- tions and their personalities be used by either the Jacobs, who are your employers, or by other individuals? Mr. BURR. Are you asking me a hypothetical question: It is possible? Mr. WTINN. I am asking you a hypothetical question, but I am asking it directly of you. Do you think you might be one of those that has been used? Mr. BURR. No, sir; I don't think so. Mr. WIXN. You don't think so. Then what you are saying is your operations with the Jacobses and acting as a vice president, although not a stockholder, that you are fully cognizant of what is involved in whatever you are doing? Mr. BURR. Mr. Winn, I have the greatest respect and admiration for Jeremy and Max Jacobs and their whole family. I believe them to be people of unquestionable honesty and impeccable integrity. I feel that during the time I have worked for them they have never once indicated to me anything but what I feel them to be-completely honest. Mr. WINN. Then you are aware and you still feel this way after the indictment in California. That does not alter that feeling in any way? Mr. BURR. No, sir; it does not. Mr. Wixx. Would the fact that several States are now in process of holding up licenses that have been applied for or renegotiated licenses where applications have been made by the Jacobses are being held up, that wouldn't alter that opinion? Mr. BURR. No, sir; it does not. Mr. WINN. Thank you, Mr. Burr. Chairman PEPPER. Mr. Radding has some questions. Mr. RADDING. Briefly, you are the vice president in charge of public relations for Emprise; is that correct? Mr. BURR. I am sometimes reluctant to state that I am responsible for public relations, in view of what has happened lately. Mr. RADDING. We are going to go into some of the other aspects of your PR work tomorrow-I don't want to tax your memory-but about ~ weeks ago when these hearings began, did you employ an individual named James Butaka on your PR staff? PAGENO="0180" 1190 Mr. BURR. Yes, sir. I employed Mr. Bukata through Haskell Cohen. Mr. RADDING. Did you request or ask Mr. Bukata to pass himself off as a member of the press at the hearings held in this room, and to sit at the press table and give out supposed information to other re- porters in this room? Mr. BURR. No, sir; I did not. Mr. RADDING. Did he do that of his own volition? Mr. BURR. Apparently he did, yes. Mr. RADDING. He did. Now, is he still in your employ? Mr. BURR. No, sir. Mr. RADDING. Thank you. Mr. PHILLIPS. Would you elaborate on that? You said you hired this man, he came here and identified himself to me as an investigator on behalf of Emprise. He later identified himself to Mr. Radding and Congressman Steiger as being a newspaper reporter, and he was here in this office, sitting at the newspaper desk, and doing things of that nature. How did he come to be here? Mr. BURR. All right. Mr. Bukata is an employee of Publicity Enter- prises of New York, which is operated by Haskell Cohen. When these hearings started, my responsibilities included coming down to Wash- ington, and in the event it became necessary, to become introduced to members of the press, in case they wanted to talk to me or had ques- tions they wanted to ask of me, as representative of Emprise Corp., or any of our people who may have been testifying. Although I know a. lot of newspaper men around the country, I didn't know a soul from Washington, because when I was in the football business, they were in the other league, the name of which escapes me. So I called Mr. Cohen to see whether or not he could come himself and introduce me to the members of the press. He said he couldn't but he would supply me with Jim Bukata, one of his associates, said. Jim is familiar with the Washington scene. I said OK, send him down.. The only instructions I gave him, "Anybody you know, please in- troduce me to them," and he followed that faithfully. I did not realize that he was being more aggressive in pursuit of those duties than he. was supposed to be. Mr. PHILLIPS. Was he an investigator? Mr. BURR. No, sir; he was not an investigator. Mr. PHILLIPS. He lied to me. Mr. BURR. If he told you he was an investigator, either there was a. misunderstanding or an untruth. Mr. PrnLLIP5. He also lied when he said he was a newspaper man,. when he told that to Mr. Steiger and Mr. Radding. Mr. BURR. If he said that, he said it without authority, and obvious- ly he was telling an untruth. Mr. PHILLIPS. I don't know if you know it, Mr. Burr, but in Arizona the racing interests there hired an investigator, paid him a lot of money, and he did some untoward things. Some of this money was. paid out of funds that were Emprise funds, or Emprise Corp., or at. least in which they owned half interest. Now we have another pur-. ported investigator presenting himself here who is lying and misrepre- senting himself. Is this a continuing type of conduct? Mr. BURR. No, sir. And I sincerely apologize to the committee as a. whole and to the individual members who may have been embarrassed. PAGENO="0181" 1191 by Mr. Bukata's enthusiasm for his job. He was down for one reason only, to introduce me to the members of the press. He had no licensing beyond that, to identify himself as anything, except as being a member temporarily, as a matter of fact, of the Emprise public relations staff. Chairman PEPPER. Did you pay him, Mr. Burr? Mr. BURR. I haven't paid him as yet, but I am expecting a bill momentarily from Haskell Cohen. Not from him directly. I haven't paid him and don't intend to. I will deal with Mr. Cohen. Mr. WINN. Along that same line, having been in PR businesses all of these years. Mr. Burr, don't you know that any time, most any place, someone, particularly in this hearing, from Emprise could call a press eonference if you wanted to talk to the press? Mr. Bum~. Yes. Mr. WINN. You said his main mission was to get you acquainted with and introduce you to the press? Mr. BURR. Right. In the event any member of the press wished to speak to a representative of Emprise Corp., then they would know who I was. And in the event we felt there was anything we should speak to the press about, then I would know to whom I was talking and under what circumstances. Mr. WINN. Well, I would say if you wanted to make yourself avail- able to the press, you could have called a press conference; and I think, being a vice president of Emprise, you would have had a pretty good crowd there. Mr. BURR. I suspect so, but basically we really had no intention of calling press conferences. If targets of opportunity were to come up, we just wanted to be present. And believe me, gentlemen, Mr. Bukata's only function was, as I have stated, to introduce me to the press and to be generally helpful, sort of a leg man. I did ask him, too, to find out when and how quickly we could get transcripts of the testimony. Mr. WINN. You wouldn't want to call this organized crime's infiltra- tion of the press, then, would you? Mr. BURR. Sir, Mr. Winn, you said that now, I didn't. Chairman PEPPER. Thank you very much, Mr. Burr. Mr. BURR. Thank you. Am I excused? Chairman PEPPER. We will adjourn the meeting until 10 o'clock tomorrow morning. Mr. GLICK. Is the witness excused, sir? Chairman PEPPER. Mr. Steiger requests that you return tomorrow for possible further questioning. We will consider that in the morning. We adjourn until 10 o'clock in the morning. (Thereupon, at 6 p.m., the hearing was adjourned, to reconvene tomorrow, Wednesday, June 14, 1972, at 10 a.m.) PAGENO="0182" PAGENO="0183" ORGANIZED CRIME IN SPORTS (RACING) WEDNESDAY, JUNE 14, 1972 HOUSE OF REPRESENTATIVES, SELECT COMMITTEE ON CRIME, Washington, D.C. The committee met, pursuant to notice, at 10 :10 p.m., in room 345, Cannon House Office Building, Hon. Claude Pepper (chairman) presiding. Present: Representatives Pepper, Waldie, Mann, Murphy, Wiggins, Steiger, Winn, and 1(eating. Also present: Joseph A. Phillips, chief counsel; Michael W. Blom- mer, associate chief counsel; and Andrew Radding, assistant counsel. Mr. WALDIE (presiding). The committee will please come to order. Our first witness today will be Mr. J. Lloyd Walker, a Buffalo con- suiting engineer. Mr. Walker, will you come forward, please. STATEMENT OP L LLOYD WALKER, ENGINEER, BUFFALO, N.Y. (Having been duly sworn by Mr. Waldie) Mr. WALDIE. Counsel, proceed. Mr. PHILLIPS. Mr. ~Va1ker, could you tell us what your occupation is, and has been for the last few years? Mr. WALKER. Yes. I am a consulting engineer, registered to provide professional engineering in the State of New York. Mr. PHILLIPS. Did there come a time when you became interested in the dome stadium project in Buffalo, N.Y.? Mr. WALKER. Yes. Mr. PI-JILLIP5. Could you tell us about your involvement with that? Mr. WALKER. Well, I was a member, full partner, of the firm of Turley, Stievater, ~Talker, Mauri & Associates, and we combined with two 1-louston architectural firms in soliciting the commission for de- signing the dome stadium in Erie County. Mr. PHILLIPS. Did there come a time when you started work on that particular project? Mr. WALKER. Yes, sir. Mr. PmLLIPs. Did there also come a time when you met persons by the names of Pordum and Ludera? Mr. WALKER. Yes. Mr. PHILLIPS. Who were they? Mr. W~ALKER. Fred Pordum and Frank Luclera were Erie County legislators. (1193) PAGENO="0184" 1194 Mr. PHILLIPS. Did they have something to do with the dome stadium? Mr. WALKER. Well, thay were naturally bona fide legislators and voted on all aspects of the stadium. Mr. PHILLIPS. In other words, Mr. Pordum and Mr. Ludera were voting on the appropriations for the stadium- Mr. WALKER. Yes, sir. Mr. PHILLJPS (continuing). Bond issue, the lease, and various other aspects of the stadium project which came before the legislature; is that correct? Mr. WALKER. Yes, sir. Mr. PI-IILLIP5. Then, too, their vote had some influence in relation to this project; is that correct? Mr. WALKER. Yes. Mr. PHILLIPS. What was your business with them? Mr. WALKER. Well, my business was to actually-in the design of the dome stadium-to associate with all of the legislators, and I associated with Pordum and Ludera. Mr. PHILLIPS. Was your job to try to lobby this matter through the legislature? Mr. WALKER. Well, you could call it that. I really was a member of the architectural and engineering team soliciting the design and we received the commission and naturally, I did lobbying of some sort. I was assigned as public relations man, and any news releases or any comments that came out of the legislature, I was responsible for. Mr. PHILLIPS. Did there come a time when Mr. Ludera and Mr. Por- dum discussed money with you; money for them? Mr. WALKER. Yes, sir. Mr. PHILLIPS. Would you tell us how that came about? Mr. WALKER. Well, after one of the legislature meetings, at a time when more money had to be appropriated for the commencement of the working drawings, we had already had money appropriated for schematic designs and so forth, the usual protocol of architectural engineering work. And then it came time to vote for an additional $900,000 to progress the working drawings. Mr. PHILLIPS. In other words, the legislature was going to vote an additional appropriation of $900,000? Mr. WALKER. Additional appropriations; yes, sir. Mr. PHILLIPS. The $900,000 was going to go to whom? Mr. WALKER. Would go to our joint firms, our joint venture firms. Mr. PHILLIPS. The firms who were doing the architectural-engineer- ~ng work? Mr. WALKER. Yes, sir. Mr. PrnLLIP5. They would receive this as fees for their particular ~vork at that time, is that correct? Mr. WALKER. That is right. Mr. PHILLIPS. What did Mr. Ludera and Mr. Pordum have to say about these fees? Mr. WALKER. Well, after one of the legislature meetings, where the additional fees were turned down, Mr. Pordurn and Mr. Ludera invited me to the Statler Hilton Hotel in Buffalo, to the Beef and PAGENO="0185" 1195 Baron Room, and put the finger on me for some kind of an appro- priation or donation, whatever you may call it, so that they could muster enough votes to pass the additional $900,000. We had considerable money invested in the design of the stadium and, as a matter of fact, we had overspent. It was an expensive job, we had professionals working throughout the country on the design of the stadium, and at that point in time, had they not voted for the additional $900,000, we would have had to stop work entirely, stop all of the wheels from turning, and abandon the project until they did vote the $900,000. Mr. PI-IILLIPs. You mention the prior vote, of voting down the $900,000. How did Mr. Pordum and Mr. Ludera vote on that? Mr. WALKER. Yes; they claimed that they could not hold it up indef- initely, the appropriation of the $900,000, if I didn't cooperate with them in money matters. Mr. PHILLIPS. In fact, they put the arm on you, is that correct? Mr. WALKER. What? Mr. PHILLIPS. As they say in some underworld circles, "they put the arm on you." Mr. WALKER. Yes. Mr. PHILLIPS. They threatened you if you didn't come up with the money they wanted, you wouldn't get this $900,000 appropriation. Is that correct? Mr. WALKER. That is right. Mr. PHILLIPS. And they weren't interested in the merits of the situa- tion, they just wanted the money? Mr. WALKER. Yes. Mr. PHILLIPS. How much money did they ask for? Mr. WALKER. That was a rather confusing item. Mr. Pordum came to my office on a weekend when no one else was there, and he and I more or less concurred on a $10,000 gift to progress the voting for the additional $900,000. And we left it on that note. Then just prior to the legislative meeting, when they were going to vote on the $900,000, even the prostadium people did not think they had enough votes to put through the $900,000. So I had breakfast again at the Statler Hilton with Mr. Pordurn, and he advised me that it was not just $10,000, it was $10,000 apiece for he and Frank Ludera. Mr. PHILLIPS. Excuse me for interrupting you, Mr. Walker. But prior to that time, did they state to you they had other people in the legislature who were cooperating with them in this matter? Mr. WALKER. Never. Mr. PHILLIPS. They never said that, it was just the two of them? Mr. WALKER. Just the two of them. Mr. PHILLIPS. And you say they wanted $10,000 apiece at this stage? Mr. WALKER. Yes. Mr. PHILLIPS. What happened thereafter? Mr. WALKER. Well, I agreed to pay the~n the $20,000, based upon a deal where I would pay them $32,000 after they had voted for the $900,000, and awarded 25 percent of the contract for the construction of the stadium. Then I was to pay them the other $8,000, I believe when the entire stadium went ahead. PAGENO="0186" 1196 Mr. PHILLIPs. It came, then, to $40,000? Mr. WALKER. They came at me for $40,000; yes. Mr. PHILLIPS. In other words, it was the $10,000 each originally, and as the step progressed, they decided they wanted $40,000 in total to be given to them at various times during the project; is that correct? Mr. WALKER. Yes. Mr. PHILLIPS. Did you, in fact, give them any money? Mr. WALKER. I did not at that time; no. Mr. PHILLIPS. After the vote, did you give them money? Mr. WALKER. Well, after the vote I told them that there was no way that I could get money out of three architectural firms without cosignatures. I couldn't do it on my own. They would have to wait for it and take it piecemeal. Mr. PmLLIPS. What did they say to that? Mr. WALKER. They said that was all right. But Mr. Porcium seemed to be the ringleader and dunned me continually for additional payments. Mr. PHILLIPS. Did you in fact make payments? Mr. WALKER. Yes; I did. Mr. PI-JILLIPs. Can you tell us the total amount of the payments you made? Mr. WALKER. The total amount, divided between the three firms that were involved in the stadium commission, I paid them was $32.000. Mr. PHILLIPS. You paid them $39,000. Some of that money was given to Pordum and some to Ludera? Mr. WALKER. Yes; I would deal with either one or the other, and they would transmit it to-they would split it up their own way. Mr. PI-IILLIP5. Did you pay them the money in cash or by check? Mr. WALKER. In cash. Mr. PI-IILLIPS. Did there come a time, during these discussions with Pordum and Ludera, that you went to Texas? Mr. WALKER. Yes; it was. Mr. PHILLIPS. What caused you to go to Texas? Mr. WALKER. Well, it was approximately the middle of July of 1970, and I was requested by Mr. Pordum or Ludera, that due to my con- nections with Mr. Hofheinz in Houston, Tex., that I arrange a meeting for them to be heard in Texas. It appears that the deal between Ken- ford Corp. and the Hofheinz interests in Texas, that two-thirds of the stadium arrangements would be handled by the Hofheinz interests and one-third by the Kenford interests. They felt that they could possibly make a better lease deal with the Texas people being two-thirds owner. They said the project just couldn't go through at lease arrangements that were then being pro- posed by Kenford Corp. Mr. PHILLIPS. This fellow Hofheinz you are talking about is he the one who built the dome stadium in Houston? Mr. `WALKER. The Ho~iston Astrodome was built by Harris County, Tex., and Mr. Hofheinz received the award to operate the stadium. Mr. PHILLIPS. lVhile in Texas, did there come a time when you, Pordurn, and Ludera had some discussion about the moneys that were due and owing to them in relation to the voting-proposition? PAGENO="0187" 1197 Mr. WALKER. Yes, sir. We arranged the meeting in Texas and we met with Jack O'Connell and Fred I-Iofheinz~ because at that time Mr. Roy Hofheinz had had a rather severe stroke, and an auditor, and a lawyer, I don't recall the names, and explained our case. They said they would get back to us, or to Pordurn and Ludera. We were waiting in the Astro World Hotel, in a suite, and Mr. Pordum had just received word from the Astrodome, either Jack O'Connell or Fred Hofheinz, that they didn't care to negotiate lease terms any further. Mr. PITILLIPS. In other words, Pordum and Ludera were advised by the Texas interests that the Texas interests did not want to negotiate this lease any further? Mr. WALKER. No; that Pordum and Ludera should go back to Buffalo and negotiate with the Kenford Corp. At that time one particular incident took place where Mr. Pordurn was stomping up and down in the sitting room of the suite, and said, "I don't know why I am bothering with you people or the Texas people, when I could get $250,000 from Sportservice." Mr. PHILLIPs. In other words, Mr. Pordum told you that all of this aggravation he was getting from the Kenford people, from you, and the Texas people, was really unncessary because he could have gotten $250~000 from Sportservice? Mr. WALKER. That is right. Mr. PHILLIPS. He said that to you while in Texas? Mr. WALKER He said that to me in Texas at the Astro World Hotel. Mr. PHILLIPS. Did you ask him any further about what he meant by this payment of $250,000? Mr. WALKER. No. He clammed up immediately after he had made the statement. Mr. PHILLIPS. He said that. He blurted it out in anger, I take it? Mr. `WALKER. He referred to what, please? Mr. PHILLIPS. He seemed to blurt this statement out because he was annoyed you hadn't gone along with him? Mr. WALKER. We had gone along with him, but Texas was not willing to discuss any lease terms in upping the annual rent and conditions for the lease of the stadium. Mr. PJTILLIPS. Now, subsequent to this matter, an investigation was conducted by the Federal Bureau of Investigation; is that correct? Mr. `WALKER. Yes; that was a very peculiar setup of circumstances. I first met the FBI in Victor Fuzak's office, the law firm who was representing Edward Cottrell. That seemed rather peculiar to me, that I should be interviewed by the FBI in a neutral office, rather than in their own. Mr. PITILLIPS. In any event, at some stage you did cooperate with the FBI; is that. correct? Mr. WALKER. I did all of the way. Mr. PhILLIPS. And you received immunity, I believe? Mr. `WALKER. YeS. Mr. PmLLIP5. You testified against Mr. Pordum and Mr. Ludera at their trial in Buffalo? Mr. WALKER. Yes, sir. PAGENO="0188" 1198 Mr. PHILLIPS. What happened to Mr. Pordum and Mr. Ludera, as a result of your testimony? Mr. WALKER. They were convicted of soliciting bribes, not actually receiving them, but they were convicted by a Federal judge and sen- tenced to a 3-year term in Federal prison. Mr. PmLLIPs. Do you know whether they have started their prison term at this stage? Mr. WALKER. Yes, they have. Mr. PHILLIPS. I have no other questions, Mr. Chairman. Mr. WALDIE. Mr. Walker, are you a licensed architect? Mr. WALKER. No, I am a licensed engineer. Our firm was classified as architects, engineers, and associates. Mr. WALDIE. After participating, as you have literally done so, in a felony, offering a bribe to a legislator, has your license been sought to be revoked? Mr. WALKER. No, sir. I did not offer the bribe. Mr. WALDIE. You paid them a bribe, did you not? Mr. WALKER. Yes, I did. Mr. WALDIE. You committed a crime, did you not? Mr. WALKER. I did. Mr. WALDIE. Has any action been taken against your license by the State that has licensed you? Mr. WALKER. No, sir. Mr. WALDIE. Is a person who commits a felony permitted to be licensed in your State? Mr. WALKER. Apparently, under the circumstances, the State TJni- versity of New York has seen fit to take no action. Mr. WALDIE, Do you know if a person who commits a felony is per- mitted to be licensed in the State of New York? Mr. WALKER. I don't really know that. Mr. PHILLIPS. Mr. Chairman, from my o~n experience, some people are and some people are not. It depends on the licensing agency, the facts, and circumstances in each case. Mr. WALmE. The facts and circumstances of this case are that the man has .stood before this committee and confessed that he has com- mitted a bribe, and that he offered money, he gave money to legislators, and solicited for a bribe, and that is a felony, as I understand the law. The fact you were given immunity so you would testify against them does not in any way prevent that crime from being a felony. Mr. WALKER. Well, I understood from the Federal court, or the Federal grand jury, that I was named as a coconspirator. Now, I was not named as a felon, or any other criminal- Mr. WALDIE. You understand conspiracy is a felony, don't you? Mr. WALKER. Well, I guess I should. Mr. WALDIE. Let me ask you about the three architectural firms that were involved in this payoff to these legislators. How did you get the cash from your participating architectural firms that you delivered to the two legislators? Did you tell them for what purpose it was to be used? Mr. WALKER. Yes, sir. Mr. WALDIE. And they knew you were participating in a bribe? Mr. WALKER. They did. PAGENO="0189" 1199 Mr. WTALDIE. And were they named as coconspirators? Mr. WALKER. That escapes my memory. Mr. WALDIE. Why don't you, for this committee's records, give me the names of those three architectural firms that committed this felony? Mr. WALKER. Yes. It was Wilson, Morris, Crane & Anderson, Architects. Mr. WALDIE. Where do they practice? Mr. WALKER. In Houston, Tex. Mr. WALDIE. And who else? Mr. WALKER. And Lloyd, Morgan & Jones, I believe. Morgan has passed away-it is probably Lloyd & Jones. Mr. WALDIE. Where do they practice? Mr. WALKER. In Houston, Tex. Mr. WALDIE. Who else? Mr. WALKER. That is all. And Turley, Stievater, Walker, Mauri & Associates Architects-Engineers. Mr. WALDIE. Did your partners know you were participating in this bribe? Mr. WALKER. Yes, they did. Mr. WALDIE. And all of the partners in the three firms you mentioned knew the bribe was being offered these legislators? Mr. WALKER. Well, my dealings were direct with Ralph Anderson, a member of the firm of Wilson, Morris, Crane & Anderson. Mr. WALDIE. He knew fully, did he not? Mr. WALKER. He knew fully and I explained it to him and I said, "Get the concurrence of your associates and we will go ahead. If you don't care to do it, we will toss the whole thing over." Mr. WALIIRE. And they cared to do it? Mr. WALKER. Yes. Mr. WALDIE. And the other firm, you made similar representations to them; they understood what they were doing? Mr. WALKER. Yes. Mr. WALDIE. Were they named as coconspirators? Mr. WALKER. Well, I probably was remiss in not noting the news- paper articles or the outcome of the trials, but I was named as co- conspirator, I know that. Mr. WALDIE. That is all you know at this point? Mr. WALKER. Yes. Mr. WALDIE. We asked that those documents be filed with this committee and I presume counsel `has commenced efforts `to do that. If they were not named, I, for one, will `be asking why they were Rot named. (The documents referred to were retained in the committee files.) Mr. WALKER. May I go a little further? Mr. WALDIE. Yes, please do. Mr. WALKER. The morning that I met Mr. Pordum in the Statler and agreed to the final amount, the prostadium people who wanted to vote for the $900,000 did not know that they had sufficient votes up to the time that Pordum walked over to the legislature that morning and then I followed him and at that point, Mr. Wolf said, "We have enough votes, go to my secretary and dictate a resolution so that we can appropriate the $900,000." PAGENO="0190" 1200 So that proved that Pordurn and Ludera had enough sway over the iDemocratic aisle to muster the necessary votes. Mr. WALDIE. You mentioned that they were negotiating with Texas people-and I didn't get their names-for a lease on the dome stadium? Mr. WALKER. Yes. They were negotiating with the-I will call it the I{oflieinz. interests. Mr. WALDIE. How much were the Hofheinzes offering for that lease? Mr. WALKER. They were very noncommital. Mr. WALDIE. What was the figure that was under negotiation? Mr. WALKER. I believe the figure was somewhere in the neighbor- hood of $750,000 a year rental on a lease option with several other things mixed in with it, minor items, such as repairs. Mr. WALDIE. What was your understanding of Pordum's comment about Sportservice? What did the $250,000 have reference to? Mr. WALKER. It had reference, in my mind, that he could have scuttled the stadium entirely with his vote if he received the $250,000. Mr. WALDIE. Is that what he said? Mr. WALKER. NO. Mr. WALDIE. You know the gentleman better than anyone in this room, you have had confidence in him and you entered into a bribery experience with him. Is Mr. Pordum the sort of a fellow you can believe? Mr. WALKER. No, sir; because I had gone ahead and paid them the full $32,000 and then at 4:30 in the morning legislature meeting, he picked the Kenford Corp. lease apart, item by item. I thought it was a very weak criticism of the lease. Mr. WALDIE. What you are saying is he is an untrustworthy person? Mr. WALKER. Yes. Well, the town, his constituents, represent Lackawanna, N.Y.- Mr. WALDIE. But it is also fair to say he is a very greedy person, isn't it? Mr. WALKER. Yes. Mr. WALDIE. And if he could have gotten $250,000 rather than $32,000, why do you suppose he didn't take it? Mr. WALKER. Well, I don't really know. Mr. WALDIE. Mr. Winn, I think you are next. Mr. WINN. I have no questions, Mr. Waldie. Mr. WALDIE. Mr. Steiger. Mr. STErnER. Thank you, Mr. Waldie. I just have a few questions. I am interested in Mr. Wa.ldie's line of questioning, also, Mr. Walker. How long have you done business in Buffalo? Mr. WALKER. Thirty-three years. Mr. STEIGER. Would it be a fair assessment to say that what was asked of you was not unusual in doing business in Buffalo; that the bribe solicitation was a relatively normal matter? Mr. WALKER. Well, it was on very, very few occasions, and I always declined the offers. I have led an exemplary- Mr. STEIGER. Excuse me. What you are saying is that it had hap- pened before, but you had always rejected it. Mr. WALKER. Right. Mr. STEIGER. Well, again, I don't mean only in dealing with the `egislature, I mean in dealing with the city government~ with licensing officials. Mr. WALKER. Yes, sir. PAGENO="0191" 1201 Mr. S~FEIGER. Is it normal to be asked -for such things as campaign contributions, whatever clearly a quid pro quo for doing whatever it is, whatever kind of business you are doing with government in and around Buffalo and Erie County? In your 33 years, would you say the climate was such as not to make startling the Pordum-Luder~ situation? Mr. WALKER. Yes, sir. It was a natural course o-f action to support the party of your choice. And I made numerous donations to the Republican Party in Erie County for no promise 0-f any return whatsoever. Mr. Si~vTGER. I am not talking about that, if you really believe you weren't going to get any support. And I don't presume for a minute that the bribery is limited to one party or the other. I am asking if in the past, if you, or you know of any other business associates in Buffalo who, as a normal cost of doing business were expected to grant, to give politicians either money or some kind of favor, in order to achieve- a contract or a license? Mr. WALKER. Yes, sir. Without mentioning the entities, there were a number of school boards-it was a known fact-wanted reimburse- ment -for granting o-f a contract. Mr. STEIGER. That is the kind of thing I am talking about: Kick- backs on contracts and those kind of things. Mr. WALKER. Yes. Mr. STEIGER. So it was a fairly normal situation. When I say nor- mal, I mean it was at least known in the business community; it that a fair statement? Mr. WALKER. Yes. Mr. STEIGER. The business community was aware of it? Mr. WALKER. Yes, sir. Mr. STEIGER. Was there any reference to it in the media of Buffalo, either the press, radio, or TV? Mr. WALKER. No, this was all undercover. Mr. STEIGER. In other words, it was concealed from the press, but known to the business community: is that correct? Mr. WALKER. I would say yes. Generally it was known. There were certain people who participated continually on this type of a deal. I turned down a $2 million commission because they wanted a $100,- 000 kickback. Mr. STEIGER. This was a government agency that wanted a kick- back, or somebody in a government agency? Mr. WALKER. Yes, sir. If you call a school board. Mr. STEIGER. Was this elected? Mr. WALKER. Yes, elected school board. Mr. STEIGER. A school board situation. Will you tell us what period of time you are talking about? Mr. WALKER. I am talking about a period of time that- Mr. STETGER. On the $2 million situation. Mr. WALKER. Oh. That period of time was approximately 3 or 4 years ago. Mr. STEIGER. And is there a unified school board in the Buffalo area. Are there school boards that represent many- Mr. WTALKER. These were school districts. Mr. STEIGER. Do you recall which school board it was? i\ir. WALKER. Well, I do- PAGENO="0192" 1202 Mr. STEIGER. Would you care to share the knowledge with the committee? Mr. \\TALKER. Well, I think that is rather an unfair question, inas- much as there were so few district schools that I dealt with, that asked for that compensation. Mr. STEIGER. Off the record for a minute. (Discussion oft the record.) Mr. STEIGER. I would ask you then, Mr. Walker, who asked for the kickback and when did that occur? Mr. WALKER. I can't tell you exactly when, but was- Mr. STEIGER. Approximately will suffice. Mr. WALKER. Approximately 2 or 3 years ago, 3 or 4, where I was invited by the school attorney to- Mr. STEIGER. Who was the school attorney? Mr. WALKER. I can't recall, but he said that I could have the com- mission for a $2 million school if I made arrangements for a kickback. And the nature of the kickback was not that I would pay him cash, as such, but what we would do would be to leave out the flooring in a corridor and they would take bids separately later on and they would deal with the subcontractors. It did not exactly involve me. They said I would not be a bagman or a moneyman. I wouldn't be involved in it at all. It was just leaving out necessary items in the school, and they would rebid those items separately and then go after the subcontractor for excesssive bids and they would take the excess in the bid. Mr. STEIGER. Let inc understand this, Mr. Walker. What you were going to do in order to get the money was to leave the amount of the bid the same as if you had put the flooring in, or whatever it was you were going to leave out. This would leave a surplus in the construction costs which they were then going to rebid and they would pocket the surplus? Mr. WALKER. Yes. I would not include it in my original bid, in my original plans, specifications, or otherwise. I would leave it out en- tirely, or put some substandard material in that would have to be rebid. Mr. STErnER. All right. Now, so it was the attorney who conveyed the board's wishes, or at least represented he was conveying the school board's wishes? Mr. WALKER. Yes. Mr. STErnER. Let's try your memory again. Where did you meet with him? Was it in his office, at a restaurant, or in your office? Mr. WALKER. At a restaurant. Mr. STErnER. Do you remember the name of the restaurant? Mr. WALKER. Yes. Mr. STEIGER. What was the name? Mr. WALKER. Downtowner restaurant in Buffalo. Mr. STErnER. The Downtowner restaurant? Mr. WALKER. Yes, sir. Mr. STErnER. All right. Now, is the attorney still practicing law? Do you still see him in Buffalo? Mr. WALKER. Yes, sir. His name was Mr. Persons. Mr. STEIGER. His name was Persons. Mr. WALKER. Right. PAGENO="0193" 1203 Mr. STEIGER. Do you know what firm lie was with? Mr. WALKER. 1-Ic was practicing on his own, representing the school board in bonding and acquisition of land, and things of that sort. Mr. STEIGER. Which school board did he represent, Mr. WTalker? Mr. WALKER. Well, I say it with reticence because it was the Depew, N.Y., School Board. Mr. STEIGER. Depew? Mr. WALKER. Depew. Mr. STEIGER. Did it ever occur to you, Mr. Walker, that even though you were not going to be identified as a bagman, that his sug- gestion was at best improper and obviously illegal? Mr. WALKER. Yes. I explained that to him, said I would like the fresh air and sunshine more than behind the bars. Mr. STEIGER. Did you consider reporting the matter to any of the Buffalo authorities? Mr. WALKER. No, I did not. This conference was in confidence and I did not report it. Mr. STEIGER. Did you not report it because you felt it would not do any good, or because it would jeopardize any future contracts you might have with this agency; or did you feel it was such a normal situation in Erie County and in Buffalo that there was no use in pursuing it? Mr. WALKER. My exact thought at the time the offer was made was that it would blackball me from dealing with any of the other school boards that might be entertaining the same thought. Mr. STEIGER. Mr. Walker, was the contract subsequently let, to your knowledge? Mr. WALKER. Yes. Mr. STEIGER. What firm was the successful bidder on the contract? Mr. WALKER. You are asking some awfully pertinent questions and I am putting some men on the spot. And really, I believe that is be- yond the scope of this testimony. Mr. WALDIE. It isn't beyond the scope of the testimony and you answer the question, Mr. Walker. Mr. WALKER. All right. Thank you, sir. To the best of my recollection, Donald IV. Love, architect, took the contract. Mr. STEIGER. I am sorry. I didn't hear the name of the firm. Mr. WALKER. Donald W. Love. Mr. STEIGER. Do you know if Mr. Love complied with Mr. Persons' request as far as reimbursement to the school board and Mr. Persons? Mr. WALKER. I know of nothing further that happened. Mr. STEIGER. Can you recall any other occasion in your doing business in Buffalo and Erie County that you encountered this kind of a situation? Mr. WALKER. No, I don't. But the inferences were there. Mr. STEIGER. You felt there were times, if you had seemed recep- tive, a specific offer might have been made; is that correct? Mr. WALKER. Yes. Mr. STEIGER. I have had the same feeling. I know what you mean. I am going to briefly recite from the trial record of the United States of America v. Pordum and Ludera, where you testified. 81-068-73--pt. 3-13 PAGENO="0194" 1204 Mr. WALDIE. While you are doing that, would you read code- fendents into the record? Who are the list of codefendants in that case? Mr. STEIGER. The entire list of defendants are Frederick Porduin and Frank Ludera. Mr. WALDIE. No architectural firms mentioned? Mr. STEIGER. No firms, no engineering firms nor attorneys. Mr. WALmE. All right. Mr. STEIGER. `On page 60-in order to refresh your memory, Mr. Walker, you apparently are reciting one of the instances in which there was an exchange of money that occurred in the Beef & Baron room. I will now recite the testimony. The direct examination was by a Mr. Richards. I will now read the testimony commencing on page 60: Question. Mr. Walker, where did you meet them? Answer. I met `them in front of the Beef & Baron room. Question. What happened? Who said what, what happened? Answer. What happened was I first went to the newsstand and bought a newspaper an'd put the package of money in the newspaper and then proceeded to the entrance of the Beef & Baron room. Question. And who did you see there? Answer. I met Mr. Pordum and Ludera, `and myself. Question. And what did you do? Answer. We, I, passed the money to Mr. Ludera in his briefcase. Question. How `did you do that? Answer. This is to the best of my recollection. Question. How did you do `that? Answer. We just-there was another gentleman present-and a buffer was set up and the briefcase was opened. I slipped the money in it. Question. Did you anybody say anything during all of this? Answer. Very little. Small talk. Question. How much money did you have with you at the time? Then the judge interrupted you: "Just a moment. What was said, a buffer?" And you responded, "There was another gentleman present." The judge asked, "Who was that?" And you responded, "It was a Mr. Charles. I forget his last name now, possibly-" And the judge interrupted and said, "Do you say Pordum and Ludera were there ?" And you responded, "Yes." And the judge asked again, "In front of the Beef & Baron Room? You said, "Yes." The judge asked: "Another man was there ?" You said, "Yes." The judge said: "Physically, something happened, apparently. What did happen?" You said, "The money was passed to Mr. in Mr. Ludera's briefcase while Mr. Pordum engaged the other gentleman in conversa- tion, so that the other gentleman was unable to see the money passed." "The Court: Was this brief-" Mr. Mahoney then interrupted, "May I have that stricken out if that is a conclusion on his part?" Mr. STEIGER. Mr. Walker, that is the only reference~ to the gentle- man's whose name you forgot. His name was Charles. Do you recall now what his last name was? Mr. WALKER. He has an office in the Statler Hilton Hotel. He was a former research man for the Federal Government, and now he is in private research, I believe. Mr. STEIGER. Private research? Mr. WALKER. Yes. I don't know of what nature. PAGENO="0195" 1205 Mr. STEIGER. Is he a private, detective, that sort of thing? Mr. WALKER. Not really, no. Mr. STEIGER. But he had an office in the Statler Hilton? Mr. WALKER. Yes. Mr. STEIGER. He works for himself? He doesn't work for anybody else? Mr. WALKER. No. To the best of my knowledge. Mr. STEIGER. Did you ask him to come in to act as a buffer? Mr. WALKER. I did not. Mr. STEIGER. Did Mr. Pordum or Mr. Ludera ask him to come in there? Mr. WALKER. No, sir. He was a man that seemed to almost have a line, because he was present at two or three other meetings I had with Pordum and Ludera. And this was just by accident, apparently, be- cause the FBI checked him out. Mr. STEIGER. The FBI did check him out. Did he know what was happening? Mr. WALKER. No. Mr. STEIGER. He didn't know what was happening while he was acting as a buffer? Mr. WALKER. No. Mr. STEIGER. Not a very good private researcher, was he? Mr. WALKER. I would say not. Mr. STEIGER. I have no further questions, Mr. Chairman. Mr. WALDTE. Mr. Wj~, did you have anything further? Mr. WINN. I didn't have any before, but some questions have come up now. I would like to get back to the lawyer, to the attorney for the school board. His name was Persons? Mr. WALKER. Yes, sir. Mr. WINN. Could you give us the name of his law firm again, please? Mr. WALKER. As far as I know, he was in private practice. Mr. WINN. Was he a member of the New York Bar Association? Mr. WALKER. He must have been. Mr. WINN. I am sorry, I didn't hear you. Mr. WALKER. He was. Mr. WINN. Is he a member of the Erie County Bar Association? Mr. WALKER. I could not tell you. Mr. WINN. Do you think that he was? Mr. WALKER. I would think he would be. Mr. WINN. Do you know of any charges that have been made against Mr. Persons for this kind of action, in supposedly representing the school board? Mr. WALKER. No, sir. Mr. WINN. And you didn't feel that it was your duty in any way to blow the whistle on this man. This was done in confidence? Mr. WALKER. No, I didn't feel it was necessary. Mr. WINN. And you don't think that the parts that you would leave out of your specifications so they could be rebid would cost additional taxpayer money to the people in Erie County? Mr. WTALKER. Yes, sir. Mr. WINN. Apparently you are a taxpayer in Erie County? Mr. WALKER. Yes. PAGENO="0196" 1206 Mr. WINN. You hesitated. Maybe you are not a taxpayer in Erie County. Mr. WALKER. Oh, yes; very definitely. Mr. WINN. Usually people say "Yes" pretty fast. Go ahead. Excuse me. Mr. WALKER. I did not realize it could have been Erie County money, but school boards set up their own budgets, their own tax rates. Mr. WINN. Yes, but where do you think they get their money, besides from the taxpayers of the county? Mr. WALKER. Well, they get the money from the taxpayer of their town. Mr. Wiwx. Of thetown. All right. Mr. WALKER. Yes. And I am not a member of that town. Mr. WINN. You live in the county but you don't live in Buffalo. So you didn't lose any sleep over the fact this was taxpayer money that was being offered as a kickback or a bribe? Mr. WALKER. No, sir. Mr. WINN. As an engineer, a licensed engineer, is it the usual procedure to define buildings and leave out part of the final product? Mr. WALKER. Never. We are inclined to overdesign. Mr. WncN. So you ought to get some Government business, then. Mr. WALKER. I would hope to. Mr. WINN. Well, I am concerned about the fact that a man like Mr. Persons-and possibly this committee or some committee might want to look into the operation of this lawyer-from a licensing standpoint, if nothing else, that he would be representing a school board, a unified school district as the Depew District, where he would try to get a behind-the-scenes agreement with an engineer or an architectural firm so that he could cover up kickbacks by the rebid procedure. Mr. WALKER. Yes, sir. Mr. WINN. But I am also very disappointed that someone in the Buffalo area, or in Erie County didn't have the guts to blow the whistle on a man like that. That is costing the taxpayer additional money because of this method of operation, which is dishonest, any way you look at it. Mr. WALKER. Well, you as a Congressman, are not so naive as to know that this goes on all over the country. Mr. WINN. lATell, now, I am also a former contractor. Mr. WALKER. Yes, sir. Mr. WINN. And I know that our architects and contractors just don't play this way. * Mr. WALKER. Not as a usual- Mr. WINN. And the quickest way they could go to the top of the list would be to blow the whistle on the guy and everybody could say, ~"We have an honest architect and honest contractor," and I think they would be much in demand. Mr. WALDIE. If the gentleman would yield. * * Another way it could be stopped, if the businessmen who are strangely immune from their participation in crimes of this nature were prosecuted. And I intend, at least as a member of the committee, to ask the prosecuting authorities why they left out the three architec- tural firms, including your own. I can understand why they would leave you out, to give you immunity, but I can't understand why PAGENO="0197" 1207 businessmen who are as culpable as the two iegislators~ strangely enough, were provided immunity by not even being prosecuted. Were they given immunity. too? The three businessmen? Mr. WALKER. The three other architectural firms? Mr. WALDIE. Yes. Mr. WALKER. Well, to the best of my knowledge, we came down to Washington and received immunity from the law department, or the Attorney G-eneral's Office. Mr. WALDIE. We will ask some questions about that. It would have been interesting to give the legislators immunity and prosecute the architects. Mr. WALKER. I don't believe the legislators received immunity. Mr. WALDIE. They certainly didn't. They aie in jail. But I am suggesting that in jail with them should have been the architects involved, if your story is correct. Mr. WALKER. Well, you see why that came about- Mr. WALDIE. I know why it came about, because you wanted the $900,000 and you thought the $32,000 was a pretty good investment. Mr. WALKER. No; there was only one person received complete immimity from the Federal and county governments and that was me, because I was the only one that could tell the story. I did it too cute, I didn~t have any witnesses, I had no way to prove that I gave these men the money, and they had to have a story from somewhere or other. So, therefore, they granted me immunity. I would have taken the fifth amendment and answered no questions. Mr. WALDIE. Well, you are certainly frank. Mr. Winn? Mr. WIN:c. I agree with the contention of my colleague from California, that it is just amazing. I think that the businessmen and those who knew of this method of operation-certainly the media- would be lambasting someone and calling for investigations. Were they doing this? Mr. WALKER. No, because it was- Mr. WINN. Were there too many toes to be stepped on? Is that why this thing was brushed under the rug? Mr. WALKER. It was too quiet. Mr. WINN. Too quiet? Mr. WALKER. To people like me who would not blow the whistle and the school board would deny the conversation in any event Mr. WINN. Well, you have such things as courts and sworn testi- mony. Let me ask you: In your bids as an engineer, what do you build in as what you think should be your profit? Mr. WIGGJNS. What percentage? Mr. WALKER. That is a n~bulous sort of a question, because- Mr. WINN. I mean in Buffalo. Mr. WALKER. We charge, as our fee, strictly in accordance with the AlA Manual of Practice, and a fee is set. There is no bargaining for' fees. Mr. IATINN. Yes; I understand this. I don't understand then, how you have additional moneys set aside for bargaining or for paying off lawyers or school boards, or legislators. Mr. WALKER. WelL the fee in the larger type- PAGENO="0198" 1208 Mr. WINN. I don't believe that is covered in the AlA booklet any- where. Mr. WALKER. No. Mr. WINN. I didn't think so Mr. WALKER. I was a contractor for 22 years, myself. I have only been involved in the design for the past 6 or 7 years. Mr. `WINN. Then you and I both know the AlA has guidelines on certain types of jobs, whether it is bid or negotiated. We know what we are talking about. Mr. WALKER. Yes, sir. Mr. `WINN. But I don't understand then how any of the contractors, or architects, or engineers in Buffalo have this extra money that they can buy off people. They are clobbering the taxpayer, aren't they? Somebody is getting clobbered and it is the taxpayers? Mr. WALKER. That is true. Mr. WINN. Have you ever been threatened? Mr. WALKER. Yes; by Pordum and Ludera. Mr. WINN. By whom? Mr. WALKER. By Pordum and Ludera, or their cohorts. Mr. WINN. Could you name some of their cohorts? Mr. WALKER. No; I couldn't. I turned that over to the FBI, and they would not divulge the names of the cohorts. Mr. `WINN. You don't know the names of any of these cohorts? Mr. WALKER. No. They came to the door one night and I wouldn't let them in and then they called back and threatened to put a deer slug through my head and my wife's. (A brief recess was taken.) Mr. `WINN. All right. I asked you if you were threatened and you said yes. Could you give the committee the information and the details of that threat? `Was it a. physical threat? Mr. WALKER. Yes, it was. Mr. WINN. How did they do that? Mr. WALKER. They did it by telephone. They came to the door and I had opened- Mr.WINN. Iamsorry.Whoisthey? Mr. `WALKER. `Well, there were two questionable looking men, partial beards, and asked to step outside. Mr. `WINN. Had you ever seen these men before in your area? Mr. WALKER. No, I hadn't. Mr. STEIGER. Were they attorneys? Mr. WALKER. No; not to my knowledge. Mr. WINN. `Would you go ahead and describe these men? Mr. WALKER. One was tall and probaibly 6 feet, and the other was a shorter man. Mr. WINN. Did they have guns? Mr. WALKER. No. They didn't display them, if they did. Mr. WINN. How did they threaten you? Mr. `WALKER. They wanted to talk to me about Pordum and Ludera and I didn't care to talk to them about it. I said that to them. I don't care-with the door chain on, and so on-I don't care to talk about Pordurn and Ludera to them. And I immediately signaled my wife to call the sheriff, which she did, but the men had disappeared by the time the sheriff got there. PAGENO="0199" 1209 But while the deputy sheriff was still in the house a telephone call came through and they said my wife and I would not last the week out. We would have a deer slug through our heads. Mr. WINN. Then the sheriff called on you and you made this report to him? Mr. WALKER. He answered the telephone. I put him on in place of myself. Mr. WINN. Oh, you put the sheriff on to talk to the person on the other end of the line that was threatening you? Mr. WALKER. My son-in-law picked up the phone, and then he said, Wait a minute, I will let you talk to Mr. Walker. Mr. WINN. And those two men, or whoever was making the call, thought they were talking to you; right? Mr. WALKER. Yes. Mr. WINN. I see. All right. Then you say that you don't know who these men were. Did you ever hear who they were? Mr. WALKER. No; I did not. Mr. WINN. Was the telephone call traced by the sheriff or any- thing? Mr. WALKER. I happened to pick up the license number. They backed into my driveway for a quick getaway. That is why I assumed that they had something in mind rather than a casual conversation. Mr. WINN. This was just an assumption-but you were afraid? Mr. WALKER. I was afraid. Mr. WINN. And you didn't want to talk to these two gentlemen about the two gentlemen you referred to? Mr. WALKER. No. Mr. WINN. What did you do then? What did the sheriff do after you gave him the license number? Mr. WALKER. I picked up the license number by going to another room and as they pulled out of the driveway, I picked up the license number and gave it to the sheriff's department and the FBI. Mr. WINN. What happened then? Mr. WALKER. The license number was checked out to the car owner, and no one ever told me who he was. Not the FBI or the sheriff. Mr. WINN. And you weren't interested enough to find out who owned that car that threatened you and your wife? Mr. WALKER. Well, I suppose the FBI and the sheriff figured I would go over and shoot the guy. I probably would. Mr. WINN. That would have made an interesting situation. Mr. WALKER. Would have been a nice grand jury report. Mr. WINN. Yes. Well, the names of these men were never brought out in the court trial in any way be the sheriff, the FBI, or anyone else? Mr. WALKER. No, sir. This was after the trial. Mr. WINN. Did you ever hear from these men again? Mr. WALKER. I may have. They called- Mr. WTINN. You may have? You don't know that it was these two men? Mr. WALKER. I don't know. Mr. WINN. But you heard from somebody? Mr. WALKER. What I did was get continual ringing of my phone and no answer from the other end. PAGENO="0200" 1210 Mr. WINN. It was a harassment type of thing? Mr. WALKER. Yes. Mr. WINN. If this was after the court trial, what was the intention of harassment then? Mr. WALKER. Well, probably the intention was to get me to change my testimony. Mr. WINN. How could you do that? Mr. WALKER. I couldn't do it. Mr. WINN. It was already a matter of record, was it not? Mr. WALKER. Yes, sir; and I had immunity that I had to tell the truth, the whole truth, and nothing but the truth. Mr. WINN. And this was all presented in the press? Mr. WALKER. Yes. Mr. WINN. Do you think they had any other objective? Mr. WALKER. Yes; probably to beat the devil out of me. Mr. WINN. Beat the devil out of you? Mr. WALKER. Yes. Mr. WINN. But you might have been tough and killed them? Mr. WALKER. Could have. Shortly after that I installed a 30-30 rifle in my home and I would have blown their heads off if they had come back. Mr. WINN. Mr. Walker, if you think something should be done about people that threaten or disagree and do not make deals with lawyers that want kickbacks from school boards, why don't you do it within the law? Why didn't you do it earlier is what I am trying to say. You did do it within the law later on. Mr. WALKER. That was what was conveyed to me by the FBI, why I didn't blow the whistle on them. Mr. WINN. That is what I am trying to find out. Mr. WALKER. Mr. Cottrell blew the whistle, I didn't. Mr. WINN. Mr. Chairman, I have no more questions. Mr. WALDIE. Mr. Wiggins. Mr. WIGGINs. No questions. Mr. WALDIE. Mr. Mann. Mr. MANN. No questions. Mr. WALDIE. Mr. Keating. Mr. KEATING. No questions. Mr. WALDIE. Mr. Murphy. Mr. Munpny. No questions. Mr. WALDIE. We thank you, Mr. Walker. No more questions. The next witness is Mr. John IR. Hanny III, Erie County legislator. STATEMENT OP ~FOHN R. HANNY III, MEMBER, ERIE COUNTY (N.Y.) LEGISLATURE (Having been duly sworn by Mr. Waldie) Mr. WALDIE. Please be seated and give your full name, occupation, and address. Mr. HANNY. My name is John R. Hanny III. I am an Erie County legislator. I represent the 14th district. My address is 96 Burroughs Drive, Snyder, N.Y., which is a suburb of Buffalo. Mr. WALDIE. Thank you. Mr. Phillips, please proceed. PAGENO="0201" 1211 Mr. PHILLIPS. Mr. Hanny, how long have you been a county legis- lator? Mr. HANNY. I was elected this past November. I am a freshman legislator. I took office January 4. Mr. PHILLIPS. In the course of your responsibilities as a county leg- islator, have you gotten involved with a stadium project that is cur- rently b~f ore the Erie County legislature? Mr. HANNY. I don't quite understand your question, Mr. Phillips. Perhaps I can answer it anyway. Most of the stadium project was done, concluded, before I took office in January. The only real thing left was to vote on the bidding of the contract. Mr. PHILLIPS. ~ote on what? Mr. ~ We had to vote and award the bids to the contractors. That took place March 28, at a special session. Mr. PHILLIPS. Did you take a position in relation to that? Mr. HANNY. Yes, I did. I was the only freshman legislator out of 11 that had a position against the Orchard Park open stadium. Orchard Park is another suburb of Buffalo. Mr. PHILLIPS. As a result of your opposition to this stadium, did you receive any threats? Mr. HANNY. Yes, sir; I did. Mr. PHILLIPS. Tell the committee about the threats you have received in relation to that stadium? Mr. HANNY. I think it would be easier to read, if you don't mind, exactly what happened. On the evening of Friday, March 10, 1972, I took my family to Memorial Auditorium to view the Shrine circus. This was approxi- mately 7:30 p.m. At approximately 8 :30 to 8 :45 p.m., I left my family viewing the circus and went to the concessions stand to buy hotdogs and Cokes. Now, this is not in this statement here, but I left them because it was prior to intermission time and I just wanted to avoid the crowds and so on. While I was standing there a stranger approached me and said, "Hanny, when are you going to wise up and go low key on the stadium controversy?" Because my position was no public funding for any stadium. As I had explained to the Courier-Express previously to this, we had other priorities in the area. I agreed we needed a stadium, but at a later date, et cetera. I will just go on here. He also added, he said, "You have a beautiful son in Jason," and that he would hate like hell to see him have his legs broken. I have six children, five daughters and one boy. My son is the young- est and he is 21/2 years old. I asked the man who he was and he told me "Nevermind," and started to walk away. I left my purchase on the counter and I told the girl that I would be right back. I followed the man down the ramp. He then turned and walked back to me and said, "Do not follow me." I felt after such a threat that I had better do as he ordered, and decided not to follow him. At the time the man approached me at the conces- PAGENO="0202" 1212 sions stand, there was no one around except the girl behind the counter, who was busy fixing my order, which was a rather large one. Conse- quently, there were no witnesses to the conversation. The only thing I can do is describe the man, but I cannot give you his name. My reason for trying to follow him, obviously, was to try to get a license number or something. And the description, as I told the FBI, is as follows: He was approximately 5 foot 9, medium to heavy build, such as mine; 175 to 185 pounds; black hair, which was a styled haircut; And he had dark eyes. As I said to them, in the excitement of receiving such a threat on my son's health, I failed to notice if he had any tattoos, walked oddly, or anything else that might lead to his identification. The only thing I can do, of course, is identify if I ever saw some mug shots of anybody. I don't think I will forget him as long as I live. Mr. PHILLIPS. You were never able to determine who sent that man, or what his motivation was, or threat to you, at all? Mr. HANNY. Nothing. Mr. Phillips, when somebody threatens me or threatens my son, I take it in a very serious vein. I don't know if some- body sent him, or whether this guy was just some kind of a nut in a crowd. The stadium was jammed with people, of course, but they were at that time all inside. I was quite outspoken against the Orchard Park Stadium. The pa- pers were covering it quite heavily. I don't know whether the guy, you know, was legitimate. I took it as such. I didn't follow his advice. I still voted against it. Mr. PHILLIPS. Did there come a time when you did run for election in Erie County, and had a deficit in relation to your campaign expenditures? Mr. HANNY. Oh, yes. I still owe money on my campaign. Mr. PHILLIPS. Do you know Mr. Jacobs of Emprise? Mr. HANNY. Yes, sir. I grew up with him. Mr. PHILLIPS. Have you had any conversation with him in relation to contributions to your campaign fund? Mr. HANNY. I did. Shortly after I won the election. Mr. RADDING. Was this Max or Jerry Jacobs, sir? Mr. HANNY. Jerry Jacobs. I know Mr. Max Jacobs but not as well as I know Jerry. I went to school with Jerry Jacobs. Mr. PHILLIPS. Can you tell us what happened in relation to your campaign funds and Mr. Jerry Jacobs? Mr. HANNY. Jerry called me on the phone at home. It was the first time I had heard from him in quite a long time, especially since his father's death. Mr. PHILLIPS. After the election or before? Mr. I-IANNY. No, sir; this was after. Mr. PHILLIPS. You had already been elected to the county legislature? Mr. HANNY. Yes, sir. And Jerry asked me if I had any campaign debts-excuse me, I am sorry-he said, "Obviously, you must have some campai~n debts." And I said, "Yes. I have." He said, "I would like to give you something toward your campaign." And I thou~ht nothing of this because of my relationship with Jerry. You gentlemen might know him as Jeremy, but in school we all called PAGENO="0203" 1213 him Jerry. And I thought nothing of this we just talked about our wives, our kids. Mr. PHILLIPS. Did you discuss the amount of the contribution at all? Mr. HANNY. At that particular point I said to Jerry, "Other than my campaign manager or my own family, I do not accept contributions from anyone over $500." Mr. PrnLLIrs. What did he have to say about that? Mr. HANNY. He just said, "That's fine." And that was the end of the conversation at that point. It was a day or two later he called me back, and he said-and this made sense to me-he said, "Some. day, at your convenience call Mr. Stanley Phillips," and he said, "Stop over and pick up a check." He said, Mr. Stanley Phillips is one of my accountants." And he said," I will reimburse him when I see him." The reason this made sense to me was because at this point of course, Jerry's father was dead, Jerry was running the family business, and he was traveling all over the world. I hadn't seen Jerry up to that point in approximately 21/2 yearS. So I don't know-it was a few days later, I made some phone calls and I talked to my campaign manager and anybody who-I had no idea what Jerry was going to contribute to the campaign fund. But we had a very unique campaign~ and we just talked everything out, and I said Jerry was a very good friend of mine, and I told my cam- paign manager that I had played football with him, we were in the same fraternity, we were in high school together. At one point I dated his present wife. We saw each other socially a few years back, while his father was still alive~ and so on. My campaign manager and my finance chairman, who happens to be a certified public accountant, saw nothing wrong with this. I had checked it out with Mr. Al Abgott, who was a fellow legislator. Mr. PIITLLIPS, Tell US about that? You said you called Mr. Abgott to see whether this was a proper contribution? Mr. HANNY. Right. The reason I made these phone calls, by the way, is because it was the first time in my life that I had ever heard the word "Emprise." I read it in the paper. Because of Mr. Steiger from Arizona, who was, I guess you might say, probing into Emprise situations in his State, and I just wanted to know, you know, if there was any real truth in this thing. I was only, you know, getting the facts out of the newspapers, just like anyone else. Mr. PHILLIPS. You were concerned about the propriety of this $500 contribution? Mr. HANNY. Oh. yes. Mr. Ahgott. No, of course. He said, "You are a lifelong friend of Jerry's." And this is very true, I was. And at this point, I distinctly remember Mr. Abgot.t saying to me, "All of the members of the legislature get a contribution." So I accepted it. Mr. PHILLIPS. He said all of the members get a contribution. That was all of the members get a contribution from Emprise or Jerry? Mr. HANNY. That wasn't stated. sir. I assumed he was talking about Jerry. Mr. PHILLIPS. The nature of the conversation, to your recollection, was there no concern about taking this money from Mr. Jacobs, that all of the legislators get it; is that correct. PAGENO="0204" 1214 Mr. HANNY. That was a small part of the conversation. Mr. Abgott's advice to me was "He is a lifelong friend of yours." And as I stated before, that is very, very true. And I saw nothing wrong with it. My campaign manager saw nothing wrong with it. We filed with the State comptroller. Everything was duly recorded. I even sent Jerry a thank you letter. Mr. PHILLIPS. The check did not come from Mr. Jacobs, it came from Stanley Phillips? Mr. HANNY. Right. Mr. PrnLLIrs. The check was made out to you, or your campaign fund? Mr. HANNY. I can't remember. But I believe it was just made out to me. A lot of fellows in that area have different names for campaign funds, organizations, fundraising groups, and so on, and I have re- ceived other checks for my campaign that were just made out to me, and I, of course, would endorse it and turn it over to my finance chairman. The reason that Jerry Jacobs told me to pick it up at Mr. Stanley Phillips' house was that Mr. Stanley Phillips lives very close to me, ~n the same community. Mr. PHILLIPS. Doesn't Mr. Jacobs also live very close to you? Mr. IL~NNY. Yes, sir; he does. Mr. PHILLIPS. Don't you live almost across the street from one another? Mr. HANNY. No. No; if I had a map, I could show you. Mr. PHILLIPS. It is not necessary. In any event, the reason Mr. Jacobs said to pick it up at Stanley Phillips was that he was nearby? Mr. HANNY. Right. And like I said, Jerry was doing a lot of traveling at the time. I would have to pass Stanley Phillips' house to go to my restaurant. I would have to pass it coming home. It would be a lot more convenient going there than stopping over to Jerry's house. Although he lives closer, it would still be out of the way. Mr. PHILLIPS. Now, the campaign contribution came from Mr. Jacobs. but it was a check by- Mr. HANNY. By Stanley Phillips. Mr. PHILLIPS. When you reported this matter to the authorities in your report on campaign contributions, did you report that as a con- tribution from Mr. Jacobs or from Stanley Phillips? Mr. HANNY. I reported it, I believe, as a contribution from Stanley Phillips, as it was a personal check and I believe that is the New York State law. My campaign manager, of course, made out all of the re- ports, and so on, and I would be glad to get a copy and turn them over to your committee. Mr. PHILLIPS. In the course of your service as a legislator, did there come a time when you had some controversy, disagreement, with Mr. Abgott? Mr. HANNY. Yes, we did. We hold our caucus on Monday night and we had a very lenghtly agenda. After going through the agenda we were informed that Mr. Ned Reagan, our new county executive, would like to meet with the Republican minority in his chambers. So all but one legislator walked across the street and went up to Mr. Reagan's chambers. There were a couple of other people there and we PAGENO="0205" 1215 were talking strictly at that point, politics, and then the Orchard Park Stadium subject came up again. Mr. PHILLIPS. Did Mr. Abgott say anything to you about the Orchid Park Stadium? Mr. I-IANNY. Well, again, I have a statement, if you don't mind me reading it, gentlemen. Mr. PI-uLbIrs. Not at all. Is this a statement you prepared for the FBI? Mr. IIANNY. Yes, sir. Please keep in mind one fact; that we were a bunch of tired guys and we were all at odds with one another on that stadiuni matter. It was not a uniform vote. On March 28, at the special session of the legislatume, the ~ ote went 15 to 4 in favor of the Orchard Park Stadium. I was one of the fOur members who voted against it. We have 20 members of the legislature and one member was absent. He was out of town. The statement is as follows: On Monday, March 6, 1972, a caucus was held at the Erie County Legislature for the Republican members. At 6 p.m. that evening when the caucus was over, we were all invited to Erie County Executive Reagan's office for further discus- sion on items pertaining to the next day's agenda. During time regular course of the conversation, the stadium bids for the Orchard Park Stadium were discussed. Mr. Lou Russo, Erie County budget director, made mention of the fact that Ili'a Construction Co. had submitted a bid way below the $23.5 million authorized. At that point I mentioned to the gentlemen that were there, Mr. Ned Reagan, Mr. Russo, Mr. Mack Keating, Mr. Floss, Mr. Wolf, Mr. Clark, Mr. Carleson, Mr. Saunders, Mr. Townsend, and Mr. Abgott, that Ilia Construction Co. should be watched very closely because of their shoddy workmanship on the construction of a school in Clarence. At that point in the conservation Mr. Abgott turned to Dave Saunders and said, "There goes Hanny again, opening his big mouth." He then turned to me and said, "Some day, Hanny, you will end up in the trunk of a car or better yet, we will burn your restaurant down and make sure you are in it." This statement was made in front of the above-mentioned people. Legislator Kevin Brinkworth was the only Republican legislator absent. I realize this is a very strong statement, and it happens to be true. But it also happens that all of us were under pressure and I find it very difficult to definitely say that Mr. Abgott meant that threat. I really don't believe he did. However, it has been reported, and as I told your investigators and I told you, this was what was said. I, of course, remember distinctly. Mr. PHILLIPS. Do you know that Mr. Abgott ever threatened any- one else relating to this stadium? Mr. HANNY. No. Mr. PHILLIPS. I have no other questions, Mr. Chairman. Chairman PEPPER. Mr. Waldie. Mr. WALDIE. No questions. Chairman PEPPER. Mr. Steiger. Mr. STEIGER. Thank you, Mr. Chairman. Mr. Hanny, you went into a rather lengthy detailed accounting of the contribution from Mr. Jerry Jacobs to your campaign. You pointed out the reason for your care was the prudence brought about by the attention that was directed at that time in the media to some of the alleged activities, and like any politician, I would assume you did not PAGENO="0206" 1216 wish to be inadvertently involved in something you had nothing to do with. But I am interested now in your attitude. You are a lifelong friend and acquaintance of Mr. Jacobs. You have known the Jacobs family, you went to school `with him, by your testimony. When was the campaign contribution tendered? At what point in time? What month and year did you get the contribution? If you said, I have forgotten. Mr. HANNY. I didn't say, and to be exact about it, it was either be- tween November 1971 and January 1972, in that area. Mr. STEIGER. Would you now accept a campaign contribution from Jerry Jacobs? Mr. HANNY. No, sir; I would not. Mr. STEIGER. Why is that? Mr. HANNY. Well, at this point, Emprise Corp. has been convicted in California of a felony, they have lost-according to the newspapers in Buffalo-their franchise rights in Ontario, Canada, for I believe it is, five racetracks up there. I have read that several other States have been investigating Em- prise because they hold liquor licenses, and so on. I do know that when you have been convicted of a felony-and I have a liquor license, too- that you just can't hold one. I believe in the court system. And at this point, I would not accept a campaign contribution from Mr. Jacobs, Sportservice, Emprise, or anyone else that I knew was related in any way to their organization. Mr. STEIGER. Do you know of your own knowledge if Mr. Jerry Jacobs or Mr. Max Jacobs in the past have made it `a practice to con- tribute to political campaigns, either of your colleagues in the Erie County Legislature, or in any other campaigns you would be aware of? Mr. HANNY. Not that I know of. I took Mr. Abgott at his word. Mr. STErnER. I am sorry, what was his word on that matter? Mr. 1-TANNY. Oh, as I stated before, Mr. Steiger, I had called AT Abgott on the phone regarding this matter, and he said, "Well, you are a lifelong friend of Jerry ~Jacohs." He said, "There is nothing wrong with it." "Besides that," he said, "all of the legislators get this." Mr. STErnER. Excuse me. All of the legislators, meaning he con- tributes to all of the legislators? Mr HANNY. Yes, sir. Mr. STEIGER. Usually after they win, is that the practice, as far as you know? Mr. HANNY. That I don't really know. Mr. STEIGER. It would represent a significant savings, if that were it. Do you know if it was done on a bipartisan basis? You are a Republican? Mr. HANNY. Yes, sir. Mr. STErnER. Do you know if Democrats also received this? Mr. HANNY. I don't know. Mr. STEIGER. All right. You recited to one of our investigators that in your experience with Mr. Jacobs, when you were much younger I gather, you used to visit him at his house and you played in what you PAGENO="0207" 1217 referred to as the "money room." Would you describe the "money room" for the committee? Mr. HANNY. Sure. The Jacobs family lived in a large old mansion on LaBrunde .Drive in Snyder. As I said, I grew up with Jerry Jacobs and I used to be over to his house a lot. 1-lie was over to my house, et cetera, as kids do. And there was an elevator in the home. I don't know whether it is still there or not, and the two of us got into the elevator, and if I remember correctly-now, please take into considera- tion the number of years that have gone by so I am just trying to recall everything-it seems to me it was a one-man elevator and the two of us at the time were a heck of a lot heavier than we are now, and we both got into the thing and went down to the basement. In the basement I recall seeing a tremendous amount of money. I also remember catching hell from Jerry's father, when we came back upstairs, for going down in the cellar without his permission. But, again, this was a long time ago. This was years and years and years ago. Mr. STEIGER. By "a lot of money," was the money just laying out on a table? How did you happen to see it? Was there a safe? What was the situation, if you recall? Mr. HANNY. As I recall, Mr. Steiger, there was a safe and it was open. I can't forget the incident, but as far as all of the details go, it was so many years ago, it is very difficult to remember. Mr. STEIGER. Was the money in currency or silver, or do you recall? Mr. HANNY. I believe it was in currency, sir. But again, it is hard to remember. Mr. STEIGER. I believe you heard Mr. Walker testify. Did you hear the witness who just preceded you? Mr. HANNY. Yes, but I was sitting in the back of the room and it was hard to understand. Mr. STEIGER. In effect, what Mr. Walker was telling us, is it was not uncommon in Buffalo and Erie County to have politicians solicit and accept bribes and for official bodies. 1-lie talked about a school board incident and, of course, the incident involved your colleagues. Is it fair to say that his image of the political climate in Erie County and in Buffalo is a valid image? Mr. HANNY. That is very difficult for me to say, since I have never once, since I have been elected to office, or even during my campaign, been approached by anyone offering me money to do anything, or to vote in their favor, at all. I would immediately call a press conference and try to blow them right off the map. Mr. STEIGER. Do you suppose that is why you haven't been approached? Mr. HANNY. Most likely, Mr Steiger. Mr. STEIGER. Mr. Hanny, you are in the restaurant business? Mr. HANNY. Yes, sir. Mr. STEIGER. A business that you inherited from your father? Mr. HANNY. No, it is a corporation. There are two corporations. The restaurant is called the "Little White House." It has been in ex- istence since 1888. My family has owned it for 11 years. We have been in the restaurant business in the western New York area for ap- proximately, the family has, for 130 years. PAGENO="0208" 1218 I have not inherited the restaurant from my father. It is a family- owned business, Mr. STEIGER. In discussing this entire situation with the inves- tigator you made mention of the fact that either you had observed or your father had reported to you he had observed a Mr. Montana and Jerry Jacobs' dad, Lou Jacobs, dining frequently at your father's restaurant. Is that an accurate description of what you told the investigator? Mr. HANNY. Not in the present restaurant. Mr. STEIGER. In a restaurant owned by your father? Mr. HANNY. Right. My father owned a restaurant, when I was a little boy, on Delaware Avenue in Buffalo, called the La Marc. And Mr. Montana used to eat in there once in a while. Mr. Jacobs used to have dinner very rarely at the La Marc. But he used to eat dinner, I know, a lot at the 31 Club. Who he ate dinner with down there, I don't know. Mr. STEIGER. In other words, you are saying Mr. Jacobs patronized this one restaurant, and Mr. Montana did, but not together? Mr. HANNY. I am sure they must ha~ve known each other because they were both very famous men in the Buffalo area. I don't know. Mr. STEIGUR. Did they dine togeth ~r; that was my question. Mr. HANEY. Not that I know of, sir. Not that I know of. Mr. STEIGER. I have no further questions. Chairman PEPPER. Mr. Murphy. Mr. Munpiiy. Thank you, Mr. Chairman. Mr. Hanny, you say you grew up with Jerry Jacobs; is that correct? Mr. HANNY. Yes, sir. Mr. Mimr}iY. You say you were in this home one time as a friend; right? Mr. HANNY. Yes, sir. Mr. MURPHY. And you happened into the cellar where you saw some money. Is this the only incident over your whole association that appeared untoward or unusual to you? Mr. HANNY. Yes, sir. Mr. MURPHY. How many years would you say that relationship dated back? Mr. HANNY. Oh, my gosh-16 years ago. Mr. MURPHY. You said your dad or your family owned a restaurant? Mr. HANNY. Yes, sir. Mr. MURPHY. And Mr. Montana and Mr. Jacobs, Sr., now deceased, as I understand it- Mr. HANNY. Yes, he is. Mr. MURPHY (continuing). Frequented the restaurant on a number of occasions; is that correct? Mr. HANNY. He may have. Now, again, I was a very young boy when my father had this restaurant on Delaware Avenue. I knew Mr. Montana; I knew Mr. Jacobs because of my relationship with his son. And as I said to Mr. Steiger, most of the time Mr, Jacobs did not have dinner in my father's restaurant, but in another restaurant, which was down the street, the 31 Club. Mr. MURPHY. You don't see anything wrong with people of that character coming in and eating in a restaurant? There is nothing you can do about it; is that correct? PAGENO="0209" 1219 Mr. I-fANNY. Absohitely nothing I could do about it. sir. Mr. MURPHY. Being a fair man and a legislator, you would draw no inferences from the fact that Mr. Montana would eat in a restaurant that you happened to own? Mr. HANNY. Well, Mr. Montana has been dead for several years. Mr. MURPHY. This was when he was alive. Mr. HANNY. I wasn't a legislator. I was a young boy when he was alive. Mr. MURPHY. You would take strong objection to anything that I would infer about your father from the fact Mr. Montana has eaten in your restaurant. would you not? Mr. I-fANNY. I don't quite understand your question. Mr. MURPHY. In other words, if Mr. Montana frequented a restau- rant owned by your father and your dad served him a meal and took his money for that meal, you would object strenuously if anyone in- ferred that anything was wrong with your father because of his rela- tionship with Mr. Montana would you not? Mr. HANNY. Yes, I would. Definitely. I know my father very well, and I know what kind of a man he is. Mr. MURPHY. So, in other words, if Mr. Montana, a well -known man in Buffalo or the western part of New York, and Mr. Jacobs, a very well-known man in the western part of New York. frequented restaurants where other people of maybe dubious character also fre- quented, there should be no inference drawn from that-. should there? Mr. HANNY. I don't believe so. Mr. MURPHY. Thank you. That is all the questions I have. Chairman PEPPER. Mr. Wiggins. Mr. WIGGINS. Thank you. Mr. Chairman. I want to ask you a few questions about your campaign and the financing of it. How much did it cost you to run your campaign, sir ? Mr. HANNY. Oh, I would say in round figures, maybe $7,000 or $8,000. Mr. WIGGINS. Did you receive any other contributions as large as $500? Mr. HANNY. I received contributions from my brother, my cam- paign manager contributed, my family contributed. Mr. WIGGINS. In excess of $500? Mr. HANNY. Yes. As I stated to your committee before, the only one that I would accept anything over $500 from were members of my family and my campaign manager. Mr. WIGGINS. When Mr. Jacobs called you on the phone, did you have any reason to believe he would contribute more than ~500? Mr. HANNY. No. I made this a standard practice during the cam- paign. I told everybody, or anybody who would call or stop into our family business that wanted to contribute to the campa ign. These were just our own rules. But I told every one what the rules were. Mr. WIGGINS. You told them, "I won't accept any more than $500": is that what you told them? Mr. HANNY. I said we make it a practice not to accept more than $500 from anyone outside of my family or my campaign manager. Mr. WIGGINS. You did not regard that as an invitation to contribute $500, did you? 81-068-73----pt. 3-14 PAGENO="0210" 1220 Mr. HANNY. No, sir; I did not. Mr. WIGGINS. At the time the money was offered as a campaign con- tribution, did Mr. Jacobs in any way suggest that he expected a con- sideration in exchange for that contribution? Mr. HANNY. No, sir; he did not. Mr. WIGGINS. You wouldn't have accepted it had he done so? Mr. HANNY. If Mr. Jacobs had asked me to do him any favors regarding a vote his way, or something, I would have refused it. I would have reported it, as a matter of fact. Mr. WIGGINS. Thereafter, up until this very moment, has ~`1r. Jacobs or anyone connected with Emprise Corp. or its affiliates solicited legis- lative favors from you? Mr. HANNY. Legislative favors? No, sir. Mr. WIGGINS. As a matter of fact, has the contribution ever been mentioned again by Mr. Jacobs, or by anyone connected with Emprise or its affiliates? Mr. HANNY. No, sir. I saw Jerry and Max Jacobs together for the first time, in what now must be close to 3 years, maybe a month ago. I was having lunch with one of my vice chairmen in Erie County, and I was dining at the 21 Club, which is very close to the Erie County Legislature, and I was in between committee meetings. I eat there quite often, so it was not uncommon for me to be in the restaurant. And Messrs. Jacobs came in and Jerry spotted me and came over to the table and reintroduced me to Max, his brother. Then they went over to their table and sat down and had lunch. That is the first time I have seen Jerry in a long, long time. Mr. WIGGINS. You see, what I am trying to do is understand the rele- vance of the campaign contribution by an old friend to a legislator to this committee investigating crime. Has there been any impropriety inthat at all? Mr. HANNY. No, sir. Mr. WIGGINS. How old were you when Jerry Jacobs and yourself went down the elevator to the money room? Mr. HANNY. Oh, my gosh. I am 32 now-16 years ago, I was 15-16 years old. Mr. WIGGINS. Did you count the money? Mr. HANNY. Did I count the money? Mr. WIGGINS. Yes. Mr. HANNY. No, sir. Mr. WIGGINS. How much was there? Mr. HANNY. Well, to a kid 16 years old, it looked like an awful lot. I wouldn't have any idea. Mr. WIGGINS. Now, from the perspective of an adult, what evil, if any, do you see in having money in a safe in the basement of one's house? Mr. HANNY. Well, I could take that in two ways. I keep money in a safe, too. Not in my home, but in my business. I rea' in the papers there are a lot of people that break into homes, steal safes, where there is money or jewelry, especially in the town that I live in, the suburb that I live in. I can't really make any comparison. Believe it or not, it is a very difficult question. I believe that Mr. Jacobs, Sr., was an accentric. He worked from 8 o'clock in the morning until very, very late at night, 7 days a week. PAGENO="0211" 1221 Certainly, before your committee started probing into Emprise, he and his company, both, had a very good reputation in the Buffalo area, especially with people that were in the industry, such as myself, being in the f~od business. I was always told as a kid, "If you want to learn the restaurant business well, go to work for Sportservice because they have excellent control systems, and so on, which is so critical in our business." Mr. WIGGINS. The purpose of my question is to really understand your testimony, Mr. Hanny, as to the relevance to this committee investigating organized crime, of your description of an incident that occurred 16 years ago, finding some money in a safe in a basement of a home, apparently, of a very wealthy man. I don't know that to be a fac.t, but I assume that to be so. Mr. HANNY. A very well what? Mr. WIGGINS. A very wealthy man. Is there any information you want to give the committee about how we should interpret that testimony? Mr. HANNY. Well, if I read in the paper truly-the facts that have been stated are true-I would now have to say sure, there was some- thing wrong, they were hiding money. But at that particular time in my life, that never even went through my mind. Mr. WIGGINS. Is that the conclusion you now draw, looking back on the incident? Mr. HANNY. No; I look back on it now and I say; Well, maybe Mr. Jacobs was, you know, after reading what has been going on around the country with Emprise, I say maybe Mr. Jacobs was in trouble. His company has been convicted in one State, and I am just waiting, you know, for the outcome. I think like thousands of other people do. It is very interesting reading. Mr. WTIGGINS. We are all entitled to draw our conclusions, and you, too, sir, are entitled to draw yours. I don't have any precoiiceived notion about Emprise, or you, or anybody else around here, but I would observe that is pretty skimpy evidence upon which to conclude that wrongdoing occurred, because money was in a safe of a very wealthy man. That is my observation, Mr. Chairman. I yield the balance of my time. Chairman PEPPER. Mr. Mann. Mr. MANN. No questions, Mr Chairman. Chairman PEPPER. Mr. Winn. Mr. WINN. Thank you, Mr. Chairman. I am sorry I had to leave for part of the testimony, but I want to ask a couple of questions. In the threats that were made to you, Mr. Hanny, that you referred to at the circus, you say that you never have found out the name of this man; is that correct? Mr. HANNY. No, sir; I did not. Mr. WINN. Did you ever go down to the police department or the sheriff's office, or did the FBI ever show you mug shots? Mr. HANNY. No, sir; they never did. Mr. WINN. You heard tlie testimony of Mr. Walker; right? Mr. HANNY. Yes, sir; I did. Mr. WINN. So you are in the same boat with Mr. Walker. You have been threatened, somebody is trying play rough, but you don't know who they are? PAGENO="0212" 1222 Mr. I-IANNY. No, sir. This was the one instance, the only one I ever had 111 my life of this nature, and I never found out from the FBI. I felt that I should report it to the FBI. As a matter of fact, I called my brother, who is an attorney with the U.S. Justice Department, and I asked my brother, "Jim, who could I contact in the Buffalo area to report this," and he gave me the name of a gentleman. As a matter of fact, he made a phone call for me. And these people, these gentlemen, came out to my family's residence; we sat down and I reported it. That was it. Mr. WINN. But they didn't bring any mug shots? Mr. HANNY. No, sir. Mr. WINN. You say you are a freshman legislator. Before you were elected, was it your general knowledge of the payoff system-not you, but business people-that seemed necessary to engage in to do business in Buffalo or Erie County? Mr. HANNY. I did not know anything of what Mr. Walker had talked about earlier. Mr. WINN. You had not heard of any of those rumors and you knew of nothing along that line? Mr. HANNY. The only ones I knew that were paid off were the two legislators, and this was before my time, on thQ legislative board. Mr. WINN. I understand you just took office in January of this year? Mr. HANNY. Yes, sir. Mr. WINN. You referred to a campaign deficit, Mr. Hairny, and I believe you said that you hadn't heard from Jerry Jacobs for 21/2 years? Mr. I-L~NNY. Yes, sir. Mr. WINN. And then, all of a suddeii, after you were elected, then Jerry Jacobs personally called you; is that correct? Mr. HANNY. Yes, sir. Mr. WINN. He made the contact with you? Mr. HANNY. Yes, sir; Jerry called me. Mr. WINN. Offering to help you with a campaign contribution. And after you went through trying to decide whether you should ac- cept this, and checked with your campaign manager and your financial manager, you went over to Stanley Phillips' house, to pick up a check. And tile check was signed by Stanley Phillips. Is that correct? Mr. HANNY. Yes, sir. It was from his account. Mr. WINN. In the State of New York do you have to file all cam- paign contributions? Mr. HANNY. Yes, sir. And this was filed. Mr. WINN. This was filed according to the law? Mr. HANNY. Yes, sir. Mr. Wn~. And it was filed under the name of Stanley Phillips, not Mr. Jerry Jacobs? Mr. HANNY. I am positive of that. Jerry's words were "Pick it up at Phillips' house-pick the check up at Phillips' house and I will reimburse him." I felt this was perfectly all right, knowing what Jerry's schedule must be like, since he took over his family's business. Mr. WINN. But Jerry Jacobs made the approach to you because you had gone to school together? Mr. HANNY. Yes, sir. And when I sent a thank-you letter out, I sent it to Jerry Jacobs, not to Stanley Phillips. PAGENO="0213" 1223 Mr. WINX. But it is recorded in the State of New York as a cam- paign contribution from Stanley Phillips? Mr. HANNY. I believe that is correct. Mr. WINN. I believe you also made the statement, before I had to leave the room, that all legislators, or someone told you that all legis- lators, in Erie County received contributions from Jerry. Am I right in that statement? Mr. HANNY. Yes, sir. Mr. WINN. Do you know by checking the records-I guess they are public records-whether those checks have all been signed by Stanley Phillips, or do any of them bear the name of Mr. Jerry Jacobs? Mr. HANNY. That I do not know, sir. Mr. WIN N. Don't you think that might be interesting to check? Mr. HANNY. Well, at the time that this contribution was offered, it was prior to our deadline on filing our campaign contributions so there was no sense at that point in going into it, writing to the State comptroller or the secretary of state and asking for copies, because at that time a lot of the fellows hadn't gotten theirs in yet. This was under the deadline. Mr. WINN. I can understand at that time why it wouldn't be of particular interest to you, but I think it would probably be of interest to this committee to see if all of the legislators in Erie County received campaign contributions from Jerry Jacobs or from Stanley Phillips, and how those were recorded. Mr. HANNY. Well, I have asked-and again I talked this over with my campaign manager-and I just asked him to do it, and it wasn't an order to do it right away. And discussing some of the events that have gone on, I said it might be a good idea for us to check this out. It is a matter of public record. anyway. Mr. WINN. I understand that. In your discussion about your restau- rant business and the advice of people for years who said to go with Sportservice because they have the know-how and contact and what- ever descriptive word you used, have you at any time considered your friendship with Jerry Jacobs and Sportservice, of asking them for help in your business? Mr. HANNY. For asking them for help in my own? Mr. WINN. You are in the restaurant business? Mr. HANNY. Yes, sir. Mr. WINN. And their concession business is basically the same? Mr. HANNY. No, sir. Mr. WINN. Have they ever talked to you about helping you in the restaurant business? Mr. HANNY. No. At one point-and I think it was before Mr. Ja- cobs, Sr., had died-Jerry and I had discussed the possibility of going into the in-plant feeding operations together. Again, with his knowl- edge of the business and mine-this was long before anything had come out about Emprise and so on-it would have been a good oppor- tunity for the both of us. But nothing ever panned out. Nothing at all, sir. Mr. WINN. Under the circumstances, if you run for reelection, would you accept a campaign contribution from Jerry Jacobs a la Stanley Phillips? Mr. HANNY. No, sir. Mr. WINN. Thank you, sir. PAGENO="0214" 12.24 Thank you, Mr. Chairman. Chairman PEPPER. Mr. Keating, do you have any questions? Mr. KEATING. No questions, Mr. Chairman. Chairman PEPPER. Mr. Waldie. Mr. WALDIE. I am interested in why you reported the contribution as coming from Stanley Phillips. The disclosure law, as I understand it, is to inform the public from whence your money for a campaign comes. Why did you not report it as coming from Jerry Jacobs? Mr. HANNY. Well, because verbally it came from Jerry Jacobs, but the actual fact of the matter is the check was signed by Stanley Phillips. Mr. WALDIE. But the actual fact of the matter is you acknowledged the contribution to Mr. Jacobs. Mr. HANNY. Yes, but I also stated earlier in my testimony, Mr. Waldie, that-maybe because~ it is on there as Stanley Phijiips, CPA- Mr. WALDIE. I know that. you know that, but it was obviously just a channel for Mr. Jacobs. The public was entitled to know, were they not, that you received it from Mr. Jacobs? And my question is: Why did you not report it as having been contributed to your campaign by Mr. Jacobs? Mr. HANNY. We read the law, New York State election law on con- tributions, and at that time I believe it was interpreted for me by Mr. Bill Cramer, who was the assistant commissioner of elections, how you would claim this. And from what I understand, my campaign man- ager received word back from him stating that whoever signed the check is the one who gave the contribution. So, you know, this is the way that it was done. Mr. WALDIE. I didn't get your answer to a question, or a response to a question Mr. Wiggins asked you as to how many other $500 con- tributions you received from persons other than your family. Mr. HANNY. I would have to bring my financial records in. Mr. WALDIE. `Were there many? Mr. HANNY. No, there is not. Mr. WALDIE. Were there five? Mr. HANNY. Yes, I think there was. Mr. WALDIE. Were there more than five? Mr. HANNY. I don't believe so. Mr. WALDIE. And your total campaign was about $8,000? Mr. HANNY. It ran around that figure. Mr. WALDIE. Were you offered more than $500 by any contributors? Mr. HANNY. No, sir, I was not; other than my own campaign man- ager gave me a contribution that was much larger. But as I stated, my family and he were the only exceptions I made. Mr. WAr~mE. That is all. No further questions. Chairman PEPPER. There are no other questions. Mr. Hannv, we thank you very much. The Flag `Day ceremonies are on the floOr of the House. We will take a recess until 1 p.m. (Thereupon, at 12:05 p.m., the hearing was recessed, to reconvene at 1 p.m. this same day.) PAGENO="0215" 1225 AFTERNOON SESSION Chairman PEPPER. The committee will come to order, please. Mr. Counsel, will you call the next witness? Mr. PHILLIPS. The next witness, Mr. Chairman, is Max Jacobs. Chairman PEPPER. Mr. Jacobs, will you please come forward. STATEMENT OP MAX ~1ACOBS, EXECUTIVE VICE PRESIDENT, EM- PRISE CORP., BUFFALO, N.Y.; ACCOMPANIED BY WILLIAM 0. BITTMAN, COUNSEL (Having been duly sworn by the chairman) Chairman PEPPER. Mr. Jacobs, are you accompanied by counsel? Mr. BITTMAN. Yes, sir. Chairman PEPPER. Will counsel please give his name, address, and the bars to which he belongs? Mr. BITTMAN. Yes, Mr. Chairman. My name is William 0. Bittman. I am a member of the law firm of Hogan & Hartson, 815 Connecticut Avenue, in Washington, D.C. Chairman PEPPER. Mr. Bittman, we know you as a distinguished attorney and we are pleased to have you here. You are familiar with the role of counsel in committee hearings? Mr. BITTMAN. Yes, I am. Mr. Chairman. I would have one request at the outset, and that is for Mr. Jacobs to read to the committee a prenared statement. Chairman PEPPER. Yes. You wish to read a prepared statement, Mr. Jacobs? Mr. JAcoBs. I do, sir. Chairman PEPPER. You may proceed, Mr. Jacobs. My name is Max Jacobs. I want this committee to know that I am the first person to appear before you on behalf of either Emprise Corp. or the Jacobs family. No one who has testified before has been au- thorized to speak for either my family or our companies. Both Mr. Donald Mooers and Mr. Brian Goodwin appeared because of a per- sonal privilege given to them pursuant to rule 14 of your rules and were speaking for themselves. I am 35 years of age, and since Janu- arv 1. 1972, I have acted as the executive vice president and secretary of Emnrise Corp. My experience in the business world and my relationship with Emprise have been relatively brief. Until late 1966 and for a short period of 1967, my primary vocation was that of a stage actor. I studied at the Catholic University of America in Washington, D.C.. and received a degree in fine arts from the University of Arizona in 1961. I have appeared on Broadway, toured, appeared on national television and have worked, for a considerable period of time, in certain major regional theaters in the United States. Mv association with my family's business commenced in November of 1966 when my father, Louis M. Jacobs. persuaded me to participate in a course of study under his direction. Mv first assignment was the management of three bowling centers in Phoenix, Ariz., where I remained from late Novembei.~ 1966 until PAGENO="0216" 1226 March 1967. After a brief theatrical interlude, extending from June through August 1967, my next assignment was that of covering the east coast operations of Sportservice. This territory encompassed the New England States and downstate New York, through central Virginia. After the death of my father in August 1968, I remained in Buffalo until approximately June 1970 for the purpose of obtaining knowledge of basic office procedures related to Sportservice operations. I was also given the responsibility in December of 1968 of overseeing the operations of the Cincinnati Royals professional basketball club and the Cincinnati Gardens, a public building in Cincinnati, Ohio. Both are owned by my brother, Jeremy, and I would describe my responsibility as that of an unpaid advisor and overseer. I was ap- pointed chairman of the board of both entities and, for a time, also represented the basketball club as its governor on the NBA Board of Governors. Beginning in June of 1970, my brother felt that I was sufficiently indoctrinated into office procedures and determined that I should go into the field. visiting Sportservice's operating units. This I have done extensively. For example, in 1971, I spent approximately 224 days on the road, which included considerable time spent overseeing the instal- lation and operation of new concessions at the Cincinnati Riverfront Stadium, completed in May 1970. In December, 1970, I first became involved in negotiations in the concessionaire field with regard to our new concession arrangements at the Golden Gate Race Track in San Francisco. Around the fall of 1970, I also assumed second line responsibility for customer relations at Baltimore and Chicago baseball. I have never had any direct responsibility with racetracks, or any other parimutuel entities. I have been informed by my counsel who met with Mr. Phillips, Chief Counsel for this committee, that one of the two principal areas which you wish to discuss with me relates to my knowledge of the transactions involved in the recent trial in Los Angeles which resulted in a jury verdict against Emprise's predecessor. The only aspect of that case with which I have any personal knowl- edge has to do with a loan made by Emprise's predecessor to my father-in-law, Phillip J. Troy, to enable him to invest in the Frontier Hotel in Las Vegas. I will, therefore, limit my remarks to that aspect of the case, although, of course, I will try my best to answer questions which you may have as to any aspect of the case. Since the nature of the conviction involves conspiratorial acts, and since I was named as an unindicted coconspirator in the indict- ment, I would like to make the following statement: I have never, in my life, met iTor spoken with the following in- dividuals who were convicted in Los Angeles: Arthur Rooks, Jack S. Sharpiro, Anthony Giardano, or Michael Santo Polizzi. In fact, until the indictment was handed down in February of 1971, I do not recollect ever hearing the names of these individuals. In addition, in the indictment, several individuals were named as unindicted coconspirators. Of those individuals, I have never, in my life, met nor spoken with the following: Maurice Friedman, T. W. Richardson, Alex Kachinko, or Irving J. Shapiro. In fact, until the indictment was handed down, I do not recollect ever hearing the PAGENO="0217" 1227 names of these individuals. The other unindicted coconspirators named in the indictment were Philip Troy (my father-in-law), Louis Jacobs (my father), and myself. Two other individuals convicted in Los Angeles are Peter James Bellanca and Anthony Joseph Zerilli. I had neither met with nor spoken to either of these gentlemen, in my entire life, until I met them on August 7, 1968, when they attended my father's wake. This was a full 9 months after the last of the alleged conspiratorial acts involved in the Los Angeles trial. Nor have I, to the best of my memory, ever spoken with either of these gentlemen concerning the Las Vegas Frontier matter. I have never been to the Frontier Hotel in my life. I have never been in the city of Las Vegas in my life. In fact, I have never been in the State of Nevada in my life. Since November of 1966, at the request of my father, I have de- voted my time to the family's business. Since the events involved in the Los Angeles case all took place in late 1966 and in 1967, they oc- curred at a time when I did not have a very responsible position in the company and when I was still fairly unfamiliar with its business. As I previously indicated, my first assignment for the company was in Phoenix, Ariz., where I was charged with the operation of three bowling centers. This assignment lasted from November 19~6 to March 1967. It was just after I started this a'ssi'gi~ment, still in No- vember 1966, that my father telephoned me in Phoenix and asked me if my father-in-law, Philip Troy, would have any interest in in- vesting in a casino in Las Vegas, Nev-. I indicated to him that, as far as `any such investment was concerned, his judgment was much better than mine; in fact, I had never even been in a gambling casino in my life. That was all that was said on the subject at the time. I heard nothing more for about 2 months. Then, toward the end of January 1967, my father made `a "conference call" from Buffalo to me, in Phoenix, and to my father-in-law, in St. Paul. At that time, my father explained to my father-in-law that he was offering him an opportunity to invest in a hotel and casino in Las Vegas, Nev. He said that he would be in touch with him at a later date, regarding details. He asked me to comment on the potential investment, and I stated that I would like my father-in-law to have every possible benefit from this investment since `he had put me on to a very good investment some years before, referring to his daughter, to whom I am happily married. Shortly thereafter, around the beginning of February, I received a call from Benjamin Re'isman, one of Emprise's attorneys, requesting certain details regarding Mr. Troy, such as his home address, age, general personality characteristics, and background. He also `asked for information about Paul Troy, Mr. Troy's brother, who is an attorney in Boston, Mass., and who, I learned in the course of con- versation with Mr. Reism'an, was representing my father-in-law in this matter. I believe that it was in `this conversation with Mr. Reisman or, perhaps, in another conversation with him shortly thereafter, that he mentioned that Mr. Troy was going to require an indemnity agree- ment. Mr. Reisman sta'ted that Paul Troy believed `that Phillip Troy would have to be guaranteed against loss. I am not certain whether or not I understood what an indemity agreement was at that time, PAGENO="0218" 1228 or what purpose it was supposed to serve `in this transaction, and I don't believe we got into any details about it. A couple of days later, my father called me and asked whether it was my understanding that Phillip Troy should receive all of the profits of the investment in the Las Vegas venture. I said that this was indeed my understanding. My father than stated that, since I was only one of six stockholders of Emprise, he did not feel that this would be fair to the `other five stockh'olders. He pointed out that the loan being made to Mr. Troy to enable him to make the invest- ment was being made only because `of his relationship to me, but the money for the loan actually `belonged to all six stockholders. I agreed with my father's reasoning, and told him that any `benefit to my father-in-law should come only from the one-sixth interest I had in the ownership of Emprise. My father then suggested that Mr. Troy shoul'd receive 15.833 percent of the `profits from the venture; he arrived at this figure in `this way: by far the most profitable entity within the Emprise system was Sportservice Corp., which was owned 95 percent by Emprise and 5 percent personally by my father and mother; therefore, Mr. Troy's share of the profits should be one-sixth of that 95 percent, which equals 15.833 percent. I agreed that thi's approach would be fair. In the middle of February 1967, my father-in-law flew to Las Vegas to meet with Mr. Reisman for the purpose of executing docu- ments in connection with this venture. Directly after that, he flew to Phoenix to visit my wife and myself. During that visit, which must have lasted 5 or 6 days, my father-in-law presented me with an in- demnification agreement, for my signature. This agreement set forth my obligation to indemnify my father-in-law against loss resulting from the investment. It further entitled him to 15.833 percent of the profits arising from the investment, as outlined above. There was a third clause, which I had not heard anything of before: that clause stated that on my father-in-law's death, this investment would be inherited by his daughter and myself. I assume that this clause was unilaterally included at my father's request; in any case, I did not ask for it. I signed this document on either the 22d or 23d of February 1967. I left Phoenix, Ariz., on the 1st of March 1967, and proceeded to tour the operating units of Sportservice on the west coast. I then traveled back east and was in St. Paul, Minn., from the 11th to the 14th of April. While I was at my father-in-law's home in `St. Paul, he showed me a brochure which contained pictures of the Frontier Hotel in Las Vegas. To the best of my recollection, this was the first time that I know the name of the hotel involved in this investment. During my conversations with my father-in-law, I believe that he also told me that he had been visited by an investigator representing the Nevada Gaming Commission. He mentioned that he had told that investigator all about the indemnity agreement. From St. Paul, I returned to Buffalo, N.Y., arriving at the end of the second week or beginning of the third week of April 1967. Some time between April 21 and 24, 1967, 1 was personally interviewed by an investigator from the Nevada Gaming Commission who had interviewed my father-in-law. I was informed some 3 years later that the name of this investigator was Davis Will. The interview PAGENO="0219" 1229 lasted about one-half hour. Also present at that interview was a Mr. Kenneth McCuaig, an independent attorney, who, in the past, had done work for Emprise. To the best of my recollection, the investiga- tor did not ask to see a copy of the indemnification agreement. He did, however, ask about this agreement, and I told him all about it. The main thrust of his discussion centered around my fitness to hold stock in a Nevada casino, since, by the terms of the indemnity agree- ment, my wife and I would inherit my father-in-law's stock upon his death. To the best of my recollection, this is all that I knew about the investment in the Frontier Hotel; and, indeed, this was the last time I thought about it, until I was subpenaed by a grand jury in Los Angeles during the month of July or August 1970, over 3 years later. Now, as I understand it, it was charged in the Los Angeles criminal case that Emprise violated Nevada law by failing to disclose to the Nevada Gaming Commission all the details of the loan to Phillip Troy. I am not a lawyer, and I do not know whether those charges are legally correct or not, although I am told by our lawyers that they do not think this conviction will be upheld on appeal. But I want to make it absolutely clear that I did disclose, to the gaming commission's investigator, everything I knew about the Frontier Hotel, and every connection I had with Phillip Troy's investment in the hotel. And-if it is a fact that organized crime figures were involved in the Frontier Hotel-I did not know it at the time, and I had nothing to do with any such people, or anyone other than my father-in-law, in connection with this investment. My brothers, our company, and the memory of my father, all are being unfairly maligned by anyone who says other- wise. I have also been informed by my counsel that the committee is interested in determining the full extent of my knowledge of, and dealings with, George Harry Johnson. I am prepared. to discuss this matter with the committee to the extent that I have nersonal knowl- edge of it.. I am aware of the fact that there have been allegations made to the effect that Mr. Johnson was hired to do certain improper activities in regard to an investigation of Congressman Steiger. So that the record will be crystal clear right at the outset, let me state clearly and unequivocally that I have never met George Johnson, have never spoken with George Johnson, have never authorized any activity of George Johnson~ and did not participate in his hiring or in directing any of the activities which he may or may not have engaged in. By way of background, let me expi am the nature of the relationship between George Harry Johnson, the Funk family, and Emprise Corp. Mr. Johnson v-as an employee of those tracks in Arizona which we have a. 50-percent stock interest in along with the Funks. As to these various tracks, the operating corporations have a management agree- ment with Funk Racing Circuit. Inc., a company wholly owned by the Funk family, giving to the Funks the exclusive right to run the tracks. to hire and fire all emploees, and to handle the day-to-day operations of the various businesses. I am aware that Mr. .Tohnson has claimc'cl before this committee that. he was instrumental i.n causing the wiretanpin~ of telephones of various persons. I have no knowledge of such activity and did not PAGENO="0220" 1230 approve of any such conduct. Under no circumstances did I ever authorize or approve such activities. I am aware that Mr. Johnson has testified that he obtained con- fidential bank records and telephone records of Congressman Steiger and other individuals. I never authorized anyone to acquire such rec- ords. I have never seen any confidential bank or telephone records belonging to Congressman Steiger or anyone else. As to Mr. Johnson's claim that he paid a bribe in order to secure certain confidential tele- phone records, I have no knowledge of this and would under no cir- cumstances ever condone such a course of action. In preparing for my testimony before this committee, I have con- ducted a thorough review of our files in order to ascertain when the name George Johnson first came to my attention. I have located a copy of a letter, dated May 4, 1970, addressed to Mr. Johnson by Mr. Walter Cheifetz, an attorney for the racing interest, which refers to an investigation which Mr. Johnson then was conducting regarding Congressman Steiger. I might add that the letter refers only to efforts on the part of Mr. ~heifetz to obtain certain public records from the SEC. However, the name George Johnson meant nothing whatever to me at the time, and I attached no significance whatsoever to the name of Mr. Johnson. Mr. Johnson's name was very dramatically called to my attention in the latter part of June 1970. I was working late on the evening of June 23, 1970, when I received a telephone call from one of our at- torneys in Phoenix, Ariz. In substance, he told me of a meeting which he and two of his associates had attended that day with Mr. Johnson at their office. He told me that Mr. Johnson had made a series of star- tling allegations, including an assertion that the Funks and their at- torney, Don Mooers, were conspiring with Congressman Steiger to drive Emprise out of business in the State of Arizona. He also told me that Mr. Johnson had further stated that he could prove this allega- tion by wiretapping the telephone lines of the Funks, and that Mr. Johnson therefore requested and suggested that Emprise hire him as a double agent to carry on this activity. Should the committee desire to see it, I would be only too happy to furnish a copy of a memorandum which I received from my attorneys which summarizes the meeting which they had with Mr. Johnson on June 23, 1970. I was quite concerned upon the receipt of this information and im- mediately contacted my brother Jerry. After discussing this with my brother, and because the information was of such a serious nature, he decided to personally go to Denver to meet with the Funks. My brother Jerry told them of the information which we had received. My brother then urged the Funks, in the strongest possible terms1 to im- mediately terminate Mr. Johnson's employment. In the months fol- lowing, numerous requests were made by both my brother and myself for two reasons that we felt were extremely serious. First of all, it was obvious that the Funks had a disloyal employee on their hands. Even more important, this employee had suggested doing something illegal, and it taxed my understanding and my brother's understanding that the Funks could under any circumstances keep a person like this em- ployed. The Funks indicated to us that they were in the process of terminating Mr. Johnson's employment. However, they felt that they should obtain certain information which Mr. Johnson had in his pos- PAGENO="0221" 1231 session and obtain a breakdown of whatever expenses he would claim prior to that termination. it is my understanding that as a result of these conversations, some time in August, Mr. Johnson's employ- ment was terminated by the Funks. I have attempted to give this committee a thorough and forthright explanation of the pertinent facts in the two areas with which I am personally familiar. I realize that there are a number of additional al- legations that have been made concerning Emprise Corp. and the Jacobs family, which this committee is also looking into. As to these other areas, such as Hazel Park, the Sports Illustrated article, and others, we are prepared to discuss them with you in some detail. However, since my brother, Jerry, had been more intimately involved in our business than I have, it is he who will be in the best position to discuss these matters with you. He has conducted a thorough inquiry into these other areas, and so, with the committee's permission, I would ask that these other areas be explored with him. I feel that this will not only save the committee's time, but would be more productive from the standpoint of developing all the relevant facts. In the event the committee wishes to interrogate me further after hearing from my brother, I want to assure you that I will make myself available at your pleasure. When my brother testifies here, he will be presenting to you a series of approximately 80 testimonials from persons who know the Jacobs family, attesting to our reputation in the sports and business communi- ties. Typical of the type of testimonials we have received would be those of Congressman Donald D. Clancy; Arnold "Red" Auerbach, head of the Boston Celtics; Arthur M. Wirtz, head of the Chicago Black Hawks; Paul Zuckerman, national head of the United Jewish Appeal; and William DeWitt, former owner of the Cincinnati Reds. Let me thank you for the opportunity of delivering this statement on those matters which I know are of concern to you, as they are to me; and should you have any questions at this point, I will try my best to answer them. Chairman PEPPER. Mr. Phillips, you may inquire. Mr. PHILLIPS. Yes, Mr. Chairman. I will try to be every brief. Mr. Jacobs, it occurs to me that we are in the unfortunate position of asking you questions which may properly be within the knowledge of your father. Apparently, most of the transactions relating to the Fron- tier operation were conducted thro~ugh your father. Is that correct? Mr. JACoBs. To the best of my knowledge, it was conducted by my father, by my father-in-law, and Mr. Reisman. Mr. PHILLIPS. Essentially, the first time you learned about the Fron- tier situation was from your father? Mr. JACOBS. Yes, sir. Mr. PHILLIPS. Tell us, just briefly, what your father said to you about that? Mr. JACOBS. My father called me on the telephone at the end of November of 1970 and said that he knew of an opportunity to invest in a gambling casino in Las Vegas, and he asked whether or not my father-in-law would have any interest in taking advantage of this opportunity. Mr. PI-IILLIPS. Had your father ever suggested to you before that your father-in-law he given the benefit of an investment of this nature? Mr. JACOBS. ~o, sir. PAGENO="0222" 1232 Mr. PHILLIPS. Did you ask him why this benefit should be given to your father-in-law? Mr. JACOBS. No, sir. I had mentioned to him in September that my father-in-law was severing his relationship with Donaldson's De- partment Store in St. Paul, Minn., and that my wife had expressed some concern to me about my father-in-law's welfare, due to the fact that he was going from a $50,000 a year job down to a $13,000 a year settlement and that he still had four or five children living at home. Mr. PHILLIPS. Is it fair to say that your father thought it was a good investment? Mr. JACOBS. It is fair to say my father told me it was a good investment. Mr. PHILLIPS. Did he say why he was not undertaking this invest- ment himself? Mr. JAOOBS. No, sir; he did not. Mr. PmLLIP5. Did he suggest you undertake this investment? Mr. JACOBS. No, sir; he did i~ot. Mr. PHILLIPS. Isn't it a fact that is exactly what occurred? Emprise, you, undertook the investment, and you did i.t through your father-in- law? Isn't that essentially what took place? Mr. JACOBS. No, sir; that is not. Mr. PHILLiPS. Well, who suggested tJ~e loan be made to your father- in-law? Mr. JACOBS. I would presume my father, sir. Mr. PHILLIPS. Did you ask at that time, knowing your father-in-law was going to get a substantial loan, what this transaction was all about? Mr. JACOBS. No, sir; I did not. Mr. PHILLIPS. Tell us why you did not? Mr. JACOBS. I accepted my father's judgment in business matters, sir. Mr. PHILLIPS. I understand you accepted his judgment, but it seems to me that an ordinary person would inquire about it, say, ~`Well, what is all of this about, what are you getting my father-in-law involved in here; if it is so good, may be we all should get involved in it." Didn't you make this kind of inquiry? You were discussing this. It would seem to me it would be a topic you would have undertaken and discussed extensively. Mr. JACOBS. No, sir. My affirmative responsibility was to run the bowling alleys in Phoenix. Mr. PHILLIPS. I am not asking you about your responsibilities. I am asking you about a relationship you had with your father, and about a deal that he was proposing to you to get your father-in-law involved, certainly, as it ultimately turned out, with a number of racketeers. It would seem to me that if you were getting involved with a $100,000 loan, you would want to know what this was all about. Mr. JACOBS. Sir, as I said before, I accepted my father's business judgment. I did not quarrel with that. Mr. PHILLIPS. You didn't ask any questions at all? Mr. JACOBS. No, sir; I did not. Mr. PHILLIPS. You say that he then contacted your father-in-law? Mr. JACOBS. Sir, the next I heard about it was toward the end of January. My wife called me to the phone, and I got on the phone and found I was on the conference call. My father was in Buffalo, I pi'~me, and my father-in-law was in St. Paul, Minn. PAGENO="0223" 1233 Mr. PHILLIPS. So between that time you knew nothing about the loan or about the transaction, or any of the facts in relation to this matter? Mr. JACOBS. This is correct, sir. Mr. PHILLIPS. When did you first learn that your father-in-law was going to be lent money? Mr. JACOBS. Sir, on that telephone conversation, my father said that that there was an opportunity to invest in a gambling casino in Las Vegas, and inquired whether or not my father-in-law would be inter- ested. My father-in-law, as I recall, stated that he would like to talk about it, and my father said that he would be in touch with him in a few days concerning the details. He then asked me to comment on it, and I said that I wanted my father-in-law to have every possible benefit from this investment since he had put me on to a very good thing some years ago-meaning his daughter. Mr. PHILLIPS. Did you at that time say, "Where is this hotel, or where is this casino? What does my father-in-law know about a casino? What are we getting involved in here?" Mr. JACOBS. No, sir; I did not. Mr. PHILLIPS. Did your father-in-law ask those questions? Mr. JACOBS. No, sir. My father said he would be in touch with him in a few days concerning the details. Mr. PHILLIPS. Did von ever learn the details of your father-in-law's arrangement? Mr. JACOBS. You are asking me when I learned the details? Mr. PHILLIPS. Did you learn the details at some time? Mr. JACOBS. You would have to be more specific as to what details, specifically. Mr. PHILLIPS. Well, how much money was going to be lent? Mr. JACOBS. Sir, I learned that in February of 1967, when my father- in-law came to Phoenix. Mr. PHILLIPS. What was his purpose in coming to Phoenix? Mr. JACOBS. He was going to visit my wife and myself, and at that particular time he presented me with a indemnity agreement to sign. Mr. PHILLIPS. What did he say to you at that time? Mr. JACOBS. He gave me an indemnity agreement to sign. He said that he had been to Las Vegas and that he had executed agreements regarding this investment. Mr. PHILLIPS. And why were you going to give him an indemnity agreement? Mr. JACOBS. Sir, because he did not have sufficient funds to be so financially exposed and the indemnity agreement was apparently at either his request or at the request of his brother, Paul Troy. Mr. PhILLIPS. How much money was involved at that time? Mr. JACOBS. The indemnity agreement states a loan of $225,000 was being made to him. Mr. PHILLIPS. So you were going to indenmify your father-in-law for this $225M00? Mr. JACOBS. That is correct, sir. Mr. Pi:IILLIPS. And he was going to hoTd the stock in this casino? Mr. JAcoBs. He would own the stock; yes, sir. Mr. PHILLIPS. Who was going to vote the stock? Mr. JAcoBS. So far as I know, he, sir. He owned it. PAGENO="0224" 10 I Mr. PHILLIPS. Well, what was he going to do with it upon his death? Mr. JAcoBs. Sir, upon his death the stock was going to my wife and myself. Mr. PHILLIPS. And what was he going to do with the profits of that particular stock during his lifetime? Mr. JACOBS. Sir, during, until such time as the debt was paid, all repayments of debentures would be paid to Emprise, to retire that debt, and then the first $50,000 of profit would be paid to Emprise to com- pletely do away with the debt. And from then on he would retain 15.83 percent. Mr. P1-fILLIPs. He was going to retain 15 percent of the profits of the stock? Mr. JACOBS. Profits of the stock. Mr. PHILLIPS. Did that appear to you to be the relationship of the owner of a stock? Do you actually think he was the owner when ho could only retain 15 percent of the profit? Mr. JACOBS. Sir, I believed he was definitely the owner. However, what is most significant to me is that this entire arrangement was ex- plained to the investigator for the Nevada Gaming Commission by Mr. Troy and was then explained by me and that investigator made his report to the Nevada Gaming Commission, and if that had not appeared to have been the case to the Nevada Gaming Commission, Mr. Troy would not have been approved as a licensee. Mr. PHILLIPS. I am asking you whether he owned the stock or not. You said he owned 15 percent of the profits and someone else owned 85 percent of the profits. You don't know if he could vote the stock or not. I think your father-in-law, when he testified here, said Em- prise was going to vote the stock. Mr. JACOBS. No, sir; I think if you read the testimony, the issue never arose, but it was his assumption that he would, of course, have the right to vote the stock. Mr. PHILLIPS. You assume he could vote the stock? Mr. JACOBS. Yes, sir. Mr. PHILLIPS. That was your assumption? Mr. JACoBs. Yes, sir. Mr. PHILLIPS. You say that he could not dispose of his stock any way he wanted to? Mr. JACOBS. No, sir; he could not. Mr. PHILLIPS. Do you think that is another indication of the fact he owned it outright? Mr. JACOBS. Yes, sir; he had made a testamentary disposition of the stock. Mr. PmLLn's. And he couldn't sell the stock during his lifetime? Mr. JACOBS. Sir, the indemnity agreement indicates he made a testa- mentary disposition. Mr. PHILLIPS. What was your agreement with him? What did he say to you when he presented you with this indemnification agreement? Mr. JACOBS. Sir, he simply told me to sign it. Mr. PHILLIPS. And you signed it? Mr. JACOBS. Yes, sir. Mr. PHILLIPS. And you had no further discussion about it? PAGENO="0225" 12.35 Mr. JACOBS. Troy expressed displeasure in the percentage arrangement. Mr. PHILLIPS. Well, Mr. Jacobs, you tell me that you got involved in this deal with little orno conversation with your father? Mr. JACOBS. That is correct. Mr. PHILLIPS. You signed the indemnity agreement involving $225,- 000 with your father-in-law with little or no conversation? Mr. JACoBS. That is correct, sir. Mr. PmLLIP5. Do you realize it is a highly implausible story? Mr. JACOBS. No, sir; because it is the truth. Mr. PHILLIPS. Did there come a time when you and others decided to conduct an investigation of Mr. Steiger? Mr. JACOBS. Sir, in February or March of 1970, just after Congress- man Steiger appeared before the New Mexico Racing Commission, I and my brother, in a conference call, called the Funks in Arizona and asked them who is Congressman Steiger and why is he saying these things about us. We asked them could they please find out who he was and why he was saying these things about us. Mr. PHILLIPS. Did there come a time when you directed an inveS- tigation of Congressman Steiger? Mr. JACoBS. No, sir. Mr. PHILLIPS. Did there come a time you were advised an investiga- tion was being conducted? Mr. JACOBS. There came a time in August of 1970, when I became aware that-no, excuse me, please. Let me back up. There came a time in June where I became aware that an individual by the name of George Harry Johnson had been retained by the Funks for this purpose. Mr. PHILLIPS. For what purpose? Mr. JACOBS. For the purpose of conducting an investigation of Congressman Steiger. Mr. PHILLIPS. What was the investigation designed to accomplish? Mr. JACOBS. Well, if it was pursuant to our request, it was to find out who Congressman Steiger was and why he was saying these things about us. Mr. PHILLIPS. And that is the sole extent of the nature of your inquiry; is that correct? Mr. JACOBS. Yes, sir. Mr. PHILLIPS. You didn't intend to get any information that could be used detrimentally against Congressman Steiger? Mr. JACOBS. NO, sir. Mr. PHILLIPS. You did not? Mr. JACOBS. No, sir. I was quite interested in knowing who Mr. Steiger was. I asked the. Funks to inquire, since they live in Arizona and Congressman Steiger represents a district in the State of Arizona, and I wanted to know if they could discover his motivation in attack- ing us. Mr. PHILLIPS. Was there some type of lawsuit brought in relation to a conspiracy allegation? Mr. JACOBS. There had been a lawsuit outstanding since before the first of the year. I believe it involved dog men in Arizona. I believe the Funks had brought a suit against- 81-068-73--pt. 3-15 PAGENO="0226" 1236 Mr. PrnLLIP5. Did you have any thing to do with bringing that suit? Mr. JACOBS. Sir, no. I wasn't aware of it, really, until after the first of the year. Mr. PHILLIr5. Were your attorneys actively participating in that lawsuit? Mr. JACOBS. Sir, I would have to explain the nature of legal rep- resentation in Arizona in order to fully answer that question. Mr. PHILLIPS. Please do. Mr. JACOBS. Sir, we have a law firm that represents Emprise Corp. in Arizona. That same law firm, under completely different billing, completely different billing system, also represents the investment that Emprise Corp., and the Funk family jointly have in corporations in Arizona. Now, to that extent the law firm would represent `both Emprise and would also represent the investment and therefore they would have been representing, I am certain, and would have been billed `by the Yuma Greyhound Corp.,, which was 50 percent owned by Emprise. Mr. PHILLIPS. So it is your corporations in Arizona that had retained attorneys to start a conspiracy suit; is t'hat correct? Mr. JACoBS. Sir, I believe that is correct. Mr. PHILLIPS. What was the nature of this conspiracy you were alleging? Mr. JACOBS.. Sir, I am not informed on that. I do not know. I would be happy to get you a copy of the complaint, sir, if you would like it. Mr. PHILLIPS. I would like to know the knowledcre you had at the time concerning this conspiracy suit, that we heard about from your other attorneys. Mr. JACOBS. `Sir, I have none. Mr. PHILLIPS. You have no knowledge of that lawsuit at all? Mr. JACOBS. No, sir. It was quite remote. It was in Arizona. But as I said, I would `be very happy to furnish you with a copy of the complaint. Mr. PHILLIPS. I am not interested in the complaint, I am interested in your knowledge, Mr. Jacobs. What I am asking you is: Did you ever discuss, with anyone, utilizing that lawsuit as a vehicle to obtain information about `Congressman Steiger? Mr. JACOBS. I do not recall such a conversation.' I am aware that Congressman Steiger was deposed in connection with that lawsuit. Mr. PHILLIPS. Was it at your suggestion? Mr. JACOBS. I really don't recall. I know it wasn't at my specific su'ggestion. Mr. PI-IILLIPS. Was it your thinking at that time that Congressman Steiger was involved in some conspiracy, that he should be deposed to determine whether he is in a conspiracy or not? Mr. JACOBS. Sir, I received a great deal of `conflicting information as to Congressman Steiger's motivation. I simply had no knowledge of whether there was conspiratorial motives, or not. There was abso- lutely-I had received nothing to confirm that. Mr. PHILLIPS. Let me ask you this: Do you think it is fair for a New York corporation to go out and start deposing Congressmen about conspiracies when they `have absolutely no evidence to `back it up? Mr. JACOBS. Sir, a New York corporation did not do that. PAGENO="0227" 1 ~~`)`~`) IbL) Mr. PHILLIPS. Well, Emprise is a New York corporation; is it not? Mr. JACOBS. That is correct, sir. Mr. PHILLIPS. And you own 50 percent of the Arizona corporations and we are told you had a substantial financial interest in them in addition to the stock; is that correct? Mr. JACOBS. In the Arizona corporations? Yes. Mr. PHILLIPS. So, in effect, you had financial control of these partic- ular corporations? Mr. JACOBS. Absolutely not, sir. Mr. PHILLIPS. Well, we had testimony, Mr. Jacobs, about the Funks having to clear the purchase of chairs with your people. And the transcripts we have received indicate that you were directing the opera- tion of these activities in Arizona.. Mr. ~JAcoBs. Sir, that is false. Mr. PHILLIPS. In any event, did there come a time when you discussed doing something to Mr. Steiger? Mr. JACOBS. When I discussed doing something to Mr. Steiger? Mr. PHILLIPS. Yes. Mr. JACOBS. Could you be more specific, sir? Mr. PHILLIPS. Did you want to do anything to Mr. Steiger? Mr. JACOBS. Did I wish to do anything to Mr. Steiger? Mr. PhILLIPS. Yes. Mr. JACOBS. No, sir. I imagine that I would have `been very happy to contribute to his opponents in an election. Mr. PHILLIPS. Would it be fair to say that you thought that your corporation should contribute to his opponents? Mr. JACOBS. No, sir; not my corporation. I am talking about Max Jacobs, personally, sir. Mr. PHIILIPS. I see. Did you also think it would `be appropriate for you to see if you could go out and find a candidate to run against Mr. Steiger? Mr. JACOBS. No, sir. I have no operating knowledge of that. Mr. PHILLIPS. Had you ever `heard that discussed? Mr. JACOBS. Oh, yes; that was discussed. Mr. PHILLIPS. Who discussed it? Mr. JACOBS. I `believe a public relations man by the name of Hal Antin, who is employed `by the Funks, posed that suggestiomi. Mr. PHILLIPS. And you didn't think that was such a good idea? Mr. JACOBS. Sir, I am not familiar with public relations work. And I indicated to him that if he could explain to me in a manner which I could understand how `he would go about doing such a thing, then I would be quite interested in listening to him and he might have some suggestions that I might wish to follow. But lie never came `back with any affirmative program. Mr. PHILLIPS. Was Mr. Antin ever assigned to investigate Congress- man Steiger, and try to develop a candidate to i-un against him? Mr. JACOBS. Sir, Mr. Antin was a never assigned to investigate Con- gressman Steiger. Mr. Antin is a public relations man. Mr. Antin and I spoke in Buffalo, N.Y., in, I believe it was, May, and I `asked him if he would go to Arizona and test the political climate there to make a determination as to whether or not there was any reasonable possi- bility of Mr. Steiger being defeated, either in a primary or a general PAGENO="0228" 1238 electiOn. And that if there was such a viability, I, Max Jacobs, would personally contribute to that candidate. Mr. PHILLIPS. When Mr. Antin undertook this particular project, who paid him? Mr. JACOBS. Well, sir, he never undertook the project. Mr. PHILLIPS. Who paid him while he was working for you? Mr. JACOBS. Well, sir, he was paid by the Funks, and I believe that I also directed Emprise to pay him because he wrote a history of the Emprise Corp. And I paid him for the writing of the history of the corporation. Mr. PHILLIPS. You say some corporation paid Mr. Antin? Mr. JACOBS. Emprise Corp. paid Mr. Antin $7,000, approximately. Mr. PHILLIPS. When did you do that? Mr. JACOBS. In 1970, sir. Mr. PHILLIPS. When? Mr. JACOBS. This was in connection with the writing of the history. Mr. PHILLIPS. When was that done; what part of 1970? Mr. JACOBS. I think it would have been May or June. Excuse me. We didn't pay him until later in the year and there was quite a bit of argument about what he wanted to charge me for writing the history. Mr. PHILLIPS. Who paid him for the, work he was doing in relation fo Congressman Steiger? Mr. JACOBS. Sir, he never did the work. In other words, sir, he never reported back to me as to whether or not there was a viable candidate and I never made any contribution to the 1970 political race. Mr. PHILLIPS. I am asking 37011: Did Mr. Antin go to Arizona and start the inquiring for that particular purpose? Did he stay in Arizona for a number of days and build up a file? Mr. JACOBS. Sir, I don't know if he did build a file. I never saw it. Mr. PHILLIPS. You knew he was in Arizona working on this project, didn't you? Mr. JACOBS. Well, sir, if he was working in Arizona, he was working in Arizona on behalf of the Funks. Mr. PHILLIPS. Isn't it a fact he telephoned you regularly and kept you advised of what he was doing? Mr. JACOBS. I spoke to Mr. Antin a couple of times in Arizona. Several times. Mr. PHILLIPS. What was he doing there? Mr. JACOBS. He was a public relations man. He was assigned to the- the Funks were having public relations problems relating to the Arizona Republic. He had been employed by them for many years, particularly in relation to a company called Western Racing. He would do such things as write the president's letter and things of that nature; Funks' public relations. When they began to have these difficulties with the Arizona Republic, he went to Arizona in order to aid them. Now, this is the manner in which I became acquainted with him. He came back east to explain the newspaper situation, et cetera. When he was in Arizona, he was working for the Funks. The assign- ment that I gave him was to write a history of the company and I also queried him as to whether or not he coulddetermine whether there was a viable political candidate running against Congressman Steiger, and if there were, I would be happy to contribute to that political candidate. Mr. PHILLIPS. Whether he was Democrat or Republican? PAGENO="0229" 1239 Mr. JACOBS. Yes, sir; whether he was a Democrat or Republican. Mr. PHILLIPS. Would you discuss first getting a Republican to run against Mr. Steiger and then getting a Democrat to run against Mr. Steiger? Mr. JACOBS. Mr. Antin stated that there would be both a primary and a general election. Mr. PHILLIPS. Isn't it a fact, your brother also stated that is the procedure he would like to follow? He said he would like to get two cracks at him? "Let's see if we can knock him off in two elections." Mr. JACOBS. Sir, I am not aware of that particular conversation. My brother may have said it. He may not. I would ask him, sir. Mr. PmLr~IPs. Weren't you also on the telephone line when that conversation took place? Mr. JACOBS. Sir, if you are talking about a specific conversation, I would have to see the transcript to determine whether or not I was in the room or not. Mr. PHILLIPS. All right. Do you know, or did you learn, that the Funks were recording your conversations in these telephone calls? Mr. JACOBS. When did I learn it, sir? Mr. PHILLIPS. Did you learn it? Mr. JACOBS. Yes, sir. Mr. PHILLIPS. When did you learn that? Mr. JACOBS. I learned that in August, sir. Mr. PHILLIPS. August of what year? Mr. JACOBS. Of 1970. Mr. PmILiPs. What did von think of that? Mr. JACOBS. Sir, I was quite angry. Mr. PHILLIPS. Why, because these fellows didn't trust you? Mr. JACOBS. Sir, I was quite angry because I consider it a very poor business practice to record telephonic conversations without first stating to the person "Do you mind if I record a portion of this con- versation?" These recordings were done without m.y knowledge and without my consent. Mr. PHILLIPS. Did you complain to them when they were recording your conversations during this period of time? Mr. JACoBS. Yes, sir. Mr. PHILLIPS. What did they say their reason was for recording these conversations? Mr. JACOBS. They said their reason for recording the conversation is since there are three or four members of the family engaged in the business, and other operating personnel, that they did not wish to report secondhand conversations which they had had, and therefore, there were some people missing from the room when the discussions were taking place, and they could call those people into the room later and play the tape for them. I told them I think that is a viable business practice, but I do not think it is proper to record without first securing the permission of the person you are talking to. Mr. PHILLIPS. They didn't say it was because they didn't trust you, anything of that nature? Mr. JACOBS. No, sir; they didn't say that. Chairman PEPPER. I am very sorry, but we have to go to the floor and vote. We will be back as soon as we can. (A brief recess was taken.) PAGENO="0230" 1240 Chairman PEPPER. Counsel, you may proceed. Mr. PHILLIPS. Mr. Jacobs, did there come a time when you were ad- vised that some type of recording was made of yourbrother's conversa- tion? Mr. JACOBS. Yes, sir. Mr. PiiILr4Ips. Tell us about that, please? Mr. JACOBS. That took place at the same time, in August, when I was speaking with the Funks in Arizona. They stated that they had re- corded conversations of both myself and my brother. Mr. PHILLIPS. Independently of the Funks doing it, had you heard that some other agency had done it? Mr. JACOBS. Oh, yes, sir. Mr. PI:IILLIPS. Tell us about that, please. Mr. JACOBS. Yes, sir. Some years before, a recording is alleged to haye been made of my brother and an attorney from the city of Mem- phis, Tenn. Mr. PHILLIPS. Was it in Arkansas or in Tennessee? Mr. JACOBS. It was in Tennessee, I believe. Mi'. PHILLIPS. What was all of that about? Mr. JACOBS. Well, sir, apparently it was pursuant to an investigation being carried on by the Arkansas State Police. Allegedly a gentleman by the name of Mr. Best is supposed to have put a bug, or some other form of recording device, in my brother's room. Mr. PHILLIPS. And that was in Arkansas, or Memphis, Tenn.? Mr. JACOBS. I believe it was in Memphis, Tenn. Mr. PHILLIPS. But it was the Arkansas people doing it? Mr. JACOBS. Yes, sir. Mr. PHILLIPS. And what were they investigating your brother for? Mr. JACOBS. Sir, pursuant to the West Memphis dog track. Mr. PHILLIPS. Did you also discuss with the Funks from time to time any lawsuits that were brought against Mr. Steiger? Libel suit? Mr. JACOBS. Oh, yes, sir. Mr. PHILLIPS. What was the libel suit all about? Mr. JACOBS. There were many discussions with many of our attor- neys as to whether or not Mr. Steiger should or should not be sued for libel, particularly, running from, I would say, the end of February to June of 1970. Certain of our attorneys wished to bring a libel suit against him and our chief counsel in Buffalo was opposed to the libel suit. The extent of the conversations diminished as time went on, due to the fact that each forum in which Congressman Steiger appeared against us his charges were found to be without merit and we were granted our dates and therefore the requirement for a libel suit stead- ily diminished. Mr. PHILLIPS. Were there some scaled papers in relation to one of these suits? Mr. JACOBS. I don't know what you are referring to, sir. Mr. PHILLIPS. Were there any documents that were under seal in the courthouse that you were interested in and discussed? Mr. JACOBS. I really don't recall, sir. I don't know what you are referring to. PAGENO="0231" 1241 Mr. PHILLIPs. Let me read you a conversation in which you are dis- cussing what actions you are going to take against Mr. Steiger, and so forth. You said: Yeah, well look the. Oh, Bradley, another thing, too. I got that note on the libel judgment based on the sealed papers and I really don't care about that. If there's anything juicy in the sealed papers we'll find a way to have someone trip over them. I tell you what they did to Jerry Jacobs down in Arkansas with the taping of his conversation in his room. That was against the law, too, but mark my words, if those bastards bad found anything juicy in that taped conversation, against the law or within the law, they would have found a way to make it public. And Albert Funk said: "Oh, I know that." You said: So, if you, if there's anything, we can't let anyone know bow we got it or any- thing like that, we'll let someone trip over it. I had better stop there. Mr. BITTMAN. May I address the Chair, please? Mr. PHILLIPS. Yes. Mr. BITTMAN. Mr. Chairman, you recall by my letter of May 26, 1972, to you, I requested an opportunity to review these transcripts and/or listen to the tapes. I indicated to you and Mr. Phillips person- ally, as well, as that it was my belief that Mr. Johnson had stolen these tapes from the Funks. I am also of the belief that with the consent of the Government, a Federal judge in Phoenix is about to return these tapes to the Funks, because they were the Funks' property. I understood at some point the committee was going to make a ruling as to whether or not these tapes, which were taken from the Funks by Mr. Johnson, would be permitted to be used during the course of these committee hearings. Chairman PEPPER. The committee has considered this matter, Mr. Bittman, after the conversations we had with you about it and your communication. As of now, counsel is making no effort to introduce into the record, any tapes. If a motion of that character were made, that would per- haps require a decision by the Chair and the committee. At the present time, as I conceive it, counsel is only asking about what purports to be. You recall, there has been no authentication by outside witnesses of the documents from which he is reading. He is simply saying, "Here I have before me what purports to be a conversa- tion between you and somebody else." Mr. BI'ITMAN. Yes, sir. Chairman PEPPER. "Do your care to comment on that? Did you say this? Do you care to comment?" It is up to the. witness to state whatever he will about it. So as of this time, it is the ruling of the Chair that unless the corn- n-iittee wishes to override the decision of the Chair, at this time the question is proper, if counsel only wishes to elicit the response of the witness as to whether that is a true statement of what he said on a certain occasion, or does he have any comment about it. Mr. BITTMAN. Thank you very much, Mr. Chairman. I would just like the record to indicate that I did make a request to review these PAGENO="0232" 1242 transcriptions and/or hear the tapes, and Mr. Phillips denied my request. Thank you very much. Chairman PEPPER. Proceed. Mr. JACOBS. Sir, your question was did I recollect anything about "sealed" documents. The conversation that you are alluding to, if I was in a discussion with Bradley Funk, I frequently referred to the matter that he was sending me as a "sea of papers"-s-e-a o-f. "A sea of papers." Never "sealed papers," sir. Mr. PHILLIPs. You never referred to any "sealed papers"? Mr. JACOBS. No, sir. Mr. PHILLIPS. And you say "If there is anything juicy in the sea of papers, we will find a way to have someone trip over them"? Did you say that? Mr. JACOBS. Yes, sir; to the best of my recollection. Mr. PHILLIPS. Well, you say there is something in the "sea of pa- pers" you are going to trip on? Mr. JACOBS. "Sea of papers." Mr. PHILLIPS. What were you going to trip over? Mr. JACOBS. Sir, here is what I was referring to. I was stating, if indeed, there was any material having to do with motivation, Con- gressman Steiger's motivation, improper motivation, that we should turn it over to a third party and should not pursue the matter our- selves, but should turn it over to a proper third party. Mr. PHILLIPS. The reading I have of this conversation-and it is very clear as to what you are talking about, Mr. Jacobs, is that you are getting some "sealed" information, some information that you are not getting appropriately- Mr. JACOBS. Sir- Mr. PhILLIPS. If you do get this juicy information, that you are going to arrange to trip over it. You are going to find another way to obtain it. That is the thrust of the conversation. Now you say that wasn't your intent and that it is not what you said. Mr. JACOBS. Sir, I am saying that you have totally misunderstood what I was saying there. It is taken completely out of context, and you must have an entire reading of that transcript in order to deter- mine what was said. Now, sir, I am telling you that I never made any reference to "sealed papers." It is "sea of papers," sir. Mr. PHILLIPS. Fine. You say here that that was against the law, too. Meaning this taking of your brother's conversation in Memphis, as you described it. You say that was against the law, too. Is that correct? Mr. JACOBS. Yes, sir. Mr. PHILLIPS. That was against the law, in your mind; is that correct? Mr. JACOBS. Yes, sir. Mr. PHILLIPS. Now, you are saying getting this "sea of papers," or "sealed papers," as I referred, page 22, you are saying that was not against the law ~ Mr. JACOBS. The "sea of papers," there was nothing that I received that was against the law that was not public knowledge. I refer to it as a "sea of papers." I said that I did not care about it. PAGENO="0233" 1243 Mr. PHILLIPS. Would you let me read it to you once more Mr. JACOBS. Please do, sir. Mr. PHILLIPS. I am reading on page 22: MAX JACOBS. Yeah, well look the. Oh. Bradley, another thing, too. I got that note on the libel judgment based on the sealed papers and I really don't care about that. If there's anything juicy in the sealed papers we'll find a way to have someone trip over them. I tell you the what they did to Jerry Jacobs down in Arkansas with the taping of this conversation in his room. That was against the law, too, but mark my words, if those bastards had found anything juicy in that taped conversation, against the law or within the law, they would have found a way to make it public. Did you say that? Mr. JACOBS. Sir, the "sea"-s-e-a o-f-"sea of papers" that I was referring to, were all public records. The libel judgment I was refer- ring to was architects, an architectural firm of Alien d~ Holson v. Sam Cynthia Snyder, and it was obviously not the libel judgment. That was misworded. That was a debtors judgment and that is a public record. The conversation that I then went on to state, that I referred to what had taken place in Arkansas, regarding Jeremy Jacobs. Mr. PHILLIPS. Were there any sealed documents? Any sealed court documents that you became aware of during this inquiry concerning Mr. Steiger? Mr. JACOBS. Not to the best of my knowledge, sir. Absolutely none. Mr. PHILLIPS. Do you know that Mr. Johnson testified here that he was told to get information any way possible and the lawyers would find a legitimate way of obtaining it later? Do you know he testified to that? Mr. JACOBS. Yes, sir; I read his testimony. Mr. PHILLIPS. Isn't that what you are saying exactly here? Mr. JACoBs. Absolutely not, sir. Mr. PHILLIPS. And when you say "that was against the law, too," what did you mean by that? Mr. JACOBS. I meant that, that which had taken place was improper and that if there was any discovery as to improper motive on the part of Congressman Steiger in attacking us, that we should make that public through a third party. Mr. PHILLIPS. After that conversation Mr. Funk said, "Oh, I know that." Mr. WALDIE. Could I interrupt? Mr. PHILLIPS. Yes. Mr. WALDIE. Just so I understand the question. Is it the counsel's contention that the judgment to which reference has been made was, in fact, sealed? Mr. PHILLIPS. It is my understanding there were sealed documents in Arizona relating to Congressman Steiger, and efforts were made by the Funks and George Harry Johnson to obtain that information and utilize it in a detrimental way against Steiger. Now, we go on, after that statement, Albert Funk says, "Oh, I know that,"-that you should use this juicy information any way you can. And you say, "So, if you, if there's anything, we can't let anyone know how we got it or anything like that. WTe'll let someone trip over it." Could you tell us what you meant by that? Doesn't that speak for itself? PAGENO="0234" 1244 Mr. JACOBS. No, sir. Mr. PHILLIPS. You have some other connotation than the one I am giving it? Mr. JACOBS. Sir, I think you-we are just going to have to review the entire transcript of the whole conversation. (Discussion off the record.) Mr. JACOBS. Now, sir; what I am saying there, what I intended to convey there, was that if there were any improper motive, whether it be a legal or illegal motive-now, there are certain legal motives that are improper. For instance, envy would be an improper motive, but it would be legal. That it would not be prudent for Max Jacobs to stand up and divulge this improper motive, that it would be best given to a responsible party to deal with. Mr. PHILLIPS. I am asking you this, Mr. Jacobs, and I am a1mn~ finished with this line. It says, "We can't let anyone know how we got it." What was the "it" you were talking about? "We can't let anyone know how we got it." Mr. JACOBS. Information pertaining to motive, to Congressman Steiger's motive for attacking us. Mr. PHILLIPS. This juicy information you referred to; is that correct? Mr. JACOBS. Pardon? Mr. PHILLIPS. The juicy information you were talking about? You didn't want anybody to know you got the juicy information? Mr. JACOBS. Juicy information? That would be a vernacular or improper, for referring to his improper motivation, sir. Mr. PHILLIPS. Do you think that is juicy information? Mr. JACOBS. Sir? Mr. PHILLIPS. The next reference clearly indicates what that "juicy information" is. I have no other questions. Mr. JACOBS. Very well. Chairman PEPPER. Mr. Waldie. Mr. WALDIE. Mr. Chairman, counsel has referred to a portion of this transcript that has not been put in the record, but has inferred that the portion of the transcript is very damaging to the Jacobs people. It is not damaging to the Jacobs people, but it is a portion of the transcript that has not been put in the record, but has inferred that it is not damaging to the Jacobs people unless we are willing to put this in the record, and I don't think we should put it in the record. And if we can't put it in the record, there ought to be no references to mis- lead anybody as to what that transcript says. I simply want to say I have read it and it ought not, in my view, to be put in the record, but it is not damaging to the Jacobs people. If that is not accepted theory, then in fairness to the gentleman before the committee, and by request of his counsel, this transcript ought to be given to them. Le me ask something of Mr. Jacobs. Mr. Jacobs, have you seen this transcript? Mr. JACOBS. Yes, sir; I have. Mr. WALDIE. Do you object to counsel having the copy of the the transcript? PAGENO="0235" 1245 Mr. JACOBS. Sir, that transcript? No, sir; I have not seen that tran- script. No, sir. Mr. WALDIE. Have you ever heard this conversation as to which counsel interrogated you relative to "sealed papers"? is this the first time you ever heard of that conversation? Mr. JAcoBs. Sir, I have never referred to "sealed papers," sir. It is "sea of papers." Mr. WALDIE. I heard your explanation. But I was taken by the alacrity of your response to clarify what seemed to be a confusing word. I am asking you, have you ever seen this transcript or heard this conversation repeated to you before counsel repeated it to you? Mr. JACOBS. Sir, I have reconstructed to the best of my. knowledge this particular conversation. Mr. WALDIE. And you recall in that reconstruction, the words "sealed papers"? Mr. JACOBS. "Sea of papers." Mr. WALDIE. But do you recall in the reconstruction, the words that were used in the transcript as having been "sealed papers" or is it your recollection, as you recoi~structed it, that it was "sea of papers"? Mr. JACOBS. It was "sea of papers." Mr. WALDIE. Did you recall that in reconstructing it before counsel interrogated you on that matter? Mr. JACoBs. Yes, sir. This was reconstructed by Phoenix counsel, sir. Mr. WALDIE. By what? Mr. JACOBS. Using Phoenix counsel, sir. Mr. MTALDIE. I don't understand that. What was reconstructed by using Phoenix counsel? Mr. JACOBS. The discussion, sir. The details of that particular discussion. Mr. WALDIE. I don't see in this discussion any Phoenix counsel. How did Phoenix counsel assist in reconstructing it? Mr. JACOBS. Sir, Phoenix counsel has tapes of these discussions which they reconstructed for us. Mr. WALDIE. All right. That is what I am trying to get at. Then you have seen the transcript of this discussion? Mr. JACOBS. I have seen a reconstruction as done by Phoenix counsel, sir. Mr. WALDIE. And in that reconstruction, were the words "sealed papers" used? Mr. JACOBS. No, sir. Mr. WALDIE. Who is the Phoenix counsel? Mr. JACOBS. The Lewis & Roca firm, sir. Mr. WALDIE. How did they get copies of the tapes? Mr. JACOBS. Sir, I really don't know. I believe it was-these were tapes that were turned back to them as part of a deposition or a nro- ceeding, or a request. Mr. WALDTE. Then, let me address your counsel. Counsel, have you ever seen this transcript of this conversation prior to this moment? Mr. BITTMAN. Congressman. I have never seen this transcript before in my life. I do have in my office a transcript of a conversation which purports to be the same conversationS but is not the same. PAGENO="0236" 1246 Mr. WALDIE. All right. In that transcript, did the word "sealed" appear? Mr. BITTMAN. Not to the best of my knowledge. Mr. WALDIE. Did the words "sea of papers"? Mr. BITTMAN. Yes, sir, "sea of papers" appeared in the particular transcript I have in my office, which was furnished to us by Phoenix counsel. I believe they obtained so-called dubs of the tapes which were turned over to the Phoenix grand jury, which were the subject matter of a court proceeding, the originals of which I believe the judge is in the process of ordering that they be returned to the Funks. Now, I would like to add right here, that since we have three or four of such transcripts, I have no idea which this committee has in its possession. I have made the request and that request was Tejected. So, therefore, we have attempted to reconstruct what possible tran- scripts the committee might have in its possession so that Mr. Jacobs could answer the questions the best he could and hopefully not out of context, sir. Chairman PEPPER. It seems to me, as I said awhile ago, that as long a.s inquiry by counsel, or any member of the committee, of the witness is related to asking the witness as to whether or not a certain statement is true, or whether he made a certain statement or not, thus giving him the freedom to say he did say it or he didn't say it, that in that significance or denotation, it is taken out of context. Mr. STEIGER. Mr. Chairman, excuse me. We are very rushed and it seems to me we are going to get awfully bogged down. As far as I am concerned, we can forget the transcripts and forget the whole line of questioning. I have some documentation here I will share with counsel and I think it is very germane. Mr. WALDIE. Before he does it, I want to finish my questioning, too. Mr. MURPHY. Mr. Chairman, at `this time, since we have gotten into these tapes, and this particular transcript, and since there are so many of them obviously floating around, I want to register my ob- jection to the Chair's ruling of the a'dmis~ibility of these tapes. I think, in all fairness to the Jacobses and their family and the counsel and the representation of this committee, that we make these tapes, or the transcriptions we have now from the tapes, available to counsel and his clients. Chairman PEPPER. Well, that is a matter for decision, of course, on the final analysis. Do you want to discuss it and rule on it right now? Let me just say this by way of explanation. We discussed this matter yesterday at some lengft. The general opinion was that it had never been customary for congressional committees to provide the witnesses copies of what is purported to be transcripts of conversa- tions, that the hearings of a congressional committee were more analogous to the proceedings of a grand jury than to the trial of a criminal case in which the defendant would always have a right to reciuest and have disclosed to him such conversations. was the intention of the Chair, unless overruled by the corn- mittee, to hold that if an effort were made to introduce the tapes in evidence, that we would not do that until there had been an op- portunity for counsel to examine them. PAGENO="0237" 1247 But since It ~s the purpose of counsel, apparently, only to in- quire relative to certain questions, as to whether that refreshed the recollection of the witness or not, and it had only been two or three questions apparently referred to, and the Chair struck out the com- ments of counsel upon the question that was not answered from the transcript; that was the basis of the Chair's rulin~. If the committee wishes to suspend and give all of `the tapes to the counsel for the witness, or for no further reference to be made to the transcripts in the proceedings, I would, of course, be glad to ad- here to the wishes of the committee. Mr. MURPI-rr. Counsel, do you have the transcript now? Mr. BITTMAN. Congressman Murphy, it was just furnished to m~ a few minutes ago. I have not had the opportunity to review it. Chairman PEPPER. Mr. Steiger has stated, as I understand it, there is no intention on his part to make any further reference to the tapes. I don't know if any other member has any desire to go into the tapes further. Mr. MURPHY. Mr. Chairman, I think Mr. Waldie is going to go into the tapes further. I understand the reasoning behind your ruling, but what you are saying is that what we cannot do direet1~ we are surely doing indirectly, by making certain references to certani portions of the tape. I just think for the sake and integrity of this committee, at least mine, that I wa'nt to make available anything I have in front of me to these gentlemen out here in front. I just think it is basic fairness. And I known Mr. Steiger's interest in basic fairness. Mr. WALDIE. My intention, Mr. Chairman, is to ask Mr. Jacobs several more questions on the conversation to which he has already responded, and I will point to the page and paragraph to counsel. Mr. STErnER. Mr. Chairman, if the gentleman would yield at this point. I would like to invoke the committee rule which cites the chairman will call upon the committee members to question in the order in which he has the list in front of him, not to preclude Mr. Waldi&s questioning-and obviously, he is going to utilize whatever method he wants to question-but so as to be certain I `am not precluded at this point. I would invoke that committee rule. Chairman PEPPER. Do you wish `the counsel to have before him the transcript? Mr. WALDIE. He has it. Yes. We gave it `to him, Mr. Chairman. Chairman PEPPER. You have now been afforded the transcript and, as far as I am concerned, you can have all of the rest of the transcripts that are `available. Mr. BITrMAN. Thank you very much, Mr. Chairman. Chairman PEPPER. Do you want to take time to look it over before you are interrogated about this? Mr. BITTMAN. That is the reason why I made my request several weeks ago for these transcripts, Mr. Chairman. One of the problems we are confronted with right now is that this transcript, I believe, only reflects an interpretation of a secretary as to what the tape re- flects. And `there is no way to compare whether or not it is accurate. A transcript, `apparently `of the same conversation, which I was PAGENO="0238" 1248 furnished from Phoenix, Ariz., counsel, gives in respect major cor- rections to this conversation. Mr. STErnER. Mr. Chairman, I would respectfully submit, under the committee rules, it is my intention to examine the witness on a totally different matter that has nothing to do with the transcript, and counsel can review my evidence. `Chairman PEPPER. Mr. Waldie is recognized. The Chair is going to recess for 5 minutes, and in the meantime Mr. Bittman can look over this transcript. Mr. WALDIR. Let me tell him what I will question him on. Chairman PEPPER. All right. He can indicate where the questions are on the tapes. Mr. WALDIE. My only question will involve page 22, the last para- graph, Max Jacobs' testimony or conversation beginning, "Yeah, well, look the. Oh, Bradley." * Mr. BITTMAN. I have that, Congressman. Thank you very much. Mr. WALDIE. That is the only paragraph I will be questioning you on. Do you need time? Mr. BITTMAN. If you give me a minute or two. (A brief recess was taken.) Chairman PEPPER. May we have order, please. Mr. Jacobs, have you had an opportunity to look at the pertinent part of the purported document about which Mr. Waldie wishes to inquire? Mr. JAcoBs. Yes, sir. Chairma:~ PEPPER. You may proceed. Mr. WTaid~e. Mr. WALDIE. Mr. Jacobs, the question I want to ask you, you say, "Oh, Bradley, another thing, too. I got that note on the judgment based on the"-your interpretation is-"sea of papers." From whom did you get the note? Mr. JACOBS. The note was-sir, it wasn't a note, sir. It was a pack- age of material that was sent to me by the Funk people in Arizona, concerning historical data on Congressman Steiger. Mr. WALDIE. Why did you use "I got that information on the libel judgment" if that is historical data? Mr. JACOBS. Sir, I think the note I am referring to, sir, is the entire- well, I would be conjecturing, sir. It was in the package. There were several documents that the Funk people felt would be of `historical intere~t to me, concerning Congressman Steiger. Mr. WALDIE. Just one final question on this fact. Is it your recollec- tion this is an accurate transcription of that portion of your conversa- tion, "Oh, Bradley, another thing, too. I got that note on the libel judgment"? Mr. JAcoBs. No, sir; it wouldn't have been a libel judgmeut. It would have been a debtor's judgment.. Mr. WALDIE. Would you have said "debtor's judgment"? Mr. JAcoi~s. I believe so, sir. Mr. WALDIE. One other source of inquiry. I have listened to the testi- mony for several weeks' now, and I find the involvement, to the extent that it has been described before this committee, of Emprise with organized crime figures to be a tenuous `involvement, to be perfectly frank with you. ButT do not find much comfort in your description of your lack of zeal in~ yOtir effort to `defeat Sam Steiger. I personally PAGENO="0239" 1249 am convinced you wanted him desperately defeated and you went to ends that were really not quite proper at all to do so. I thought the Funk testimony was far more credible in that regard than was yours. Do I gather that it is your testimony here, that in your zeal to have Sam Steiger defeated, you did not eiigage in, authorize, or were aware ~of, any improper activities? Mr. JACOBS. Sir, that is my statement. And, sir, I might add, par- ~nthetically, that nothing that I received from Arizona by way of information concerning Congressman Steiger had anything more than historical significance as to who Congressman Steiger was. Mr. WALDIE. So that it is your testimony that all you were seeking to do was get some background information of a historical nature on Mr. Steiger, and you would then be supporting the candidate in the hope he could be defeated, hut in an ethical and proper manner on the issues? Is that really your testimony? Mr. JACOBS. Yes, sir. Basically-sir, if I may take a moment. Sir, we never heard of Congressman Steiger before February 23, 1970; February 21. At that time, sir, he launched a series of attacks ~against my family, my father's reputation, covering materials we had never heard before. Most of what he said was false, just factually false. We were desperately concerned. Mr. WALDIE. I know, and I don't want to interrupt you, but I know of your concern and I know of your unhappiness with Mr. Steiger's ~attacks, and I know of your belief they were totally unfair and im- proper. But knowing all of that, I find it difficult to accept your con- tention that you would not have authorized or become aware of any efforts that were less than totally ethical in youl desire to have Sam Steiger eliminated from his position of authority that was causing you so much trouble. And yet I gather that is what you are telling me? Mr. JACOBS. Sir, I would have supported an opposition candidate to Congressman Steiger with my own money. Mr. WALDIE. But you were not seeking any derogatory information concerning Mr. Steiger's personal life or business connections to use in any such campaigns? Mr. JACOBS. Sir, nothing of an illegal or improper nature, and inso- far as derogatory, sir, I would say I was interested in any informa- ~tion that would have explained to me his motivation for attacking my family. Mr. WALDIE. I have no further questions, Mr. Chairman. Chairman PEPPER. Mr. Wiggins. Mr. WIGGINS. I yield to Mr. Steiger. Chairman PEPPER. Mr. Steiger. Mr. STEIGER. Mr. Jacobs, in your prepared testimony, on page 8, the bottom of the page, referring to Mr. Will's interview with you, you make the statemeiit, "He did, however, ask about this agreement." And the line just ahead of that-"To the best of my recollection, the investigator did not ask to see a copy of the indemnification agree- ment. He did, however, ask about that agreement and I told him all about it." sow, Mr. Jacobs, I am going to quote to you from the transcript of the Californiia matter of the United States of America, Plaintiff, ~v. Ze~illi, ~oli~i, et cetera, recently completed. PAGENO="0240" 1250 On page 2926 of this transcript, Mr. Will is on the .stand, and he is being examined by Mr. Kotoske, who. is a Federal prosecutor. He addressed Mr. Will, Mr. Kotoske did, and said, "You have before you, do you not, what is marked as exhibit 7A, item 8. Have you ever seen that document before?" That document, for your recollection, is the guaranteed indemnity agreement, and I would be happy to have you review it. It is a familiar document, I suspect. Mr. Will responds to Mr. Kotoske's inquiry, "No, I have not." "Did you see it on the day you interviewed Mr. Jacobs?" "No, I did not." "Did you recall him ever telling you about that document?" "No." Here we have a clear contradiction between what Mr. Will has said under oath in this matter and what you have said under oath here. Would you care to explain that contradiction? Mr. JACOBS. Yes. Mr. Will is in error. Mr. STEIGER. He is in error, or he is dishonest? Mr. JACoBS. No, sir. He is simply in error. Mr. STEIGER. All right. Fine. Now, if we could have a little assist- ance here, I am going to ask that you look at a copy of this. I ask that you look at the document, Mr. Jacobs, that the young lady is handing you. It is a document that is on a letterhead marked "Max William Jacobs, 703 Main Street, Buffalo, N.Y. 14203," dated June 24, 1971. Is that your letterhead, Mr. Jacobs? Mr. JACOBS. Yes, sir; it is. Mr. STEIGER. It is addressed to Sgt. E. M. Garner, 4813 Alexandria Drive, Metairie, La. Do you recognize the person to whom it is ad- dressed? Mr. JACOBS. Yes? sir. Mr. STEIGER. Will you take a minute, Mr. Jacobs, and review that letter. I will ask you first if you will look at the signature at the third page. Is that your signature? Mr. JACOBS. Yes, sir; it is. Mr. STEIGER. Do you recall writing the letter? Mr. JACOBS. Yes, sir; I do. Mr. STEIGER. Fine. The letter accompanied a file that I have here in my hand, a file which I will make available for your inspection. Now, Mr. Jacobs, you have testified here that you did not instruct Mr. Antin, George I-larry Johnson, or anybody else. That your very words were "We didn't investigate Steiger, never intended to use anything against Steiger, the sole reason was to find out who Steiger was and why he was attacking us. If he did build a file, I never saw it." These are your words, "if Antin," meaning he, "built a file, I never saw it." Now, Mr. Jacobs, you have also responded to Mr. Waldie that you were interested in history, the history of Steiger. I gather that in addition to your dramatic ability, you are also something of a his- torian. I am going to ask, now that you have a chance, if you will look at the bottom of the first page of your letter. PAGENO="0241" 1251 Incidentally, you might identify who Sgt. E. M. Garner is. Mr. JACOBS. Yes, sir. He was a sergeant attached to a division in Louisiana that conducted the investigation of Emprise prior to the licensing of Jefferson Downs Race Track last year. He requested of me any information that I might have concerning you, after your testimony, sir. Mr. STEIGER. You sent this in pursuance to his request, is that correct? Mr. JACOBS. Yes, sir. Mr. STEIGER. And this file escaped your attention at the time you told us that you didn't investigate Steiger you never intended to use anything against Steiger, and if Antin did build a file, you never saw it? Mr. JACOBS. Sir, that question was asked pursuant to Mr. Antin's assigument regarding the election. Mr. STEIGER. Oh, he built a file but it has had nothing to do with the election; it was for the historical thing you were doing? Mr. JACOBS. Sir, when I was being directly examined, I was asked about- Mr. STEIGER. Excuse me, Mr. Jacobs. I am going to interrupt. I don't mean to be rude, but I think, perhaps, I can phrase a question that will be easier for you to respond to. Did Mr. Antin ever build a file for you, for whatever purpose, which involved anything about me. that you ever saw? Mr. JACOBS. Not Mr. Antin. To the best of my knowledge, the Funks Mr. STEIGER. The Funks did all of this? The Funks built the file that we now are referring to, under the cover of the letter you have before you? Mr. JACOBS. Sir, this was sent at several different times to me in packages by the Funks, and I tried to assemble it under proper head- ing and categories. Mr. STEIGER. That is hardly responsive to my question. Are you telling me, while you have a file and had a file, and appar- ently did investigate Steiger, contrary to your statement saying, "We didn't investigate Steiger," but you did have a file. Now, you are telling me that Mr. Antin didn't compile a file, the Funks compiled a file? Mr. JACOBS. To the best of my knowledge, it was the Funks, sir. In attempting to respond to your statement, I would like to say that what you are quoting from, before this hearing, was in direct reference to a question asked pursuant to my request of Mr. Antin, that he determine whether the political climate would enable you to be beaten, either in a primary or general election. The question was then asked of me~ "Did he send you back a file on it?" I said, "No, sir; there was no file." It was no file pursuant to Mr. Antin's assignments given by me. Mr. STEIGER. Well, of course, counsel also asked you if you ever participated in an investigation of Steiger. I really don't see much point. Obviously, we will have the transcript of this at some future date and can debate that. I am not concerned about the semantics of our discussion. I am interested, I am very interested, in what you had to say about this particular file. Now, I want to know if all of the information in this file came from the Funks. Sl-065-73-pt. 3-16 PAGENO="0242" 1252 Mr. JACOBS. I would like an opportunity to look at the communica- tion, sir. Mr. STEIGER. Oh, be my guest. Incidentally, Mr. Chairman, I would like to advise you and the com- mittee at this point-and I guess the Jacobses and their attorneys and the public relations people and the man's friends-that I don't view this hearing as vindication, an attempt to vindicate either Steiger or Jacobs. This hearing was called in good faith by the committee to investigate the invasion of organized crime in sports. I have contended and do contend that the Jacobses do business with organized crime. To my satisfaction, that has been established. What has devel oped as a. result of these hearings is that the Jacobses do busi- ness very nmch like organized crime, and that has developed as a result of these hearings. And that is what my chief concern is. Frankly, Mr. Chairman, that is why I asked the committee's indul- gence on this matter that is before us at. the moment, the file Mr. Jacobs has apparently dispersed throughout the country. And that is my pur- pose and I want the chairman to understand that. Mr. Jacobs, did you have a chance to review the letter? Mr. JACOBS. Yes, sir. Mr. STEIGER. Now, I would repeat the question, Mr. Jacobs. Do you recall if any of the information in this file was acquired from anybody else other than the Funks? Mr. JACOBS. To the best of my recollection, the only thing which I sent to Sgt. E. M. Garner, which was not obtained by the Funks, was a communication sent by Congressm~in Chappel.i to the Louisiana Rac- ing Commission. Mr. S'PEmER. Mr. Jacobs. did you authorize Hal Antin to employ an investigator out of Philadelphia to investigate Steiger in Washington and environs? Mr. JACOBS. No, sir. I requested that he interview competent in- vestigators from investigative firms, to see whether or not they would be interested in undertaking such a task, in order to determine your motivation in attacking us. An assigmuent, incidentally, which he never completed~ hut did report back to me that he was unable to hire a.n investigative firm. Mr. STEIGER. Well, Mr. Jacobs, among these documents which I will show you in a. moment, is one which lists photographs of the farm that my wife and I lease in Virginia; the legal description of that farm; the taxes that the landlord paid on the farm and a narrative that is unsigned and includes the credit rating. Also, includes the salary schedule of my staff, identifies my staff and gives the salary schedule, as of 1970, and an item from Stone's Mercantile Agency, "home owner- ship indicates family stability," whatever in the hell that means. This is the document. The only identity on the document is the notation Ash, Bauersfeid, Burton & Mooers-that is a familiar out- fit-Attorneys, 3900 Wisconsin Avenue. Did that come from the Funks, or did that come from-that is not the document-the pictures and the rent that I pay on the farm and that sort of thing, was that from the Funks, also? Mr. JACOBS. Sir, that all came from the Funks, and it is a matter of public knowledge. PAGENO="0243" 12.53 Mr. STEIGER. The pictures are a matter of public knowledge and the credit report is a matter of public knowledge? Mr. JACOBS. Sir, a credit report can be obtained on any individual. Mr. STEIGER. Who obtained the credit report? Mr. JACOBS. Sir, I am afraid you have to ask the Funks. I really don't know. Mr. STEIGER. You don't know who obtained these documents then? You don't know who specifically obtained them? Mr. JACOBS. Sir, I received that information from the Funks. Mr. STEIGER. Entirely from the Funks? Mr. JACOBS. Except for the communication. Mr. STEIGER. Except for the letter. And even the information that was obtained here in Virginia and Washinizton? That is interesting that you would get that from the Funks. How do you account for the fact you got that information, the personal information about my residence and so forth? Mr. JACOBS. Sir, how do I account for it? Mr. STErnER. Yes. How do the Funks happen to come by it? Do you know if it is accurate? Mr. JACOBS. Sir, do I know if the information is accurate? Mr. STEIGER. Yes. Mr. JACoBs. No, sir; I do not know. I was simply sent it by the Funks. Mr. STEIGER. Do you know if any of the information you received is accurate? ~ .TAcrn~s Sir, I did not check out authenticity of it since it only had historical value. Mr. STEIGER. Well, I guess we come to the nitty-gritty then, Mr. Jacobs. Now, there is another item of history I can value. Go to the last paragraph, Mr. Jacobs, of your letter. There is one final piece of information not contained in these files, which I feel you should be aware of. It reads: The Congressman is currently married to his second wife. His first wife. Cynthia Steiger, divorced him. Apparently it was a very unpleasant action. The transcript of this divorce proceeding was impounded by the juvenile court in Prescott, Ariz. Did you ever verify that? Where did you get that little juicy piece of infornaation? Mr. JACOBS. Sir, that was transmitted to me by the Funks. Mr. STETGER. Oh, but not in writing? Mr. ~JAcoBs. No, sir; it was transmitted telephonically. Mr. STEIGER. Telephonically? It really doesn't seem that much of historic value, telephonically. Before you signed your name to that little piece of information, you signed your information, as a matter of fact, not alleged, not any- thing else was impounded by the juvenile court in Prescott, Ariz. You did not bother to find out if indeed it was impounded by the juvenile court in Prescott, Ariz? Mr. JACOBS. No, sir; I hadn't. Mr. STEIGER. Because if you had done that you would have found your statement was in error. PAGENO="0244" 1254 After listening to your explanation concerning the sealed reference Mr. Waldie called to your attention-and I must say I share his surprise at the alacrity of your mental gymnastics in being able to translate "sealed" to "sea of"-how would you translate "impounded"? What did you mean when you wrote "impounded"? Mr. JACOBS. Sir, I probably- Mr. STErnER. Maybe the rest of this paragraph will refresh your memory. I will finish reading it: Apparently it was a very unpleasant action. The transcript of this divorce proceeding was impounded by the juvenile court in Prescott. Apparently under Arizona law this is done whenever a divorce centers around a minor (as, for example, in any action which a minor might be named as corespondent). Now, that is a very interesting legal historical observation, Mr. Jacobs. What were you trying to imply? What were you saying in. that matter? Mr. JACOBS. Sir, this information was given to me, I believe, by- Donald Mooers, on the telephone, from Arizona. I was simply re- peating it. Mr. STEIGER. It seems really in context with the rest of your letter.. Were you simply putting that in as a legal point for Sergeant Garner, so that he might understand, might better understand Arizona. law and why they would impound a divorce proceeding in a juvenile court? Was that your purpose? Mr. JACOBS. No, sir. Upon review, it appears to me to be unnecessary,. that I ought not to have said it, and I apologize for it. Mr. STEIGER. Oh, I am sorry, Mr. Jacobs. I won't buy that. The reason I ask you that is because Mr. Arnold Weiss-do you know who Mr. Arnold Weiss is? Mr. JACOBS. Yes, sir, I do. Mr. STEIGER. Mr. Arnold Weiss sat in my office at one point, it was in the spring of last year, and suggested, that in this ugliness of politics, there were ugly rumors, and he then went on to suggest one of the many ugly rumors he had heard was the cause of my divorce was an association between myself and my then 3-year-old daughter,. and "wasn't that awful ?" I then had Mr. Sidney Hayman of WJR, a station in Buffalo, N.Y.,. tell me that Mr. Arnold Weiss told him the same story, `saying, "Isn't~ it awful, the kind of rumors that get started?" Now, Mr. Jacobs, I don't know where you draw the line or what you consider historical value, or how deep your venom and your conviction that my attack on you is unfair, and I frankly am not con- cerned about what you feel about me. But I think the committee is. entitled to know. Is this kind of behavior done just because of your blind rage or is it a calculating method of destruction? Have you any idea? Can you make the distinction in your own mind? Mr. JACOBS. Sir, I would have to respond that this last paragraph is unfortunate, and I a~oiOgize for it. Mr. STErnER. Have you always gotten off that easily, Mr. Jacobs, in life? W]ien you as a little boy, when you did something wrong, you just apologized? Mr. JACOBS. No, sir. Hardly at all. Mr. STEIGER. Mr. Jacobs, I am going to ask that the clerk, if he would, take this down and let you look at this file, because I think it is important. PAGENO="0245" 1255 I would like to know, while you are examining the file, how many such files did you send out around the country, to the best of your recollection? Incidentally, you will note in that file, there are the pink slips in the file-I would refresh the committee's memory. Our chief counsel had requested from Mr. Mooers, memorandums which he had made in the Steiger matter. 1~\Te have five of these memorandums here, which are identical to the ones offered to the committee. They are repeated ver- batim. They are photocopied in this report. I point that out to the committee so they might know, in spite of Mr. Mooers' statement that they never made any use of these memoran- dums. Apparently, Mr. Jacobs made use of them, possibly in the absence of Mr. Mooers' knowledge. But use was made of these memo- randums. I don't know what you want to do with them. They are al- ready introduced in the record. How many of those files have you dispersed about the country? Mr. JACOBS. I have dispersed these files to every counsel represent- ing us in a major area of conflict. I would say that there would be ii or 12 various States, and I did so for one reason oniy, that they were asking the same question that I had asked: Who is Congressman Sam Steiger and why is he saying these terrible things about us? It was in effect a matter of acquainting counsel with the individual that would in all likelihood be appearing in their State, to say things about Emprise, to say things about the Jacobses, to make a number of allegations. In addition, I also furnished them with other information. I fur- nished them with each and every allegation that you have made and the rebuttal to it, and the findings of the various racing commissions after hearing your testimony. Mr. STErnER. Mr. Jacobs, I will tell you I neither removed or added a single item from that file, and there is none of your own rebuttal, there isn't even the "Meet Emprise" or whatever this magazine was you put together. It is your testimony that you only sent 11 copies to counsel around the country? Mr. JACOBS. No, sir. I said probably a dozen to various coansel. Mr. STEIGER. But only to counsel around the country? Mr. JACOBS. Oh, no, sir. This was sent to other people. Mr. STEIGER. Do you recall how many media people received this file, approximately? Just an estimate? Mr. JACOBS. No, sir; I really don't recall. Mr. SITIGER. Wefl, my count is somewhere around 15. Mr. JACOBS. That many, sir? Mr. STEIGER. Yes, sir. Your memory of the matter is better than mine. Was it more than that? Mr. JACOBS. No, sir. I don't recollect that many, sir. Mi'. STEIGER. How many do you recollect Mr. JACoBS. I recollect far fewer than that. I would say five or six people who were friendly to me, whom I knew personally. Mr. STEIGER. You mean there are only five or six media people in this country who are friendly to the Jacobses? Mr. JACOBS. Sir, I don't think that calls for any response. Mr. STErnER. No? I think it is important, because I have documen- tation at least 15 people have see~i it in various parts of the country. PAGENO="0246" 1256 I will stipulate the media people could have exchanged it among them- selves. They have a way of doing that, particularly with unverified material, I understand. Mr. Jacobs, you have heard testimony here about your brother's con- tribution to a gentleman from the Erie County Legislature. Were you in the room? Mr. JACOBS. Yes, sir; I was. Mr. STEIGER. Do you participate in any of those political decisions as to who gets money and who doesn't? Mr. JACOBS. Sir, I make my political contribution on my own, sir. Mr. S~IGEn. Well, in other words, you do participate then. Is it a practice of the Jacobs brothers, individually, not as a corporate entity, to make political contributions to everybody running for the Erie County Legislature? Mr. JACOBS. Sir, to the best of my knowledge-and my brother can verify this-that is the only contribution he has ever made to any mem- ber of that legislature, and I have never made any. Mr. STEIGER. Have you ever made any contributions to any other political campaign in the country? Mr. JACOBS. Sir, ever since I was 21 I have been contributing money frequently to the various political candidates. Mr. STEIGER. In the New York area where you do business? Or what would motivate you to contribute? Mr. JACOBS. Generally around the country. For example, I just finished making a contribution to Senator Henry Jackson of Washing- ton. And, incidentially, I have no business in the State of Washington. I didit because I admired his stand on Israel, sir. Mr. STEIGER. Mr. Jacobs, do you know a man named Joseph Jenckes III? Mr. JACoBS. Yes, sir; I do. Mr. STEIGER. What is his occupation? Mr. JACOBS. Jo~ Jenckes, I believe, is the assistant U.S. attorney for the State of Arizona. Mr. STEIGER. Is there a matter pending before the U.S. attorney's office at this time that involves Emprise? Mr. JACOBS. Sir, unless it would relate to the Los Angeles matter, I wouldn't know. Mr. STEIGER. You wouldn't know? Mr. JACOBS. Unless it relates to the Los Angeles matter. Mr. STEIGER. You aren't aware of the George Harry Johnson matter that is pending in Arizona, the wiretapping, and so forth? Mr. JACOBS. Oh, yes, sir. Mr. STEIGER. That one. It must be difficult to keep this history in mind. Mr. JACOBS. Yes, sir. Mr. STEIGER. So you are aware there is a matter pending before the U.S. attorney's office in Arizona, and you do know Joe Jenckes? Mr. JACoBs. Yes, sir. Mr. STEIGER. Did you attend a wedding of Mr. Jenckes' recently? Mr. JACOBS. Yes, sir. I have known Mr. Jenckes for more than 12 years. Mr. STEIGER. What was the date of the wedding? PAGENO="0247" 1257 Mr. JACOBS. I think it would have been the 8th, 9th of April, some- thing around that time. Mr. STEIGER. Did you give Mr. Jenckes a gift at the wedding? Mr. JACOBS. Yes, sir. My wife bought them a gift and I gave Joe a check. Mr. STEIGER. What was the nature of your wife's gift? Mr. JACOBS. My wife purchased three pieces of silver flatware cost- ing $73.58. Mr. STEIGER. It was, in fact, a very attractive sterling silver tea set; s that right? Mr. JACOBS. It may well have. Mr. STEIGER. What was the amount of the check you gave Mr. Jenckes? Mr. JACOBS. $1,000. Mr. STEIGER. Did he keep that money? Mr. JACOBS. No, sir. We ha.d a discussion on the telephone, and he said that he really felt because of his position that he ought to return it, and I said, "I understand that." Mr. STEIGER. How many similar thousand-dollar gifts have you made to your friends on the occasion of their wedding in the past? Mr. JACOBS. I made one to a fellow by the name of Dave Sabin, an actor friend of mine, when he was married about 3 years ago. Mr. STEIGER. He was not involved in any matter that was then pending in any legal situation? Mr. JACOBS. No, sir. Mr. STEIGER, As a witness or anything? Mr. JACOBS. No, sir. I feel when a man is getting married, he gets an awful lot of gifts that he cannot really use, but that money is always helpful to him. Chairman PEPPER. I am sorry, but we have to surrender this room to other Members of Congress who have already had previous commit- ments for its use. We will have to suspend until tomorrow morning. Before we recess, I would like to ask counsel and each member of the committee, does either one of you contemplate the use of any of these so-called tapes in any questioning tomorrow? If so, I am going to ask that counsel for the committee give to counsel for the witness the tapes on which you expect to make inquiry, and that would include the tapes that related to Mr. Jerry Jacobs, who is going to be a witness tomorrow. Do any of you have any intention of using any of the tapes? Mr. STEIGER. I have one. Chairman PEPPER. Very good. Any more? Counsel, you will be furnished a copy of that tape, which is the only one of which use will be made in interrogation at the session tomorrow. Mr. BITTMAN. Thank you very much. Chairman PEPPER. We will adjourn until 9 :30 here, and this wit- ness will please be back at 10 o'clock tomorrow morning, plus other witnesses who are subpenaed for that date. (Whereimon, at 3 :35 p.m., the hearing was adjourned to reconvene tomorrow, Thursday, June 15, 1972, at 9:30 a.m.) PAGENO="0248" PAGENO="0249" ORGANIZED CRIME IN SPORTS (RACING) THURSDAY, JUNE 15, 1972 HOUSE OF REPRESENTATIVES, SELECT COMMITTEE ON CRIME. Washington, D.C. The committee met, pursuant to notice, at 9:35 a.m., in room 345, Cannon House Office Building, the Honorable Claude Pepper (chair- man) presiding. Present: Representatives Pepper, Waldie, Mann, Murphy, Wig- gins, Steiger, Winn, and Keating. Also present: Joseph A. Phillips, chief counsel; Michael IV. Blom- trier, associate chief counsel; Chris Nolde, associate counsel; and Andrew Redding, assistant counsel. Chairman PEPPER. The committee will come to order. Today's first witness in these hearings will be Max Jacobs. Mr. Jacobs' testimony is being resumed from yesterday. STATEMENT OF MAX JACOBS, EXECUTIVE VICE PRESIDENT, EMPRISE CORP., BUFFALO, N.Y.; ACCOMPANIED BY WILLIAM 0. BITTMAN, COUNSEL-Resumed Chairman PEPPER. At the conclusion of the hearing yesterday, Mr. Steiger was inquiring of the witness. Mr. JACOBS. Mr. Chairman, sir. I should like to draw attention, if I may, to one point in testimony yesterday. It regarded a "sea of papers" as opposed to "sealed papers." There was a transcript, as I informed your committee, that I had reviewed, that had been prepared by Phoenix counsel. Directly after the committee meeting yesterday I went back to my attorney's office and I looked at that transcript and it verified that this was indeed a sea of papers. I then called Phoenix counsel, who had listened to the transcript, to determine whether or not that indeed was the correct reading. He said that it was and I am happy to offer now the tran- script which we had at our office of that tape. Sir, I would also like to state that I in no way intended and I hope I did not in any way mislead the committee as to whether or not I had ever had any discussion concerning Congressman Steiger's im- pounded transcript of his divorce proceeding. I did indeed have dis- cussions concerning that but, sir, that in no way related to the conversation which was discussed yesterday from the transcript. (1259) PAGENO="0250" 1260 Chairman PEPPER. And you offer the purported transcript of a conversation which you send to the podium for introduction in the record or just for examination? Mr. BITTMAN. Mr. Chairman, we would like to offer only that por- tion of the transcript which was read into the record yesterday by certain members of the committee and Mr. Phillips. Nevertheless, our version, which was transcribed by the Phoenix attorneys, to show that there was a discrepancy between the two transcripts. Chairman PEPPER. Identify, Mr. Counsel, by page number what you are talking about. I think we ought to have a copy. I thought you sent it up here. Why don't you send up what it is you have in mind and mark the places that you wish to introduce and then see what the pleasure of the committee is. Mr. BITTMAN. I have specific reference, Mr. Chairman to page 22, the bottom of page 22, that Congressman Waldie referred to yester- lay. I have excerpted that portion of page 22. Mr. STEIGER. Mr. Chairman, I would like to make a unanimous consent raquest. I will stipulate that the conversations said "sea of." I think there are really far more urgent matters that the committee needs to get into not only in connection with Emprise but the whole matter before the committee. In the interest of expediting the matter I suggest we move on to the examination of Mr. Jacobs. Chairman PEPPER. Would that be satisfactory to you? Mr. BITTMAN. Certainly. Mr. Chairman. Chairman PEPPER. All right. One member of the committee, Mr. Wiggins, said he does not accept ~the stipulation. Mr. WIGGINS. I don't wish to get involved in a discussion of whether one transcript is right Or the other is wrong, but I can't agree that this committee ought to stipulate that theirs is right and ours is wrong. If counsel wishes to submit their version I think we ought to have it, but I don't wish to decide that issue in their favor at this time. Chairman PEPPER. I think Mr. Wiggins is right. Suppose if you have anything to offer, Mr. Counsel, you send it up and the committee will entertain it. I would think that you would want to show the orig- inal of the materal that you have sent up so as to authenticate it, if you wish to offer it, but send it up and we will view it. Mr. BITTMAN. That portion of the transcript, Mr. Chairman, has been submitted. Chairman PEPPER. Now, what is the source of the material that you sent up, Mr. Counsel? Mr. BITTMAN. Mr. Chairman, Emprise's Phoenix attorney had what I referred to as dubs of certain conversations which were taken from the Fimks. The originals are presently in court in Phoenix. Ariz., and I understand as recently, as late as yesterday afternoon, the Federal judge down there is in the process of making a ruling that the orig- inals be returned to the Funks. Copies of those originals were made rand I refer to those as dubs. Phoenix counsel at my request has reviewed those dubs and has made certain transcriptions of the dubs. PAGENO="0251" 1261 With respect to Mr. Jacobs' testimony yesterday, there was an. inconsistency between the transcript that the committee has and the transcript that we had, and there must have been about 15 or 20 minutes of dialog and colloquy about that yesterday. Chairman PEPPER. Was there any other divergency, any other in- consistency between the two documents because of this matter of "sealed" or "sea of" papers? Mr. BITTMAN. Mr. Chairman, there were other inconsistences but they were of a very minor nature. Chairman PEPPER. So you did have yesterday, when your client was being questioned about this, you did have in your possession a tran- script that was comparable or similar in most respects to the one the committee had. Mr. BITTMAN. That is right, and we have had that for approximately 2 or 3 weeks. Mr. ~WALDIE. Since I brought the matter up, let me tell you precisely my motivation for having done. so. At the time you were responding, Mr. Jacobs, to counsel's inquiry on this subject, you did not indicate that your recollection had been refreshed from a transcript in your possession. It was my understand- ing at that time that you were testifying from personal recollections without having had access to the transcript. I did not know that you had access to any transcript until such time as counsel advised me when I asked if in fact you had a transcript. Had you advised the committee that the transcript in your possession had translated those words as "sea of" rather than "sealed" the entire controversy could have been avoided. I think the committee would have been well served had we been advised that in fact you had transcriptions of all of these conversations and that your transcription differed in that respect from ours. Mr. JACOBS. We should have done so. Mr. BITTMAN. I don't know if we do have transcripts of all of the conversations the committee has. We only have what Phoenix counsel furnished to us. I have no knowledge, other than transcripts that were furnished to inc last night, w'~hat transcripts the committee has in its possession. Chairman PEPPER. Without objection on the part of the committee, and I will give you an opportunity to object, the material that was sent up, an excerpt, page 1, section 3, tape 2, purporting to be part of a conversation between someone entitled "Max," which I suppose is Mr. Jacobs; and "A1"-Who was "Al," that was Mr. Funk- Mr. JACOBS. Albert Funk. Chairman PEPPER. (Continuing.) Is te.ndered by the witness and his counsel for inclusion in the record. This is an excerpt of a tape record- ing which they have, which purports to show a cert.ain discrepancy between the record of the tape which the committee has and the record of the tape which the witness and his counsel have. Is there objection t.o the inclusion of that in the record? If not, it will be so received. (The excerpt referred to follows:) MAX. Another thing, too. I got that note on the libel judgment based on the sea of papers and I really don't care about that. If there's anything juicy in the sea of papers we'll find it or someone to trip over them. I tell you what they did PAGENO="0252" 1262 to Jerry down in Arkansas with the taping of the conversation on his own, that was against the law, too, but mark my words, if those bastards had found. anything juicy in that taped conversation-against the law or within the law- they would have a way to make it public. AL. I know that. MAX. So if there is anything. We can't let anyone know how we got it or anything like that. We'll let someone trip over it. Mr. Steiger, you may proceed. Mr. STEIGER. Thank you, Mr. Chairman. Mr. Jacobs, by your testimony yesterday you indicated that you mailed out at least 15 packages of the files that we discussed at yesterday's. close. You also testified that other than the fact that it came from the Funks you could not attest as to either its accuracy, or indeed, even the manner in which it was collected; is that correct? Mr. JACOBS. That is right. In fact, I believe in the communication that you presented to me from Mr. Garner in several respects I ad-- dressed myself to the matter of its authenticity or lack of. I would draw your attention to the first page of that particular communication that you handed to me which I sent to Sergeant Garner,. at the bottom of which I said Mr. Senner's comments must be taken. in the political vein in which they were made. On the third page, sir, where I sa.id I find no particular merit in this file below in which I said the final file I have entitled "Junk." I am unable to assess this information or to put any value on it. This is the type of information which contains slurs, innuendos, forced coinci- dence, and so on. I clearly defined that particular material. Mr. STEIGER. So you are telling us that although you identified, at. least to Sergeant Garner, the title as "Junk," and some of it is question- able, still you thought it was worth transmitting to 15 people, at least? Mr. JACOBS. Yes, sir; from an investigative standpoint. These people were interested or I was interested in letting them know whatever I had in my possession regarding you so that they could properly evaluate you, sir. Mr. STEIGER. Even though by your own definition it was either junk or questionable as to its value? Mr. JACOBS. Yes, sir; much as in the same value you have frequently said things that you would state on other occasions were junk. Mr. STEIGER. Well, I would be interested in having you recite one of those occasions, Mr. Jacobs. Mr. JACOBS. Certainly, sir. The allegation pertaining to Canandaigua Race Track in which you sta.ted that Emprise had been involved in a bribe, scandal, and then afterward stated that you had been incorrect, sir, and in fact what you were referring to took place some several years before Emprise got involved. In addition, your comment regarding Robert Cousy where you stated he had been indicted and then afterward recanted that, sir. In your statement that we owned part of the Ice Capades which you afterward recanted, things of that nature. Mr. STEIGEB. All right, let's start from the last one back. Did your father ever own 7 percent of the Ice Capades? Mr. JACOBS. Yes, sir; many years ago. PAGENO="0253" 1263 Mr. STEIGER. As far as Mr. Cousy, you were aware that I responded, I was asked on cross-examination by Mr. Cheifetz in New Mexico as to whether I had referred to Mr. Cousy as the coach of the Royals. Mr. Cheifetz asked me if I knew anything derogatory about Mr. Cousy. I said all I recalled was he was involved or indicted somehow in a gambling situation. That was my response, if you recall. Mr. JACOBS. You stated he was named in a gambling scandal some years ago, he was named in an indictment in a gambling scandal some years ago. Mr. STErnER. I don't have the language but concerning the Can- and.aigua reference, I said Emprise had eventually acquired Can- andaigua~, a property which had been involved in the Morhouse matter. Mr. JACOBS. You said in the Congressional Record that Emprise owned a certain percentage of Canandaigua Race Track which sub- :sequently was involved in a bribe, scandal, sir. Your chronology was wholly in error, sir. Mr. STEIGER. Mr. Jacobs, I am simply telling you that you have had, or the Jacobs family has had, 21/2 years to rectify this. I think it is a fair statement to say I have recited at least some 80 names and places in which Emprise has behaved either improperly, or immorally, or in conjunction with organized crime. You have applied the general label of liar, fraud, and other like, friendly, descriptions. It occurs to me that since you have under litigation at least four newspapers, and you have sued some four newspapers and have threatened suit against the Arizona Racing Commission, Arkansas Racing Commission-you have, I assume, threatened other racing coin- missions with suits-why is it you haven't taken the tack that you now take and say Steiger is wrong and here is why he is wrong ancT these facts are in error and because he is wrong he obviously is doing us harm and, therefore, there is remedy in the courts. You, yourself, have been quoted on numerous occasions as saying Steiger has immunity and that is why we can't sue him, when the truth is, of course, as you well know, because of your experience and able counsel, you well know that at no time under oath on the record testimony which I have given in New Mexico, Arkansas, Florida, other places, Arizona, that come to mind, at no time did I have immunity, in fact I specifically waived immunity. So it would seem to me you are in the rather skeptical position of accusing the attacker rather than simply trying to remedy specific wrongs. Clearly you have done enough research to find errors in three statements. I would suggest to you, sir, that there have been probably hundreds of such statements. Don't you feel the responsible approach to remedy this situation would be to simply document or point out the specific points of error which you contend are present, rather than simply vilifying me, or in some way attempting to prove that you are a]l right because I am bad? I would tell you, Mr. Jacobs, if I were 10 percent as bad as you con- tend I am, and if my motives are as venal as you suspect, that really wouldn't alter the facts as to your own situation. Doesn't it seem from a responsible standpoint that you would be better off attacking the statements per se rather than myself? Mr. JACOBS. Oh, sir, we have attacked the statements on several occasions. PAGENO="0254" 1264 Firstly, prior to responding to your question, sir, if indeed it is a~ question, one of the major reasons why we felt that we really need have no recourse to a lawsuit concerning you, as I stated yesterday, is that in four or five forums, sir, your charges have been fully aired and the racing commissions involved have had an opportunity to see the other side presented, and upon reviewing both sides, sir, have determined that your charges have had no merit and we have been granted dates. Therefore, sir, it has really been unnecessary, in my judgment, to bring libel action although many of our lawyers have requested that we do so. Sir, in order to shorten this, I would be happy, Emprise would be happy, to document each and every error which you have made, sir, and would further be happy to document errors which you have recti- fied and then recorrected afterward; in other words, indicating that you had full knowledge that the material that you were addressing yourself to was in error. We would be very happy to document all of that, sir, and submit it to this committee if that would shorten this. Mr. STEIGER. I am sure the committee would welcome any such document. I am surprised you haven't prepared such a document for submission long before this time, having gone to a great deal of expense to try to shoot me down individually when it would seem to me the most logical way to shoot me down, rather than do a history of me-although I must confess being flattered by the fact you thought I was worthy of historical- (The document referred to above had not been received at time of printing.) Mr. PEPPER. I think it is only in the interest of the understanding of these hearings to state that that the I-louse Select Committee on Crime is investigating the infiltration of organized criñie into legiti- mate business and we are presently engaged in the investigation of the infiltration of organized crime into sports, particularly the racing industry. Now, I think our primary concern is not about the character or the integrity of our colleague or the character or integrity of the witness or his company but anything that bears upon our inquiry. Here is a large concessionaire in the racing industry. Now, has that conces- sionaire owned or does it own any tracks, have any licenses, or been guilty of any conduct that is not in the public interest, any impropriety, and the like? I am sure we would be pleased if our distinguished colleague would address himself to that question as much as he can. Mr. S'immEr~. Yes, sir. Mr. Jacobs, have you met or have you ever had occasion to deal with any of the people in New Orleans associated with the Carlos Marcello family? Do you know who Carlos Marcello is? Mr. JACOBS. I have heard of Carlos Marceflo. Mr. STEIGER. Are you aware he is identified as an organized crime leader of New Orleans. Mr. JACOBS. I am aware he has been identified. Mr. STEIGER. Do you know if you ever had a meeting with any of his henchmen or people in his organization? Mr. JACOBS. Name them, please, sir, and I will tell. PAGENO="0255" 1265 Mr. STEIGER. Well, no, I would prefer, if you would, I think it would lend to the spontaneity of the thing if you knew of any which you met with. If you don't know that anybody you met with was a member of his family, obviously the answer would be no. Mr. JACOBS. I don't know. To the best of my recollection, sir, I never have, but I would like you to name the individuals you are referring to so I can tell you whether or not I have ever met them. Mr. STEIGER. The purpose. of the question, Mr. Jacobs, is to find out if your associations with organized crime might be of an innocent nature in which you weren't aware of who you were doing business with. Mr. Jacobs, do von accept the fact that there is an organized criminal organization in this country? Mr. JAcoBs. Sir, I believe in organized crime, I do believe- Mr. STEIGER. You mean you believe in the presence of organized crime. Mr. JACOBS. I believe it does exist, sir. Mr. S~nnGER. Have you just come to that opinion recently? Mr. JACOBS. No, I believe to the best of my know1ech~e that I have read many tracts concerning organized crime, many newspapers re- ferring to it in my lifetime, sir. Mr. STEIGER. In the year 1970 did you believe in the existence of organized crime? Mr. JACOBS. To the best of my recollection, sir, I suppose so. Mr. STEIGER. Did you ever recommend to your brother that you divest yourselves of those holdings in which you are doing business with organized crime? Mr. JACOBS. Where, sir? Mr. STEIGER. For one, Hazel Park. Mr. JACOBS. Sir, from 1970 on. my brother, I know, has tried to divest our company of its stock in Hazel Park, has tried to purchase the assets of certain members of Hazel Park, has tried to purchase all of the assets of Hazel Park, and has pushed very strongly for the liquidation of that investment, sir. Mr. STEIGER. You are telling me then that you and your brother agreed it was a good idea to divest yourselves of that particular as- sociation. Mr. JACOBS. Since 1970, yes, sir. And in fact- Mr. STEIGER. Why did you feel that, Mr. Jacobs? Mr. JACOBS. Sir, if I felt it was incumbent~ due to the fact that an as- sertion had been made in a hearing and, as a matter of fact, our particular shares of stocks are subject to an escrow agreement. Mr. STEIGER. When did they go into trust, Mr. Jacobs. Mr. JACOBS. As recently as, I think, within the past month, with the National Ba.nk of Detroit. Mr. STEIGER. I thought so. That was subsequent to the conviction in Los Angeles; is that not correct? Mr. JACOBS. Yes, indeed. Mr. STEIGER. With regard to your associations with John Masoni, was it you who recommended that your brother dispose of his partner- shin holdings in Idaho with Mr. Masoni? Mr. JACOBS. No. PAGENO="0256" 1266 Mr. STEIGER. You don't know why he decided to dispose of those holdings? Mr. JACOBS. No, sir; I am afraid you would have to ask my brother. Mr. STEIGER. I would be happy to. With regard to the vending machine contract in St. Louis, with the Giardano people: Do you know who Mr. Giardano is? Mr. JACOBS. I have heard of him, I have never met him. Mr. STEIGER. Did you know he was convicted in the Los Angeles matter? Mr. JACOBS. I am aware of that. Mr. STEIGER. But you didn't meet him in the course of the trial? Mr. JACOBS. No, sir; I did not. Mr. STEIGER. Never had the opport~mity to visit with him. Are you aware an Emprise subsidiary has a contract with a vending machine organization in the St. Louis area that is in the control of Mr. Giardano? Mr. JACOBS. Sir, I am not aware of that at all. Mr. STEIGER. If that could be demonstrated to your satisfaction do you think the Emprise entity should divest itself of that association? Mr. JACOBS. I very definitely do. In fact, when the allegation was first made here we sent a letter to DISCO which is that particular vending company. We informed them of the allegation that had been made. They sent a letter to us, to our attorneys, to Courtney Good- man, who is the alcoholic beverage commissioner, citing who owned the company, who had the stock interest in the company, then sub- sequent to that another allegation was made regarding an arrest of the principal and we sent a letter to them again asking for informa- tion pertaining to this and it was determined that this apparently was an impounding of a single vending machine because it did not have a stamp, a city of St. Louis cigarette stamp. But in short, we have taken this position: If there are any allegations made regarding any purveyors, any purveyors at all, we will ask that they be investigated by the proper authorities and if those authorities tell us that we ought not to do business with those individual purveyors we will cease doing business with them. Mr. STEIGER. I congratulate you on a remarkable recovery of mem- ory of the St. Louis situation compared to your first response to my question of if you were aware of any relationship with DISCO. In fact, I did not even mention DISCO, as far as I know. That was very good. I think you probably came to a good conclusion and I am cer- tainly not qualified to comment on your business behavior. Mr. Jacobs, I have come to the conclusion, as I stated earlier in this hearing, that not only does Emprise do business with organized crime but even more important, perhaps, they do business very much like organized crime, and by that I mean they either intimidate, or they attempt to purchase, or they bribe, or they act. As a matter of fact, I have the catalog. They intimidate, they bribe, they promote conflicts of interest. Now, we are prepared to examine this and I suspect your brother would be the more appropriate one to respond to many of these situations. In general, Mr. Jacobs, I would ask for your response on these mat- ters: Do you recognize that the charges leveled at you by other than PAGENO="0257" 1267 Steiger could conceivably have some merit, or is every charge that is leveled at Emprise and the Jacobs family, either media source or public official, the product of some kind of venal desire, or simply the normal desire to attack that which is large-Steiger aside? Of all of the charges which have been made against Emprise is there any one characterization as to their nature? Are they all wrong? Mr. JACOBS. If you will refer to the specific charges. Mr. STEIGER. The Arkansas Racing Commission, for example, that ruled that you were not a desirable, Emprise was not a desirable operator of their parimutuel, of the South Dog Track in West Memphis. Mr. JACOBS. That was reversed in court. Mr. STEIGER. I understand that. Incidentally, it has been refiled, I understand. Mr. JACOBS. Yes. Mr. STEIGER. I want to stay accurate, and I know you are interested in accuracy. I am asking you if that kind of a charge, that was reversed in court, as you say, but if that kind of charge by a five-man commission was wrong, what motivated the commission? Was the charge incorrect, the charge recited in the Arkansas brief? Mr. JACoBs. Sir, I would have to see the brief, but in substance I am quite certain that it was incorrect. Mr. STEIGER. Fine. That was incorrect. I-low about the SEC finding of fact that Emprise concealed its true ownership in the Tucson Turf Club? Was that the result of misunder- standing, malevolence, venality, or was it accurate? Mr. JACOBS. That is another one of your celebrated -false statements. Mr. STEIGER. That is false, right? Mr. JACOBS. That statement. The SEC didn't make a finding against Emprise Corp.? Mr. STEIGER. The SEC made a finding of fact against Mr. Jacobs. Mr. Chairman, we will insert this document. (The document referred to follows:) [Administrative proceeding, file No. 3-2476] U~NITED STATES OF AMERICA BEFORE THE SECURITIES AND EXCHANGE COMMISSION SEPTEMBER 2, 1970 IN THE MATTER OF TUCSON TURF CLUB, 4502 NORTH FIRST AVENUE, TUCSON, ARIZONA 85719 FILE NO. 24SF-333. SECURITIES ACT OF 1933, SECTION 3(B), REGULATION A Order Permanently Suspending Ewemption I Tucson Turf Club ("Issuer"), an Arizona Corporation. organized to operate a horse racing track in Tucson, Arizona, filed with the Commission on August 21, 1967, a Notification on Form 1-A and an offering circular related to a proposed offering of 298,000 shares of its $1.00 per value common stock at $1.00 per share for the purpose of obtaining an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to the provisions of Section 3(b) thereof and Regulation A promulgated thereunder. Jacob J. Isaacson lo- cated at 666 Omaha National Bank Building, Omaha, Nebraska, was named as the underwriter. 81-068-73-pt. 3-17 PAGENO="0258" 1268 II The Commission on June 10, 1970, temporarily suspended the Regulation A exemption of Tucson Turf Club, stating that on the basis of information reported to it by its staff, it had reasonable cause to believe that: A. The terms and conditions of Regulation had not been complied with in that since December 19, 1968, Issuer has filed no report of sales as required by Rule 206 and has not reported the offering as discontinued. B. Reports of Sales on Form 2-A filed by the Issuer on May 8 and December 19, 1968 are false and misleading with respect to the true ownership by Emprise Corporation, a New York corporation, of 218,000 shares of stock reported as held by Jacob J. Isaacson, the nominal underwriter. C. The terms and conditions of Regulation A have not been complied with in that Issuer had failed to amend its offering circular dated October 5, 1967, as amended November 7, 1967, at any time following nine months from said date, or to reflect material events occurring since the date of said amendment, including the cessation of the operations of Issuer. P. Issuer was caused by Jacob J. Isaacson, its director and nominal under- writer, and Emprise Corporation, its controlling stockholder, to violate the pro- vision of Section 17(a) of the Securities Act of 1933 by causing the offering cir- cular to omit to state material facts necessary to be stated in order to make the statements made, in the light of the circumstances under which they were made, not misleading in that Jacob J. Isaacson was named therein as an under- writer, source of the financial backing for Issuer, and controlling person of Issuer when in fact Emprise Corporation was the actual underwriter, source of the financial backing and controlling entity. III Mr. Isaacson on June 27, 1970 acknowledged receipt of the order of temporary suspension and disclaimed omissions to state material facts as claimed in that order and denied knowledge of the failure to file 2-A reports. Mr. Isaacson was informed in a letter dated July 8, 1970 that his denial of the allegations in his letter would serve no purpose and that the allegations could properly be contested in a hearing ordered by the Commission. Mr. Isaacson has not requested a hearing. No hearing having been requested by the issuer within thirty days after the entry by the Commission of an order temporarily suspending the exemption of the issuer under Regulation A, the Commission finds that it is in the public interest and for the protection of investors that the exemption of the issuer under Regulation A be permanently suspended, therefore, It is ordered, pursuant to Rule 261 of the General Rules and Regulations under the Securities Act of 1933, as amended, that the exemption under Regula- tion A be, and it hereby is, permanently suspended. By the Commission. ORVAL L. DuBoIs, Secretary. Mr. STEIGER. The basis simply was Emprise concealed its true own- ership and misled the public in their brochure. Aside from the fact that I am patently a liar, was the SEC finding of fact wrong? Mr. JACOBS. Sir, whether it was wrong or not, I do not know, but I do know it was entered against Tucson Turf, sir, and Tucson Turf did not answer that. Mr. STEIGER. Who owned Tucson Turf? Mr. JACOBS. Tucson Turf at that time, at the time of the filing of the SEC finding, I believe some 86 percent was owned by Emprise. Mr. STEIGER. Thank you very much, Mr. Jacobs. Was the SEC driven by some desire to destroy Emprise? Mr. JACOBS. No, sir. Mr. STEIGER. Were they wrong? Were they wrong in their finding of fact? Mr. JACOBS. Sir, I do not know. I am not an attorney. I just don't know. PAGENO="0259" 1269 Mr. STErnER. Was the finding of fact that Emprise had a bad general reputation in racing and would not be good as an owner of a race- track in the State of New Mexico-that was also, I believe, a five-man commission-was that finding of fact generated by dishonesty or in some way improper? Mr. JACOBS. Yes, sir; definitely, that finding was in error. It was predicated principally on an appearance which you made in which you made 36 specific allegations. Mr. STEIGER. I am going to interrupt you there because that is patently false, since we have the language of the finding and it does not refer to Steiger at all. It refers to a series of facts which had only to do with the financing of the Ruidoso Race Track, so this is some- thing I suspect I am as familiar with as you are. And I simply tell you my kindest interpretation of your response is you are mistaken, you have New Mexico mistaken, you have the SEC apparently wrong, you have the State of Arkansas or Arizona Racing Commission wrong. And Steiger is a liar. I-low about the findings of Auditor General Osman who testified before this committee on one set of figures. Was he part of a conspiracy, or was he wrong, or did he misunder- stand the intent of Emprise? Mr. JACOBS. I think the best way in which I can respond to the Osmond characterization would be to say that it was submitted, it was reviewed, it was studied by the auditor general-I am certain it has been studied- Mr. STEIGER. Mr. Osmond is the auditor general. Mr. JA(~oBs. Yes, sir; and it was also studied by the legislature and if these bodies have not found it to have any merit or weight in the past 2 years since it's been entered, I think that these bodies, that their comments should be solicited because I think it's quite obvious. Mr. STEIGER. That charge is without merit? Mr. JACOBS. There is a confusion in that report. Mr. STEIGER. Mr. Osmond was very specific. 1-le testified before the committee. The committee heard his response. How about the Sports Illustrated article? Mr. WALDIE. When you are asking about these incidents, because I do not have the same familiarity, and I presume the other members do not, that you do, are these incidents related to organized crime or related to the method of doing business of Emprise, which you believe to be improper? Mr. STEIGER. Actually in the instance of Arkansas there is a relation with organized crime. In the instance of New Mexico it would have to qualify under my belief that they do business like organized crime. SEC would also have to be a matter in which they do business like organized crime. I think, Mr. Waldie, that is a very fair question. I think perhaps the committee in its desire to recognize whether or not organized crime has infiltrated into sports is going to have to recognize that it really makes little difference if the net result is the same as if organized crime had invaded sports. If there is corruption, if there is an abuse of the public trust, it would seem to me if the net result is the same the committee ought to be just as concerned. PAGENO="0260" 1270 The Sports Illustrated article, I assume it was either distorted or in some way inappropriate? Mr. JAcoBs. Sir, it was very distorted and might I add parentheti- cally nothing that has happened since my father's death has done more to hurt me personally. My brother is prepared to address himself to that particular article, sir. Mr. STErnER. All right. Mr. Jacobs, have you either on behalf of yourself, or on behalf of any other member of your family, or on behalf of your organization or anyone in your organizatiOn, given any money, or anything else of value, to any public official, State or Federal, in the last 2 years, 24 months? Mr. JACOBS. Have I? Yes. Mr. STEIGER. Would you tell the committee what that was and when it occurred? Mr. JACOBS. Sir, in the past 2 years I have made dozens of political contributions. Mr. STEIGER. Political. Where did you make most of the political contributions? You mentioned Senator Jackson. Who else did you contribute to, if you remeniber? If you do not remember; it is all right. Mr. JACOBS. Senator Hubert Humphery, to Ned Reagan, who was elected as the Erie County executive. I contributed to his campaign. Mr. STErnER. Do you recall what that amount was? Mr. JAcoBs. Yes, sir; that was $1,000. Mr. STEIGER. Thank you. Mr. PHILLIPS. Excuse me. Does the Erie County executive supervise your stadium contracts? Mr.~ JACOBS. Sir, I do not know. And numerous others, sir. Mr. STEIGER. For example? Mr. JACOBS. I could not recollect all of them. Mr. STEIGER. Any in the State of Ohio? Mr. JACOBS. Yes, sir; well, sir, that wasn't per so a political con- tribution. I contributed $100 to the Gilligan dinner. I also, I think, contributed $50 to the individual who is now the mayor of Cincinnati. Mr. STEIGER. Aiiy other contributions in Cincinnati in the last 2 years? Mr. JACOBS. None that I can recall, sir. Mr. S'rEIGER. How about the State of California? Mr. JACOBS. California? I do not recall any in the State of California. Mr. STEIGER. How about the St:ate of Illinois? Mr. JACOBS. Illinois? Sir, I do not believe- Mr. STEIGER. How about Florida? Mr. JACOBS. Florida? Not to the best of my recollection. Mr. STErnER. How about Kansas? Mr. JACOBS. Kansas? Not to the best of my recollection. Mr. STEIGER. All right. How about Arizona? Mr. JACOBS. Arizona? Not to the best of my recollection. Mr. STEIGER. How about any other than an elected official? PAGENO="0261" 1271 I remind you of your statement yesterday that you gave a thousand dollars. I mean that kind of a wedding gift I would characterize as giving money. Mr. JACoBs. All right, sir, I am very happy that you asked that question. Mr. STErnER. I know you are. Mr. JACOBS. You asked yesterday about a gentleman by the name of Joe Jenches. and Joe Jenckes is one of the closest friends I have in the world and he was married recently and I gave him $1,000 at the reception after his wedding. Now, I went to college with Joe Jenckes, I acted on the stage with him, I roomed with him, we drank together, we double-dated together, I knew hi~n in New York City when both of us were seeking jobs as actors. I also would like to state that I saw Joe sometime between Septem- ber and December of 1970 just after the empaneling of the grand jury that you referred to yesterday, which incidentally has been for all practical purposes inactive for 2 years, and Joe told me, when we met, he told me that he had nothing to do with that grand jury, he was going to have nothing to do with that grand jury at his request, because of his special friendship with me. He was not assigned to it, he asked to be relieved from it, sir. Mr. STErnER. Did Mr. Jenckes keep the $1,000? Mr. JACOBS. No, sir; he returned it. Mr. STEIGER. Why did he not keep the $1,000? Mr. JACOBS. Sir, he called me in Buffalo and he said, "Look, I am very touched by this but"-he said, "I am not certain that in my position that I should be taking this particular $1,000 even as a wed- ding gift. I know the context in which it was given, but really, Max, do you understand?" I said, "Joe, listen, if that is going to be of aid to you and you will be able to use it, I would be happy to have you have it. If, however, it is going to cause you any distress, I understand, so send it back," and he sent it back with a very nice letter. Mr. STEIGER. Were there any other gifts, things of value to any other public officials, anywhere in the country in the last 2 years that you can remember at this time, other than campaign contributions? Mr. JACOBS. Christmas presents, I think, to some. Mr. STEIGER. For example-would you help us with that? Who did you give Christmas presents to? Mr. JACOBS. I think I gave Christmas presents to all my area congressmen. Mr. STEIGER. What kind of Christmas present did you give? I didn't get one. Mr. JACOBS. Sir, you are not in my area. Mr. STEIGER. I certainly hope not. Mr. JACOBS. I believe that they were salt and pepper shakers. I do not exactly recall. They were quite attractive. Mr. STEIGER. Is it fair to say they were modest cost? Mr. JACOBS. I imagine they were anywhere between $50 and $100. Mr. STErnER. By "area" you mean the New York State area? Mr. JACOBS. Not only the New York State area, but I believe I may have sent some to the Cincinnati area, some into the Florida area. PAGENO="0262" 1272 Mr. STEIGER. Other than the Christmas gifts to some Congressmen, do you recall any other Christmas gifts to public officials, State racing commissioners, Governors, executives, secretaries of state, those type of ptopie? Mr. JACOBS. None specifically, but I am quite certain- Mr. S~rmGER. You are in the practice of doing that, though? It has happened in the past? People that you meet in your travels with your business, you either exchange gifts with or see to it you have them on a gift list; is that correct? Mr. JACOBS. I do, sir. I would be happy to submit to this committee my entire Christmas gift list. Mr. STEIGER. I don't think that is necessary, Mr. Jacobs. I have been requested to inquire who in Cincinnati did you send the salt and pepper shakers to, if you recall? Mr. JACOBS. I believe I sent them to Congressman Don Clancy. Mr. STEIGER. Not to Congressman Keating, I gather?. Mr. JACOBS. Sir, I do not recall. Congressman Keating is here. Mr. KEATING. I recall, and you did not. Mr. JACoBs. I am sorry, Congressman. Mr. STRICTER. I have one more question. Again I want you to think very carefully on this one. Have you, with the same list of stipulations, on behalf of yourself, or for the organization, in the last 3 years given a gift or anything of value to any officer or representative of a labor union other than wages which he would have accumulated by working for one of your entities? Mr. JACOBS. Sir, to the best of my recollection, no; unless he were on the Christmas list. Mr. STEIGER. I think, Mr. Chairman, since Mr. Jacobs has demon- strated a desire to cooperate with us on this matter, I for one would ask that .at his convenience he furnish the committee with his Christmas list from last Christmas, if that would be appropriate, if the com- mittee would not object. Chairman PEPPER. Is that agreeable, Mr. Jacobs? Mr. JACOBS. Certainly, sir. Mr. PEPPER. Very well. (The list referred to contained 125 names and was retained in the committee files.) Mr. WINN. Would the gentleman yield? Mr. STEIGER. Yes, sir. Mr. WINN. Along the same lines, on the political contributions, Mr. Jacobs, did you make those in the name of Max Jacobs? Mr. JACOBS. Max Jacobs. Mr. WINN. They were made in your name. Mr. JACOBS. Yes, sir. Mr. WINN. None through Stanley Phillips? We heard yesterday testimony that your brother, I believe it was, contacted Mr. Hanny and wanted to help him with his campaign deficit but when the money came around the check was signed by Stanley Phillips. You don't operate through Stanley Phillips? Mr. JACOBS. No. In fact I believe that that was an isolated single incident. Perhaps my brother Jerry would be best to respond to it. However. I believe Stanley Phillips lives quite close to Mr. Hanny and Jerry paid Stanley Phillips back after. He said, "I have made PAGENO="0263" 1273 this commitment. Please, since you are going in the neighborhood, do it," and he paid Stanley Phillips back. Mr. Wixx. Well, I understand that. I am just trying to ascertain in my own mind if the political contributions that you have made to the individuals that you named were made in the name of Max Jacobs or if they were made in the name of Emprise, or if they were made in tIle name of Stanley Phillips. Mr. JACOBS. No, sir; any political contributions that I have made has been made in tile name of Max Jacobs. Mr. WINN. I thank you. Mr. STEIGER. I do have one more matter, with the committee's indulgence. Mr. Jacobs, you are aware that one of the items, in fact you referred to it in the Garner letter, is association with Mr. Peloquin, which has been described by the Phoenix attorney of yours as one of the reasons that .1 am attacking Emprise. In brief-this is a statement by Bradley Funk, and the statement to which Mr. ~\Teiss, your counsel in Buffalo, has referred frequently. I was particularly curious about reports that Mr. Steiger was fronting for a corporation known as Intertel which was supposed to have been involved with lucrative gambling interests in the United States and abroad, and according to these reports Meyer Lansky, who is considered by the FBI to be one of the bosses of the national crime syndicate, also figured in the operation of Intertel. Do you know if that conclusion was reached as a result of my em- ployment of Robert Peloquin for the purposes of a deposition? Do you know, Mr. Jacobs, if that was the basis of this conclusion? Mr. JACOBS. I am sorry, I don't understand your question. Mr. STEIGER. Are you familiar with the Intertel allegations of Em- prise that Steiger is fronting for a national crime syndicate? Mr. JACOBS. Sir, that is not Emprise's allegation, sir. That was one of the areas investigated by the Funks, and if I might add parentheti- cally, sir; I think that there is absolutely no support to any references made regarding Mr. Peloquin in any report that we received that Ilave any value or validity whatsoever. Mr. STEIGER. On March 3, 1972, an article in the Courier Express, a Buffalo newspaper, quoting Mr. Arnold Weiss, speaking as counsel for Emprise Corp., Mr. Weiss stated that "Steiger is associated with Bahama gambling interests and Resorts International, reportedly run by Robert Peloquin and Meyer Lansky, two international characters of questionable repute." That is Friday, March 3, 1972. You are now telling RS that Mr. Weiss was not speaking for Emprise. The lead on tllC article is, "Attorney Arnold Weiss, Buffalo counsel for Emprise Corp." Now are you now telling me that Mr. Weiss was not speaking for Emprise on that. occasion? Mr. JACoBs. Sir, to my knowledge he certainly was not, but I think tilat you Sllould invite him down here in order to ask him about that. Ask him whether or not he was representing it. At the time you do ask him down, sir, you could ask him about the allegations which you made yesterday that he made certain seeiny references to you. Mr. STEIGER. I didn't make an allegation, I made a statement. I try not to make any allegations. I try to make statements. PAGENO="0264" 1274 Mr. JAcoBs. I spoke with Mr. Weiss last night. He emphatically denied that statement and lie would be happy to appear before the committee to address himself to that statement. Mr. STEIGER. We are not going to chase any more rabbits at this point. I think, Mr. Bittman, I would address this to you, recognizing that you are not under oath. Mr. BITTMAN. If you want to put me under oath I will be happy to be sworn in. Mr. STEIGER. I don't know if it is necessary. I am asking for an opinion in this matter. I know of your personal background and I happen to have very high regard for Mr. Peloquin, and since I have taken the liberty of reading this into the record I would like to ask if you know who Robert Peloquin is? Mr. BITrMAN. Yes, sir; I do. Mr. STEIGER. Without the committee, have I discussed this with you before this moment? Mr. BITTMAN. It sounds like a quiz show, butyou have not. Mr. STErnER. Have I ever discussed anything with you except what I thought of your clients, for about 2 minutes yesterday? Mr. BITTMAN. That is the only time I have ever spoken to you. Mr. STEIGER. Will you please tell the committee your personal opinion of Mr. Peloquin. Mr. BITTMAN. Bob Peloquin is a personal friend of mine with whom I worked for many years in the Justice Department and he enjoys an excellent reputation. Mr. S'rEIGER. Thank you, Mr. Bittman. I have no further questions. Mr. PEPPER. Mr. Waldie, have you any questions? Mr. WALDIE. No. Mr. PEPPER. Mr. Keating. Mr. KEATING. Yes, I have a few questions, Mr. Chairman. Mr. Jacobs, were you involved with Emprise at any time when Mr. Veeck was the owner of the Cleveland Indians? Mr. JACOBS. Sir, that would have been in the late 1940's. I would have been around 10 years old. Mr. KEATING. You have the sport concession at the River Front Stadium? Mr. JACOBS. Yes, sir; we do. Mr. ICEATING. Are you familiar with the circumstances when you obtained that concession at River Front. Stadium? Mr. JACOBS. Sir, I sat in on the presentation that was given to the proprietors of the baseball club; yes, sir. Mr. KEATING. And when was that? Mr. JACOBS. Sir. I believe that that would have been 1970, perhaps 1969,1 am not certain. Mr. KEATING. What is the term of that concession at River Front? Mr. JACOBS. I believe that is around 25 years, sir. Mr. KEATING. Have you ever computed the average length of time of the leases of your concessions? Mr. JACOBS. Well, sir, within the industry the rule of thumb, and this not only applies to our company but to other concessionaires, PAGENO="0265" 1275 and these are just rough rules of thumb, the average racetrack con- cession agreement is about 15 to 151/2 years and the same with the average baseball stadium agreement. Building agreements are about 10 years and dog track agreements are about 191/2 years. Those are rough averages from discussing around the industry. Mr. KEATING. Do you have any loans involving the River Front Stadium? Mr. JACOBS. No, sir; that was an investment, direct investment. We had to equip. Mr. KEATING. This is true of most of your concessions, investment in your own equipment at that particular stadium, is that correct? River Front or Lake Front? Mr. JACOBS. Lake Front-sir, do you mean in Cleveland? Mr. KEATING. I was on Lake Front and you mentioned River Front.. One is in Cleveland and one in Cincinnati. Mr. JACOBS. We are not currently the concessionaire in Cleveland. Restaurant Association is. Mr. KEATING. That was terminated, was it not? Mr. JACOBS. Yes, sir. That was a 10-year agreement and it was terminated. Mr. KEATING. When was that terminated? Mr. JACOBS. I believe 1969, sir. Mr. KEATING. Why was that terminated? Mr. JACOBS. Sir, we were outbid. Mr. KEATING. You were outbid? Mr. JACOBS. By Restaurant Association. Mr. KEATING. On the renewal? Mr. JACOBS. Yes, sir. It was a public bid. That is a civicly owned facility bid by written submission. Mr. KEATING. Have you been in on any discussions involving the sports center or proposed sports center to be built between Cleveland and Akron? Mr. JACOBS. No, sir. Mr. KEATING. Are you in any way involved in the proposed sports center that was announced yesterday in Cleveland that is part of a multimillion-dollar complex downtown? Are you aware of it? Mr. JACOBS. Well, no; sir; I wasn't aware of it. Mr. KEATING. Do you have any concession contracts with Debarta.lo? Mr. JACOBS. Debartalo, sir; yes, sir. The Thistle Downs Race Track in Cleveland has four racing meets running at them, all of which I believe are owned by Mr. Debartalo. Mr. KEATING. How many different places do you have concessions in the State of Ohio? Mr. JACOBS. C-ce, sir, quite a few. Roughly, if I can just take a moment. I think I can do this in my head. I think seven or eight lo- cations, sir, plus a number of drive-in theaters. Mr. 1(EATING. And four of those areas are in the Cincinnati area? Mr. JACOBS. Yes, sir. Mr. KEATING. Some 50 percent of your Ohio operation, so far as concessions are concerned, are in the Cincinnati area? Mr. JACOBS. Yes, sir. Mr. KEATING. Including Latonia. Mr. JACOBS. Oh, sir- PAGENO="0266" 1276 Mr. KEATING. Which is in Kentucky. Mr. JACOBS. I wasn't including that among the Ohio, but yes, that would be a substantial concession. In addition, sir, a number of the drive-in theaters in which we operate are located between Cincinnati and Dayton. Mr. KEATING. Are you familiar with any loans made to River Downs Track in Cincinnati, Ohio? Mr. JACOBS. Sir, I know what the current status of the loan is; how- ever, our operations there go back to 1942. Mr. KEATING. I am more interested in the current status, and that eliminates a series of loans and renewals that have taken place through the years. As I understand it, you presently have a loan down there. Mr. JACOBS. Sir, we are presently guaranteeing a loan which Mr. Andreola, who is the owner of River Downs, has taken with the Central Trust Co. in Cincinnati, sir. Mr. KEATING. And what is the amount of that loan? Mr. JACOBS. I believe itis $1% million, sir. * Mr. 1(EATING. Under your guarantee of this loan by Mr. Andreola to the Central Trust Co., in the event that he defaults, do you take over any ownership in the company? Mr. JACOBS. Sir, I believe that the bank would, of course, come to us and then we would have to go to Mr. Andreola. However, Mr. Andreola, I believe, has signed this personally and Mr. Andreola is an extremely substantial person. He has the Freiden calculator, office calculators, as part of his fortune. Mr. KEATING. I understand. But the key is, under the terms of the guarantee, in the event of default, would you be entitled to take over any ownership of the stock? Mr. JACOBS. Of the racetrack? Mr. KEATING. Yes, sir. Mr. JACOBS. Sir, that I do not know. I would assume we would go to Mr. Andreola and he would have to satisfy any default under the guarantee. Mr. 1(EATING. What is it he pledged to secure the loan with you, or with Central Trust; do you know? Mr. JACOBS. Well, sir, we have simply guaranteed on his loan. I don't know what he would have pledged. I would be happy to find that out for you. Mr. KEATING. What inducement was there for you to guarantee the loan? Mr. JACOBS. I really don't know, sir. We have quite a valuable con- cession contract there. Mr. KEATING. Well, there must be some way that you can recoup the loss, in the event that one does occur, in spite of the wealth of Mr. Andreola. Mr. JACOBS. Well, sir, what we would have to determine is to look at the pertinent documents themselves, which I would be happy to provide to you, in order to determine what the recourse is. I do not know whether the track is pledged or whether it is simply Mr. Andreola's personal signature. Both he and his wife have signed on this loan, and as I say he is an extremely substantial person, sir. I PAGENO="0267" 1277 would say the possibility that Mr. Andreola could default would be extraordinarily remote. Mr. I(EATING. Both he and his wife have signed the note, is that cor- rect, personally? Mr. JACOBS. To the best of my understanding, sir; yes. Mr. KEATING. I would judge if you had both of them sign there must have been some other kind of security involved or some other pledge; but you don't recall. Mr. JACOBS. No, sir. I would be happy to submit the file to you. Mr. KEATING. All right. We would be interested in knowing. Were you familiar with the Cincinnati Royals original purchase? Mr. JACOBS. The original purchase? You mean when the team came from Rochester? Mr. T(EATING. No, when you first assumed ownership. It is in your brother's name, presently; is that correct? Mr. JACOBS. Yes, sir. Mr. I(EATING. You are chairman of the board? Mr. JACOBS. That is correct. Mr. KEATING. And presently they are in Kansas City and Wichita? Mr. JACOBS. Kansas City and Omaha. Your question was, was I familiar with the purchase in 163? Mr. KEATING. That is correct. Mr. JACOBS. Sir, I was not. I was not working with the company in 1963. My attorney, Ambrose Lindhorst, is familiar and I would have to defer to him. I would be happy to get you a response in writing as to that initial purchase. Mr. KEATING. Your father was initially involved in the purchase of the Cincinnati basketball club rather than your brother; is that correct? Mr. JACOBS. Sir, I am not certain; I am not certain, I just don't know. Mr. KEATING. And the purchase was made from the estate of Thomas Wood? Mr. JACOBS. That is correct, sir. Mr. KEATING. And the Gardens was purchased from them, too. Mr. JACOBS. Yes, sir; some 40 percent of the Gardens was purchased from that estate. Mr. KEATING. I suppose with respect to the Cincinnati Royals, I would be better off inquiring of your brother when he testifies, is that correct, as to the ownership and purchase? Mr. JACOBS. Oh, sir, I would not think that my brother himself would be familiar with the transaction. I believe my attorney, Ambrose Lindhorst, handled that transaction at that time completely. Mr. ICEATING. What percentage of the Royals does Jerry Jacobs own at this time? Mr. JACOBS. I-lie owns 1,042 shares out of 1,849 outstanding, prac- tically 56 percent. Mr. KEATING. Now did he obtain that, from your father? Mr. JACOBS. Sir, I believe he obtained it directly from the Woods estate, I am not certain. Mr. KEATING. In 1963? Mr. JACOBS. Yes, sir; I believe so. I am not certain. PAGENO="0268" 1278 Mr. KEA~ING. Was your brother with the business at that time? Mr. JACOBS. Yes, sir; he was. Mr. KEATING. Are you familiar with any loans made to the Royals by Emprise or by the Jacobs family and any of their associated com- panies? Mr. JACOBS. Sir, for this past year the Royals, Emprise, had a rather heavy line of credit extended at the Central Trust Co. and they were, Emprise, was really guaranteeing on a loan which the Cincinnati Royals had to make, just had to make, and none of the minority stock- holders had the wherewithal so I just respectfully requested that the Central Trust Co. please, using Emprise's guarantee, loan the Royals the money. Mr. I(EATING. What were the terms of that guarantee? Mr. JACOBS. The terms of that particular guarantee were if the Royals don't have the funds the Central Trust Co. can come to Emprise and collect the money. Mr. I(EATING. And does Emprise then pick up the ownership of the Royals? Mr. JACOBS. No, sir; Emprise has no agreement at all with the Royals. Mr. KEATING. There is no pledge of stock or securities? Mr. JACOBS. Absolutely none, sir. Mr. KEATING. Is there any commitment by the minority shareholders ~n the event that Emprise picks up a guarantee; do they have any obligations? Mr. JACOBS. No, sir; none at all. * Mr. KEATING. Now, the concession at the Cincinnati Gardens has been a rather successful operation. Mr. JACOBS. Sir, this has been one of the operations that I have been most blessed with. In 1967, there were 86 dates at the Gardens and this past year there were some 208 dates, and while I don't take much credit for it, the personnel on the premises, I think, have done a wonderful job in keeping that particular facility booked with events, and conse- quently the concessions have benefited to the degree that the building has benefited. Mr. KEATING. The Garden then is now a successful operation after having difficulty for many years, is this what you are saying? Mr. JACOBS. Yes, sir; it is a modestly successful operation, becanse running a building of that size is, with the many and varied different kinds of dates, not as successful. Let's put it this way, the net profit based on the net volume is very low but we are very happy to be in the black. Mr. KEATING. Are all of the hooks and records for the Cincinnati Gardens and Cincinnati Royals kept in Cincinnati? Mr. JACOBS. I don't know if they are kept in Cincinnati or kept in Buffalo, sir. I know that the auditor, the person who-sir, I really don't, know. I do know that we send an auditor, Ted Gartman, down from Buffalo annually to audit the books, so I imagine s1nce he leaves Buffalo and goes to Cincinnati, they are probably kept on the premises at the Gardens. But, sir, excuse me, I would like to, I would like to find that out for you because I recall the books of the Royals were kept there, about the Gardens I don't know, the Gardens- PAGENO="0269" 1279 Mr. KEAT1Nci. I am riot as concerned about the Gardens as the Royals' books because I am not sure that all of the shareholders were satisfied that the books were always kept in Cincinnati, and that is why I was questioning you. Mr. JACOBS. The books of tire Royals were kept in Cincinnati. Mr. KEATING. At all times? Mr. JACOBs. To the best of my knowledge, sir. Mr. KEATING. Who hired Bob Cousy as coach of the Cincinnati Royals? Mr. JACOBS. I did, Sli. Mr. I(EATING. Did yOU have the. original conversation with him? Mr. JACOBs. Yes, sir; I did. Mr. KEATING. Did he get in touch with you or did you call him? Mr. JACOBS. I got in touch. I got in touch with him, I believe, sir. Mr. KEATING. Was Mr. Lindsey from Boston involved in that trans- action in any way? Mr. JACOBS. I don't know. I believe that Mr. Lindsey knows Red kuerbach and that Mr. Lindsey asked Mr. Anerbach t~ talk to Bob Cousy. I was in the market for a coach. But I spoke to Arthur Morris from Chicago, who is a gentleman that deals in player talent. I said I was in the market for a coach and we scouted certain coaches and I don't know, somewhere along the line I think Mr. Lindsey may have spoken to Red Auerbach and Red Auerbach called Bob and then I talked to Bob and asked him if he would be my coach. Mr. KEATING. Would it be fair to say that the initial contact was made by someone other than yourself, with Bob Cousy? Mr. JACOBS. Yes; I believe it was Red Aiierbae.h. Mr. KEATING. It was not Mr. Lindsey who called Bob Cousy and suggested he contact you? ~Mr. JACOBS. I thii~k it was Red Auerbach. It could have been Mr. Lindsey. I know Mr. Lindsey, I have met Mr. Lindsey, I don't know, but I do believe it was Red Anerhach. Mr. 1(EATJNG. You say you do know Mr. Lindsey? Mr. JACOBS. Yes, I met him on two occasions. Mr. KEATING. Do you recall having any conversation with him re- garding tire hiring of Mr. Cousy as coach of the. Rovals? Mr. JACOBS. I really don't recall. Perhaps I did. I really don't know. Mr. ICEATING. How long is Coach Cousy's contract? Mr. JACOBS. He just ended a 3-year contract and we signed him to a 1-year contract with two options. Mr. KEATTNG. Now, are you familiar with the ownership of Emprise of Latonia Race Track in northern Kentucky? Mr. JAcoBs. I know how mnch of it we own, sir. Mr. KEATING. Were you involved in the transaction at all ? Mr. JACOBS. No, sir. Mr. KEATJNG. That was before your time? Mr. JACOBS. Yes, sir. Mr. KEATING. Just about the time you were coming into the com- pany, I guess, around 1967. Mr. JACOBS. Sir, I think that the ownership of that entity goes way back and there was a bankruptcy and someone was discharged, but, PAGENO="0270" 1280 sir, I have never had any direct responsibility with any parimutuel op- eration and - Mr. KEATING. At all? Mr. JACOBS. If that was the time I was starting with the company I would have been in the West Rung Bowling Alleys. Mr. I(EATING. I think the purchase of Latonia does coincide with your original reentry into the business and being out, you were han- dling something for 3 months out West; I can't recall. Mr. JACOBS. Bowling alleys in Phoenix. Mr. KEATING. That is what it was. Then the concession at Riverfront Stadium. You said you were in on the negotiations and the signing of the contract and all? Mr. JACOBS. Sir, I was in on the presentation. Various concession- aires were brought in, each given an individual period of time and Jack Sanders, who is our vice president in charge of these operations, and my brother, and Ambrose Lindhorst went in and made oral and display presentation. I was there for that, but I was primarily window dressing, if I might be termed that, in that I spent a lot of time in * Cincinnati anyway. * Mr. KEATING. Who represents your interest in Omaha so far as the Cincinnati Royals are concerned? Mr. JACoBs. Joe Axleson `is the general manager of the Royals and he will, together with the building director, Charley Mancuso. Mr. KEATING. But there is another man out there, and I can't seem to find the paper here at the moment, when you played games in Omaha previously, there was some other man that was involved in the financial affairs of those transactions when you would come into town. Mr. JACOBS. Was it Charley Mancuso? Mr. KEATING. No. Mr. JACOBS. Well, it might be the man who is the head of the Big Brothers there. We have an arrangement with the Big Brothers, they are in charge of season tickets, et cetera, and, I don't know, we might have signed through them. Mr. KEATING. Who would have signed the checks for you in those operations in Omaha? Mr. JACOBS. The checks, sir? 1 really don't know unless it would be either-sir, if indeed the Big Brothers would have been promoting the game, then the head of the Big Brothers would have made the remission to the Royals. Mr. KEATING. I can determine that. I just don't happen to harve it with me at the moment. One question on the East St. Louis matter. I think it has been well- known that Mr. G-iardano, who is involved in the Mafia or reputed to be head of the Mafia in St. Louis, apparently was involved with some business transactions with Emprise. Are you aware of that ~ Mr. JACOBS. Not to the best of my knowledge, sir. Mr. 1(EATING. You did not do business with Mr. G-iardano at any time? Mr. JACOBS. Not to the best of my knowledge, sir. Mr. KEATING. Is there any question in your mind that he has been identified as head of the Mafia for some number of years in East St. Louis? PAGENO="0271" 1281 Mr. JACOBS. Sir, I don~t live in that area. The first time I ever heard the name of Mr. Giardano was in 1970. Mr. KEATING. I recognize we have another very important witness and I will yield back the balance of my time. (The following letter was received in response to the foregoing re- quests of Mr. Keating:) EMPRISE CORP., Buffalo, N.Y., July 18, 1972. Re Crime Committee Hearings. Hon. WILLIAM J. KEATING, house 01 Representatives, Washington, D.C. 1)EAR CONGRESSMAN KEATING When I appeared before your Committee re- cently, you interrogated me with respect to the relationship between Emprise Corporation and River Downs. At that time, request was made for, and I agreed to supply, full and adequate information covering the position of Emprise Cor- poration with the racing facility located in your own Congressional District. First, let met state that the information which I orally supplied at the hearing was not totally accurate and was based on information supplied me by our cor- porate staff. Since that time, I have, however, been able to secure full and accu- rate information covering the entire posture of River Downs, Emprise Corpora- tion and financial matters generally relating to River Downs. The following information, as far as I can determine, is accurate. 1. Emprise did not make any loan to Queen City Turf Club, Inc. (River Downs) when that company purchased the River Downs Race Track. 2. Sportservice has been the concessionaire at all times during its present ownership and, in addition, under previous owners dating back to 1942. 3. Following the purchase of River Downs Race Track by Queen City Turf Club (headed by Mr. Andreoli), Emprise loaned the corporation $1,000,000.00, half of which was paid back within four or five months as per contract. The remainder was to be paid over an extended period of time, commencing several years in the future. This loan was guaranteed by Mr. and Mrs. Andreoli, and the only additional security was an assignment of the concession rentals due from Midwest Sportservice, Inc. in the event of a default. No stock in Queen City Turf Club, Inc. was pledged and no mortgage was given on any of the personal property or real estate. 4. On April 5, 1972, Sportservice Corporation negotiated a new loan with Queen City Turf Club, Inc. in the face amount of $1,275,000.00. From the pro- ceeds of this loan, the balance remaining on the old obligation was liquidated. At the time that this loan was negotiated, it was anticipated between the par- ties, and the agreement so recites, that the obligation was to be assigned to a bank, specifically the Central Trust Company of Cincinnati, Ohio. Subsequently this bank was agreeable to making the loan, not, however, on the basis of the assignment but upon a new demand note in like amount of Queen City Turf Club, Inc., guaranteed by the same guarantors as on the original note to Sport- service Corporation, namely, Mr. and Mrs. Andreoli, individually, and Trans- airco, Inc., an Andreoli Holding company, plus the guarantees of Sportservice Corporation and Emprise Corporation. This was effected and from the proceeds of the bank loan, the obligation under the note to Sportservice Corporation of April 5, 1972 was thereby substituted therefor. Subsequently there was obtained by Sportservice Corporation a letter of commitment from Queen City Turf Club, Inc. and the same guarantors as on the original note to Sportservice Corpora- tion, which confirmed the original intent of the parties in the event of any default on the bank loan and also confirmed that all of the provisions of the documents between Queen City Turf Club, Inc. and the guarantors with Sport- service Corporation remain in full force and effect. Additional supplementary agreement is in process of being prepared for the purpose of more speciflc~ally confirming the original intent of the parties. The instrumentation in connection with this transaction provides for a second- ary pledge of the corporate stock in Queen City Turf Club, Inc. The stock is pledged primarily to the Provident Bank of Cincinnati in connection with cer- tain obligations due and owing to the Provident Bank. The above obligation is not secured by any mortgage on the real or personal property of River Downs. PAGENO="0272" 1282 5. At the time the above loan by Sportservice Corporation was negotiated, the following real estate mortgages were of record and constituted a first lien against the River Downs real property: (a) An open-end mortgage from Queen City Turf Club, Inc. (hereinafter called River Downs) to The Provident Bank of Cincinnati, Ohio, (hereinafter called Provident Bank) in an amount up to $670,000.00, recorded March 24, 1972 in Mortgage Book 3866, page 244. This mortgage covered the River Downs Race Track as security. (b) An open-end mortgage from River Downs to Provident Bank, recorded October 20, 1970, in an amount not to exceed $1,010,000.00, recorded in Mort- gage Book 3770, page 290. This mortgage also conveyed the River Downs Race Track as security. (c) A mortgage from River Downs to Provident Bank in an open-end amount of $1,050,000.00, recorded October 20, 1970, in Mortgage Book 3770, page 201. This mortgage also conveyed the rack track property as security. (d) All of the foregoing mortgages were prepared by the law firm of Keat- ing, Muething & Kiekamp. 6. Subsequent to the negotiation of the loan by Sportservice Corporation above described, additional transactions involving River Downs are recorded, and in- volving others, as follows: (a) A mortgage from River Downs to Provident Bank in the amount of $2,205,000.00, recorded May 4, 1972, in Mortgage Book 3873, page 860. This mortgage also conveyed the River Downs Race Track property as secutity and was prepared by Lloyd W. Stiess, Attorney at Law. (b) A financing statement from River Downs to Provident Bank, re- corded under date of May 4, 1972, predging to Provident Bank `all furniture, fixtures, equipment and other personal property owned by the undersigned (Queen City Turf Club, Inc.) `and located on property known as the River Downs Race Course". This is Document Number G-24080 in the Recorder's Office of Hamilton County, Ohio. (c) A conditional assignment of leases and rents from River Downs to Provident Bank, recorded on May 4, 1972, in Mortgage Book 3873, page 869. This is a conditional assignment of any rents due from Cincinnati Turf Club (which operates the second meeting at River Downs) to Queen City Turf Club, Inc. (the owner of the River Downs Race Course property and the operator of the first racing meeting each year). This document was prepared by Don R. Gardner, an~ attorney affiliated with the law firm of Keating, Muething & Kiekamp. (4) As far as I know, all of the foregoing encumbrances against River Downs Race Track, running in favor of The Provident Bank, are currently uncanceled of record. 7. From the foregoing, it is quite obvious that neither Einprise nor Sport- service could have any primary control over the operation of River Downs Race Track in the event of a default by Queen City Turf Club, Inc., arising from the loan guaranteed by Sportservice and Emprise, because The Provident Bank has a first right to foreclose upon the race track real estate, as well as the chattel properties that comprise the personal property of the race track, in the event of a default or an assignment for creditors or bankruptcy. This language will be found in all of The Provident Bank mortgages. Further, while there is a secondary pledge of the stock in River Downs Race Track to Sportservice, there is a primary pledge of such stock as further col- lateral and security to The Provident Bank. It is, therefore, obvious, under the mortgages above described, assignments and pledges set forth, The Provident Bank would be in a far superior position to exercise any rights of foreclosure,~ domination or ultimate ownership of the race track facility in question. 8. The racing facility located at Latonia, Kentucky, `and known as Kentucky Jockey Club, Inc. is the only other racing facility in the Cincinnati area in which we have an interest. As you know, our ownership position in Latonia is quite susbtantial and we also operate the concessions at the same facility. Kentucky Jockey Club, Inc., like River Downs, has also done business with The Provident Bank since September, 1969. In 1969, The Provident Bank was paid $462.70 for payroll services in connection with Latonia; in 1970, it was paid $1,044.10 for services; and in 1971, it was paid $1,524.50 for similar services rendered to Latonia. Starting in 3~anuary, 1972, American Financial Leasing and Services Com- pany took over the work that The Provident Bank had been doing at Latonia and PAGENO="0273" 1283 entered into a new contract with this facility for similar services. Up to and including June 27, 1972, American Financial Leasing was paid the sum of $1,177.20, and additional payments will be made in connection with the second meeting at Latonia in the fall of the year. 9. I have no direct knowledge, but do believe that the mutuel change fund (which amounts to about $300,000.00 a day) is also currently handled by The Provident Bank to River Downs, and this, I believe, has been the situation for a number of years. I do not know who handles the mutuel change fund at Latonia. I trust that the foregoing supplies such information as will satisfy the com- mitment that I made to you at the time of my recent appearance before your Committee. Respectfully submitted. MAX W. JACOBS. Mr. PEPPER. Next is Mr. Winn. Mr. WINN. Thank you, Mr. Chairman. I will go through mine as quickly as possible. Mr. Jacobs, in working with the concessionaire aspect of Emprise and Sportservice, do you finance owners of racetracks? Mr. JACOBS. Sir? Mr. WINN. Does Sportservice finance or guarantee loans to the owners of horseracing tracks? Mr. JACOBS. Sir, there have been occasions when loans have been requested and we have supplied them either to owners or to the racing facilities. Mr. WINN. What percentage of the tracks where you have the con- cessions would you be involved in the financing of the owners? Mr. JACOBS. Sir, I would have to submit a listing. I couldn't answer that question off the top of my head. Mr. WINN. I think you said since 1970, particularly, or maybe 1967, you have been involved in the concession part. That is your specialty, isn't it, for Sportservice? Mr. JACOBS. I have spent most of my time in certain aspects of the concessions. I have no affirmative responsibilities as it refers to parjmutuels. Sir, what I am saying is that I simply could not tell you off the top of my head about the loans. Mr. WTNN. You don't have an offhand opinion as to whether you helped finance 25 percent of the tracks, 50 perce~~t, or 70 percent? Would you have any idea? Mr. JACOBS. No, sir; but I would be happy to submit that to the committee. Mr. WTNN. Then how many tracks are involved? Mr. JACOBS. I believe that we are concessionaire at more than 40 tracks in the United States. Mr. WINN. I wonder if ou would supply the committee with a list of those tracks where you have the concessions and you would also be involved in the financing of tl~e ownership. Mr. JACOBS. Sir, I would be happy. We would be happy to supply you with that. (The information requested, see material received for the record at end of Jeremy Jacobs' testirnonyon June 15, 1972.) Mr. WINN. Who handles your legal work for the former Cincin- nati Royals, now the Kansas City-Omaha franchise? Mr. JACOBS. At present Ambrose Lindhorst. 81-068-73-pt. 3-18 PAGENO="0274" 1284 Mr. WINN. The same gentleman. You have not hired the services of a Morris Shenker? Mr. JACOBS. No~ sir; not to the best of my knowledge. Mr. WINN. He is not involved in any of your legal negotiations in any way? Mr. JACOBS. Not to the best of my knowledge. I have heard the name, sir. Mr. WINN. You have heard the name? Mr. JACOBS. Yes, sir. Mr. WINN. Do you know where you have heard the name? Mr. JACOBS. Sir, I believe Mr. Shenker is an attorney in St. Louis and he is quite prominent in the United Jewish Appeal and Bonds for Israel. Mr. WINN. All right. The name of the Cincinnati Royals is in the process of being changed to the Kansas City Kings, and since that is a new franchise, are you going to have, or is there going to be, a so- called covered contract for the concessions in Kansas City? Mr. JACOBS. Sir, the concessions at Kansas City are held by a com- pany called B. & L. Concessions. They have had them for a number of years. And Sportservice, a subsidiary of Emprise, has 50 percent in the company and has had for many years. Mr. WINN. So B. & L. is another one of the Emprise Corp.'s affiliates. Mr. JACOBS. Sir, it is one of the 26 corporations in the Sportservice subsidiary system that is 50 percent owned where there is another owner. Mr. WINN. Did this have anything to do with the transfer from Cincinnati to Kansas City because Sportservice or B. & L. already had the concession contract? Mr. JACOBS. No, sir; it could have nothing to do with that. That would be a violation of my fiduciary responsibility as chairman of the board. Mr. WINN. It would be what? Mr. JACOBS. A violation of rn-v fiduciary responsibility as chairman of the board of the Cincinnati Royals to take that into consideration whatever in determining a good city in which to move this franchise. This franchise was moved to Kansas City because they have a very, very active local group. To illustrate: Last year I don't think the Cincinnati Royals had a thousand season tickets sold. Today in Kansas City we have over 2,000 sold, and there is a group of 75 prominent and interested citizens, and they also made a very, very favorable lease arrangement with the basketball team. Mr. WJNN. Let me clarify that. The 75 men didn't make the lease arrangement, the lease arrangement is made with the city; it is not? Mr. JACOBS. That is correct. Mr. WINN. Well, I won't get into the fact that Kansas City has always been a very fine basketball town and they enjoy one of the two big national basketball tournaments and many times have had the NCAA finals there. I am sure you are aware of that. Mr. JACOBS. Yes, sir. The man I hired as my general manager 3 years ago, Joe Axleson, is from Kansas City and he worked with the NATA for many years. PAGENO="0275" 1285 Mr. WINN. You said 56 percent of the stock in the Cincinnati Royals is owned by Emprise? Mr. JACOBS. No, sir; it is owned by my brother Jeremy Jacobs. Mr. WINN. It is owned by Jerry? Mr. JACOBS. Yes, sir. Mr. WINN. Who owns the remainder of the stock? Can you tell us or shall we ask Jerry who the remaining stockholders might be? Mr. JACOBS. No; I would know better. There are some 83 to 85 stock- holders. I would be happy to supply you with a stockholders listing. (The information referred to above follows:) I, Ambrose H. Lindhorst, do herewith and hereby certify that the following is a true, accurate and exact copy of the shareholders of the Cincinnati Basketball Club Company, as of June 19, 1972: Certificate Shareholder No. Number of shares Robert Acomb, Inc., 3511 Edwards Rd., Cincinnati, Ohio 90 5 Joseph A. Axelson, care of Cincinnati Gardens, 2250 Seymour Ave., Cincinnati, Ohio 184 1 R. M. Ayers, 8751 Hollyhock Dr., Cincinnati, Ohio 88 5 Dr. Charles 0. BahI, care of Hammond North, 5300 Hamilton Ave., Cincinnati, Ohio 2 10 Frank E. Bernet, 3180 Epworth Ave., Cincinnati, Ohio 3 10 Robert G. Bernet, 2991 Work Rd., Cincinnati, Ohio..._ 4 10 Dennis R. Bierbaum, 1183 Meredith Dr., Cincinnati, Ohio 155 10 Howard David Blaney, Jr., 6622 Bramble Ave., Cincinnati, Ohio 6 10 Sidney C. Brant and Joseph A. Brant, trustees U/W of William S. Schwartz, dated Apr. 29, 1966, 1401 Tn-State Bldg., Cincinnati, Ohio 190 10 Mr. J. W. Brown, trustee, Cincinnati Transit Co., 6 East 4th St., Cincinnati, Ohio 7 10 J. W. Brown, care of Cincinnati Transit Co., 6 East 4th St., Cincinnati, Ohio 177 30 Perry T. Christy, 6481 Navaho Trail, Cincinnati, Ohio 133 2 Cocinco, Pest Office Box 1118, Cincinnati, Ohio 186 1 Ms. Lillian H. Cook, 2164 Slane Ave., Cincinnati, Ohio 152 10 Hon. Chase M. Davies, Judge, Hamilton County Prebate Court, Hamilton County Court House, Cincinnati, Ohio 109 1 Jacob E. Davis Il, 3801 Lindhurst Dr., Columbus, Ohio U 1 L. L. Davis, First National Bank Bldg., Cincinnati, Ohio 12 10 Mrs. Helen Dennis, 2338 Bedford Avenue, Cincinnati, Ohio 13 2 Mrs. Sarah Mary Dessner, Lakeshore Dr., Lake Mohegan, N.Y 185 1 Henry L. Dithmer (deceased), care of Mrs. Ross Hastie, 7585 Ridge Rd., Cincinnati, Ohio 14 1 Mr. Robert F. Dreidame, 1200 American Bldg., Central Parkway at Walnut St., Cincinnati, Ohio 16 20 Mrs. Betsy H. Liruffel, 7865 Graves Rd., Cincinnati, Ohio 167 2 Mr. Clarence H. Duesing, Jr., Box 8, 910 Stanton Ave., Terrace Park, Ohio 157 10 First National Bank of Cincinnati, trustee for Ross M. Hastie, for Robin Brooking Haotie, Cincinnati, Ohio 170 2 Bertram Fishel, 4 West 4th St., Cincinnati, Ohio 21 1 Paul D. Galeese, 3305 Central Ave., Middletown, Ohio 176 1 Dean R. Gaudin, 365 Brockdorf Dr., Cincinnati, Ohio 24 1 Albert Gentry, Jr., 636 Oak St., Cincinnati, Ohio 23 1 Nicholas Giordano, 3525 Locust Lane, Cincinnati, Ohio 96 1 Stanley Gurisn, 4811-0 Kings Hill Dr., Columbus, Ohio - 165 1 Andrew Brooking Hastie, 7585 Ridge Rd., Cincinnati, Ohio 174 2 Warren S. Hensel, 7400 Brill Rd., Cincinnati, Ohio 29 10 Thomas Dawes Hibbard, care of B. Gates Dawes, Carew Tower, Cincinnati, Ohio 30 1 Charles A. Hinsch, 1001 Fifth Third Bunk Bldg., Cincinnati, Ohio 32 1 Andrew Hopple, 6447 Honeysuckle Dr., Cincinnati, Ohio Roland J. Halley, 5733 Belmont Ave., Cincinnati, Ohio 136 1 Jeremy M. Jacobs, care of Emprise Corp., 703 Main St., at Tupper, Buffalo, N.Y 1' 04~ 172 10 173 5 Max W. Jacobs, care of Empnise Corp., 703 Main St., at Tupper, Buffalo, N.Y 179 11 181 15 183 5 Max William Jacobs as custodian for Seth Stephen Jacobs under the New York Uniform Gifts to Minors Act, 703 Main St.,at Tapper, Buffalo, N.Y ~193 10 1197 10 Max William Jacobs as custodian for Mstthew Charles Jacobs underthe New York Uniform 194 10 Gifts to Minor Act, 703 Main St., at Tupper, Buffalo, N.Y ~195 10 1196 1 Dr. Lawrence 0. Jacobs as custodian for Christopher Loais Jacobs under the New York Uniform Gifts to Minors Act,21 Maple Hill Dr., Larchmont, N.Y 198 10 Dr. Lawrence D. Jacobs us custodian for Luke Thomas Jacobs under the New York Uniform Gifts to Minor Act, 21 Maple Hill Dr., Larchmont, N.Y 199 10 PAGENO="0276" 1286 Certificate Number of Shareholder No. shares Harry S. Leyman,Jr., 1416 First National Bank Bldg., Cincinnati, Ohio 41 10 Ambrose H. Lindhorst, 1200 American Bldg., Central Parkway at Walnut St., Cincinnati, 1 42 20 Ohio ~150 6 t153 5 M. C. Loveless, 2236 Glenside Ave., Cincinnati, Ohio 43 5 Francis T. Martin, 1703 Central Trust Tower, Cincinnati, Ohio 45 2 Mayors Electric Co., 24 Clay St., Cincinnati, Ohio 47 1 E. Paul Messham, 3412 Carew Tower, Cincinnati, Ohio 49 10 Herbert Middendorff, 8500 Miami Rd., Cincinnati, Ohio ~ E. H. Mosler, Jr., New Yorker Hotel, Suite 1514, 34th St. at 8th Ave., New York, N.Y 99 ito Dr. J. M. Mulvey, Cincinnati Doctors Bldg., Cincinnati, Ohio 119 1 Mrs. Florence E. O'Leary or Mrs. Anne L. Brandstetter, JT/WROS, 4531 Arcie St., Orlando, Fla 189 2 Raymond L. Patterson, 10695 Stargate Lane, Cincinnati, Ohio 54 1 Gabriel Paul, care of Clevoland Indians, Cleveland Stadium, Cleveland, Ohio 55 10 Frank Peabody III, 414 Sprite Rd., Louisville, Ky 164 5 John Pease, 95 Fleming Rd., Wyoming,Ohio 57 5 William M. Powell, 145 West McMillan St., Cincinnati, Ohio 58 10 Thomas E. Price, Dixie Terminal Bldg., Cincinnati, Ohio 59 lo Bolen R. Redmond, 1300 Beckman St., Cincinnati, Ohio 61 10 Hoddy Reed, 256 Strader Ave., Cincinnati, Ohio 63 5 122 7 Carl W. Rich, Kroger Bldg., Cincinnati, Ohio 10 171 10 182 1 Gordon Rich, Second National Bldg., Cincinnati, Ohio 120 1 Gilbert Richards, care of Jordan Valve Co., Helen and Blade Ste., Cincinnati, Ohio 151 10 Joseph F. Rippe, care of The Provident Bank, 1 East Fourth St., Cincinnati, Ohio 178 1 Frank H. Rolfes, 3477 Morrison Place, Cincinnati Ohio 107 S. Rosenthal & Cc., Inc., 22 East 12th St., Cincinnati, Ohio 64 0 Joseph F. Rusche, 1108 First National Bank Bldg., Cincinnati, Ohio 8 1 James A. Salinger, 2601 Section Rd., Cincinnati, Ohio 6 10 A. D. Scaggs, Box 247, Logan, W. Va 187 10 Milton Schloss, Jr., 97 Marion Avs., Cincinnati, Ohio 139 5 Louis L. Schott,5376 Cloves-Warsaw Pike, Cincinnati, Ohio 68 10 Mrs. Gertrude Schuster, 6467 Mayflower Ave., Cincinnati, Ohio 188 1 Robert J. Schuster, 1853 Bluefield P1., Cincinnati, Ohio 72 10 Mrs. Virginia M. Schuster, 1853 Bluefield P1., Cincinnati, Ohio 130 1 Virgil M. Schwarm, 626 Park Ave., Hamilton, Ohio 101 2 Larry Shea's Pharmacy, 3823 Glenway Ave., Cincinnati, Ohio 74 5 Dr. H. H. Shook, 2328 Auburn Ava., Cincinnati, Ohio 93 10 Sigler & Co., Manufacturers Trust Co., New York, N.Y 146 10 Lean A. Slavia, 6420 Cambridge Ave., Cincinnati, Ohio 94 10 Roy Smith, 1817 Wynnewood Lane, Cincinnati, Ohio 77 5 Leonard J. Stark, 3021 Vernon P1., Cincinnati, Ohio 78 10 James Calles Stowell, Care of B. Gates Dawan, Carew Tower, Cincinnati, Ohio 125 1 Thomas M. Upaoa,3922 EastSt., Cincinnati, Ohio 98 10. Alfred J. Wnisbrod, 7300 Fair Oaks Dr., Cincinnati, Ohio 81 20 Mrs. Marianne Whaeler, 7633 Pineglen Or., Cincinnati, Ohio 166 2 James R. Williams, 1 East 4th St., Cincinnati, Ohio 82 50 T. J. Zumbiel, 2339 Harris Ave., Cincinnati, Ohio 85 5. AMBROSE H. LINDHORST, iS'ecretary of Cincinnati Basketball Club Co. CINCINNATI, Ouio, June 19, 1972. Mr. WINN. Are there any men from Kansas City on there? Mr. JACOBS. Not at this time. To the best of my knowledge. Mr. WINN. Any men from Omaha on there? Mr. JACOBS. Gee, Sir, I really don't. Most of them are Cincinnati residents. Mr. WINN. The Lieutenant Governor of the State of Missouri, do you know if he is listed on there or not? Mr. JACOBS. Sir, what would his name be? Mr. WINN. William Morris. Mr. JACOBS. No, sir; I don't recall. Mr. WINN. That doesn't ring a bell? Mr. JACOBS. I don't recall any Morris. PAGENO="0277" 1287 Mr. WINN. All right. That is all the questions I have, Mr. Chairman. Mr. PEPPER. Mr. Murphy. Mr. MURPHY. Thank you, Mr. Chairman. Mr. Jacobs, the purpose of this committee is to inquire into the influence, if `any, of organized crime on professional sports. There have been a lot of allegations and a lot of statements about certain well-known criminal figures that may or may not be doing business with Emprise Corp. Emprise Corp. has been the subject of hours of testimony before this committee. I think one of the reasons is the fact that you have so many interests in various sporting teams around the country, as well as the concessions that serve various sporting teams. Only one concrete fact has emerged so far as regards Emprise and its association, as far `as I am concerned, and that is the conviction in California of your alleged failing to report Emprise's interest in ownership in a casino there. We have asked the chief counsel of this committee on a number of occasions, as well as other members of this committee, to have the facts of that case `brought forth and put into the record. As of this date nobody has testified with any knowledge concerning the trial and what really took place there. I am wondering if your counsel, Mr. `Bittman, is aware of that trial and might shed some light on the conviction-as to who was con- victed `and what portion of your corporation or corporations were found guilty, if that `be the fact. Mr. JACOBS. My counsel was not at that particular trial but he has familiarized himself with the nature of the evidence. Mr. MURPHY. Well, Mr. Chairman, with your indulgence and the committee's indulgence I would like to get into some facts about that case instead of a lot of allegations of what people have read in the. paper and what has been reported. I would like the forbearance of this committee for about 5 or 10 minutes. Mr. Bittrnan, if you could cut it down to that and give us a legal opinion of what took place out there, as far as who was convicted, if there is a conviction, and if a judgment has been entered. Mr. BITTMAN. Of course, as Mr. Jacobs indicated, I did not partici- pate in that trial in any way. Principle trial counsel for Emprise was an attorney by the name of Joel Ball, who is a well renowned attorney, member of the American Trial Attorneys, who is, in my judgment, one of the finest trial attorneys in the country. The facts that I briefly relate to the committee at this time are facts that were furnished to me from Mr. Bali and from his office. There was a conspiracy case under section, 1 believe, title 18, section 1952, which is called the Travel Act, which means interstate commerce to violate a particular State law. In the indictment it is charged that two Nevada statutes were vio- lated. A number of defendants were named. There are a number of unindicted coconspirators. The only defendants in that case that have been linked to organized crime figures, to the best of my knowledge, not only from what facts I have been furnished but from my own personal knowledge. would be C-iardano, Zerilli, and Polizzi. Now the gist of it is that a hotel in Las Vegas is going to be con- structed with a casino, the New Frontier. A number of people went PAGENO="0278" 1 c) around the country to obtain investors in the particular casino. And how Emprise got into the picture, as I understand it, is in connection with two loans that were made. One of the loans has already been de- scribed here, and that is the loan to Max Jacob's father-in-law, Philip Troy. That loan was in the amount of $225,000. And I believe that Mr. Max Jacobs has covered that completely in his statement before the committee and also in respect to certain questions that were asked. The other loan was to two Detroit, Mich. businessmen, a Mr. Ka- chinko and Mr. Rooks. That loan, I believe, was approximately $512,000, and there has never been a suggestion that Mr. Rooks and Mr. Kachinko have ever been linked to organized crime. They owned a paving company in Detroit, Mich. which did a substantial amount of paving work at Hazel Park. I understand they a]so owned a ski resort and they were men of some substance. Now, as I understand, and I will have to go into a little background, and I am speaking without notes, and extemporaneously, so if I inad- vertently make a mistake I will apologize and I will attempt to correct my testimony. That Peter Bellanca, a young lawyer in Detroit, his father for many years has been general counsel of the Hazel Park Race Track. He was very close to Mr. Louis Jacobs, the father of Max Jacobs. Mr. Bellanca died and his son, being a young lawyer, and apparently there were other children still in school, went to Mr. Jacobs and indicated to him that he was a very young lawyer, that the contract of Hazel Park meant very much to him and he would appreciate any cooperation or help that Mr. Jacobs could lend to keep him the Hazel Park contract. Anyway, Peter Bellanca did maintain that particular contract. Generally, a~s I understand it, Peter Bellanca approached Mr. Lou Jacobs and indicated to him that he was in the process of legally repre- senting a number of people in connection with the construction of the New Frontier Hotel and that it meant much to him, he was a young lawyer, and that if he would assist him he would appreciate it. And among the people that he was representing were Mr. Rooks and Mr. Kachinko from Detroit and, as I understand it, this is how Mr. Jacobs met Mr. Rooks and Mr. Kachinko and agreed to loan them the $512,000. There were numerous loan agreements that were drafted, I under- stand, and I might add, quite candidly, there is a dispute about this in Los Angeles, but I understand from all the facts that I have been furnished that more than adequate collateral was put up by Mr. Rooks and Mr. Kachinko for that loan that Emprise made. Like I said, in all candor I want to say that the prosecutor disagreed with that, he said there was not adequate coliaterai. In any event the loan was made. How did Emprise get into this case? The contention of the prosecu- tor was that certain of the people that purchased an investment in this hotel were fronting for Giardano, Zerilli. and Polizzi, and they con- tended that the stock that Rooks and Kachinko purchased was actually purchased on behalf of Zerilli and Polizzi. There has been no sugges- tion that Mr. Troy held the stock for any organized crime individuals. Mr. MURPHY. Was Rooks convicted? Mr. BITTMAN. Kachinko died and I am not sure if Rooks was con- victed. Yes, he was. Mr. STEIGRR. On all but one count. PAGENO="0279" 1289 Mr. BITTMAN. Emprise was named in the one count in connection with the conspiracy and the situation as to Eniiprise was whether or not a full disclosure was made to the Nevada Gaming Commission, and I believe that the facts are, and don't believe this was in dispute, that all of the facts relating to Rooks-Kachinko loan were turned over to the Nevada Gaming Commission. I don't think there is any dispute about that. I don't think there is any dispute about the fact that all of the loan documents concerning the Troy-Emprise loan were turned over to the Nevada Gaming Commission. As a matter of fact, a partner of Peat, Marwick, & Mitchell accounting firm so testified. The one document there was a dispute about was the personal indem- nification agreement that Max Jacobs had with his father-in-law. However, of significance, and if I may address myself to that for a moment, is that Phillip Troy, father-in-law of Max Jacobs, testified at the trial that he fully disclosed all of the contents of that indem- nification agreement to an investigator for the Nevada Gaming Com- mission named David WilL Max Jacobs also testified as a Government witness in the trial and he testified that he also told David Will about the indemnification agreement. Again, in all candor, David Will disputes this, but I think the significance of it is that he doesn't dispute the fact that Philhip Troy told him about the indemnification agreement. So there is undisputed evidence in the record that full disclosure was made concerning all of the documents to the Nevada Gaming Commission, including the indemnification agreement. All the loan documents were fully disclosed. Initially the indictment against Emprise was dismissed. This origi- nally was a subsidiary to a parent corporation called Hyde Park and the Government indicted this particular subsidiary, which was out of existence, I believe, approximately a year before the indictment was even returned, and again there has never been a suggestion by the Government that the merging of the assets into Hyde Park, the parent corporation, was in any way anticipating this grand jury because the grand jury wasn't even in existence. The indictment as to old Emprise was dismissed and a new criminal information was eventually returned naming the Emprise Corp., which is the present Emprise Corp., on the basis that under New York law if an old corporation, which is no longer in existence, was convicted that the new corporation would be obligated to pay what- ever debts, et cetra, of the old corporation. In the criminal information it specifically states all of the acts alleged in the criminal information were allegedly committed by old Emprise and not by the present Emprise Corp. as we know it today. That, basically, is my knowledge of the case. I would be more than happy to submit a complete summary of this entire case to the com- mittee. As a matter of fact, I am in the process of preparing such a summary right now because I believe there has been a tremendous amount of misinformation about what this case was and what effect this case has on Emprise, and if the committee so desires I will he more than happy to furnish this to the committee and I would certainly welcome the opportunity to do it. I assume if you would want to check PAGENO="0280" 1290 my accuracy, that you could send it to the TJ.S. attorney's office in Los Angeles, because hopefully this would be a fair and accurate summary of all of the evidence in the trial that any way related to Emprise. I might also mention that Mr. Zerilli did testify in Los Angeles, as did many other witnesses-it was a 9-week trial-that he never had any conversation with Mr. Louis Jacobs concerning the fact that he was going to be a stockholder or secret stockholder in the New Frontier, and based on my review of the transcript and the summaries of the transcript which were furnished to me, there is not a single witness who ever testified that anyone from Emprise was aware that anyone was going to hold any secret stock interest on behalf of Zerilli. Mr. MURPHY. I for one would like to have a summary of this sub- mitted in lieu of the prosecutor or someone from California submit- ting something because this committee is obviously not getting any cooperation. And I for one would like to have the facts in front of me. Mr. PHILLIPS. I think the record should reflect we have contacted the Justice Department and asked them to give us copies of the record and they have insofar we have asked them. In addition we have asked them to come and testify about all evidence so the committee could be briefed rather than reading 9 weeks of testimony. The position of the Justice Department was that this matter is still pending, that it will be appealed to the circuit court of appeals, and that their position would be that it would be improper to make public statements about it which might be reported in the press while the matter was still under consideration in the courts. Mr. BITTMAN. There was a hearing recently in Los Angeles. Mr. WALDIE. I want to comment on that, and the reason I want to comment on it is because we required the defendants in that case, under subpena, to appear before this committee and they took the fifth amendment and were castigated for so doing. The Justice Department, in effect, is taking the fifth amendment. They refuse to testify before this committee on the basis the matter is in session. I do not appreciate the Justice Department not appearing before this committee. I do not know how we can get the information we were seeking from the defendants that we were not able to get because they took the fifth amendment, and in lieu of the Justice Department not coming before this committee this is the first time I have heard anybody explain this case. I have heard all kinds of references to it. I have never seen any of the documents. I did not even know they were in possession of the committee, and I think a summary would be extremely important for the committee. It would be much more im- portant for the committee if the Justice Department would send a representative to testify before this committee as to precisely what the involvement of Emprise was with organized crime in that Cali- fornia lawsuit that had been the whole basis and substance of this investigation, and the one fact that I really have not been able to clarify in my own mind, in terms of Emprise's involvement with organized crime. I am not convinced that any conviction or even minimal case had been made by the testimony to date. I do not under- stand that conspiracy and I suspect I will never understand it until the Justice Department appears before this committee and explains it to the committee. PAGENO="0281" 1291 Mr. PmLLIPs. I think in fairness to the Justice Department, Con- gressman Waidie, we should state that the assistant U.S. attorney who tried the case was prepared to come here, was prepared to testify, was quite willing, and cooperated with two of our staff attorneys. He con- sulted his superiors in Washington about the matter, the head of the Criminal Division. Mr. MURPHY. He is not coming. Mr. PHILLIPS. Yes, sir; until the appeal is resolved they feel it would prejudice the rights of the defendants and not be to the defendants advantage. Mr. MURPHY. We have had testimony about this conviction. I do not know who is right or who is wrong in this matter, but I think in fairness that either the Justice Department come down here and testify or we quit making reference to the conviction in California, if in fact a conviction stands out there. I am not too sure that the judg- ment has been entered yet. Mr. BITTMAN. No judgment conviction had been entered. Mr. MTJRPHY. Then it seems to me we have spent 3 or 4 weeks talking about a conviction that hasn't been entered yet and the Justice Depart- ment hasn't seen fit to come before us, yet we keep making references about people and whether they are right or wrong. I carry no brief for the Jacobs' action, but I do carry a brief for the committee and its integrity. We keep making these references, and I for one would like to have the facts. I would `appreciate Mr. Bittman submitting a sum- mary of that trial. Mr. BITTMAN. I will be more than happy to do so. (The summary referred to follows:) MEMORANDUM SUBMITTED BY WILLIAM 0. BITTMAN (Re Emprise Corp. and United Sta~tes v. Zerilli) Recently, a federal District Court jury in Los Angeles returned a verdict of guilty against Emprise Corporation and certain individuals in a prosecution based upon investments in a Las Vegas hotel and casino. Some people have taken the view that this conviction means that Emprise has become involved with organized crime. In fact, the case means no such thing, and it is the pur- pose of this 1~Iemorandum to correct any misunderstandings by setting forth ex- actly what this case was about and what Emprise's conviction means. This case involved a charge of conspiracy, and it is a matter of law that once the existence of the conspiratorial relationship is established, one conspirator will be held criminally responsible for the acts of his co-conspirators, and their declarations may be evidence against him (subject to certain qualifications and exceptions too technical to go into here). However, the discussion that follows is limited to evidence of what Emprise itself actually did, not what one or an- other of its alleged co-conspirators may have done, because this seems to be the appropriate evidence to look to in order to determine what this case means about Emprise. In any event, it should be made perfectly clear that Em- prise maintains that it was not involved in any conspiracy whatsoever. THE DEFENDANTS "Old" Emprise and "New" Emprise "Emprise Corporation" was named as one of the seven defendants in this case. However, the Emprise Corporation which was actually tried arid con- victed in the District Court was not alleged to have committed any of the acts upon which this prosecution was based. The acts were alleged to have been committed by a corporation, also called "Emprise Corporation," which now no longer exists. PAGENO="0282" 1292 The events upon which the prosecution was based all took place in 1966 and 1967. At that time there was a corporation in existence called "Emprise Corpora- tion" (for reasons which will become apparent, we will refer to it as "Old Em- prise"). This corporation was a subsidiary of a diversified company called "High Park Corporation." On March 1, 1970, long after the events out of which this case arose, and almost a year before the indictment in this case, Old Em- prise was merged into its parent company, High Park Corporation, and ceased to exist as a separate corporate entity. A few weeks later, High Park changed its corporate name to "Emprise Corporation." We will refer to this company, form- erly High Park Corporation, as "New Emprise." It is New Emprise which presently exists and which was convicted in the District Court. At the time of the events in this case, New Emprise was called High Park Corporation and bad absolutely nothing to do with the events of this case. Therefore, the. District Court dismissed the indictment which the prosecution brought against Old Emprise on the ground that no jurisdiction could be ob- tained over Old Emprise because it had ceased to exist. The prosecution then brought a new charge, this time against New Emprise. This new cha rge, under which the case was actually tried, alleged the same facts as the dismissed indict- inent. It stated specifically that: "It was the original Emprise which (allegedly) committed the conspiratorial acts charged But it went on to state that: "Pursuant to the laws of the State of New York, the now existing Emprise `Corporation, as the survivor of the previously described merger between original Emprise Corporation and High Park Corporation is named as the defendant herein." Judge Gus J. Solomon upheld this peculiar practice of bringing criminal charges against a corporation based on acts of another corporation "because under New York law New Emprise may be responsible for the criminal acts of Old Emprise." In other words, by the express language of the federal District Court, Em- prise Corporation (New Emprise) is in this case, not because of any wrongful act ever committed by it, but solely because, as a successor corporation, it "may be responsible for the criminal acts of Old Emprise." This means that it may have to pay a fine which is levied against Old Emprise, because, under the law of New York State, a corporation which is merged out of existence may have had various debts and obligations, one of which might be an obligation to pay a criminal fine; `the right to collect that money continues to exist as a claim against the suc- cessor corporation. It does not mean that the successor corporation is "guilty" of the crimes of the merged corporation. The individual defendants The individual defendants in this case were Anthony Joseph Zerilli, Michael Santo Polizzi, Anthony Giardano, Peter James Ballanca, Jack S. Shapiro, and Arthur J. Rooks. None of them are, or were, officers, directors, or stockholders of either Old or New Emprise, and no officers, directors, or stockhølders of either Old or New Emprise have been indicted. Mr. Zerihli was, at the time of the events with which this case is concerned, the head of Hazel Park Race Track in Detroit. Mr. Polizzi was a manufacturer of plumbing fixtures and automobile parts, also in Detroit. Mr. Giardano was a friend of Mr. Zerihli, an'd was in the banana import business in St. Louis. We are informed that Messrs. Zerilli, Pohizzi, and Giardano are i~egarded, in some law enforcement circles, as being connected, in some way, with organized crime, but there was no evidence of such a connection in the case. Mr. `Shapiro was a Detroit jeweler who had a substantial investment in the Silver Slipper ,in Las Vegas. Mr. Bellanca was a young attorney from Detroit, who renresented Mr. Shapiro in negotiations in connection with his investment in the Frontier Hotel; he was also attorney for and a director of Hazel Park Race Track. Mr. Rooks was a Detroit businessman engaged primarily in the paving business; he did paving work for Hazel Park Race Track. So far as we know, none of these people is even rumored to have a connection with organized crime. THE FRONTIER HOTEL PROJECT This prosecution was based upon events growingout of a plan to build and operate a hotel and casino in Las Vegas, called the "Frontier Hotel." The proiect was initiated in 1965 by one Maurice Friedman. Together with T. W. Richard- PAGENO="0283" 1293 son, Jack Barenfeld, Malcolm Clarke, and William Weiss, he formed a joint venture, called Las Vegas Property Management Co. (LVPM), which owned a lease on certain land on the Strip in Las Vegas, and a corporation, called Vegas Frontiers, Inc. (VFI). The corporation was to equip, furnish, and operate a hotel and casino on the land, which would be built by R & H Holding Co., the actual owner of the land. It was planned to raise the necessary capital by selling 100 shares of VFI stock at $10,000 per share (each purchaser of a share of stock would also be required to purchase, in addition, one $5,000 Class A debenture and-with a few exceptions-one $30,000 Class B debenture). Each of the five backers of the project agreed either to sell 20% of the stock of VFI, or to pur- chase it himself. During 1005, 1966 and through July of 1967, the funds for the project were raised in accordance with the plan outlined above, and the hotel and casino were built. Of the defendants, only Rooks and Shapiro actually acquired VFI stock. Zerilli and Polizzi were interested in doing so, but Zerilli's interest in Hazel Park Race Track possibly made him ineligible to invest in Las Vegas, and Polizzi's reputation possibly disqualified him from doing so; both decided not to invest in VFI, because to do so would have delayed the licensing of the casino. Both Rooks and Shapiro also acquired part of the interest of the LVPM joint ventures. The Frontier Hotel opened on July 27, 1967. It did poorly from the start: the floor show was a flop, and the casino lost a substantial amount of money the first month. Around August, R & H I-biding Co. sold the land to Howard Hughes at a substantial profit. Mr. Hughes also bought up all of the trade accounts. in November of 1967, Mr. Hughes bought out both LVPM and the stockholders of VFI. There was some profit for the LVPM joint venturers, but the YFI share- holders got back only the money invested, plus interest on the debentures. THE PROSECUTION'S CHARGES AGAIN5T EMPRISE Legal background The prosecution which was ultimately brought against Emprise as a result of the Frontier Hotel project was found upon an alleged coaspiracy to violate a federal statute, popularly called the "Travel Act" (18 U.S.C. § 1952). This statute is a federal act passed to aid in the enforcement of state laws, and it makes it a federal offense to use interstate commerce to violate (among other things) state laws relating to gambling. Thus, although a prosecution under the Travel Act is a federal prosecution in federal court, the substantive laws in- volved are state laws. In this case, the state laws allegedly violated were statutes regulating the Nevada gambling industry. In Nevada, gambling is, of course, legal, but it is very strictly regulated. One aspect of this regulation is reflected in laws requir- ing full disclosure of all persons with financial interest in a gambling casino, before that casino will be licensed. The Nevada Gaming Control Board prepares forms which must be filled out by anyone seeking to invest in a casino, and con- ducts investigations of potential investors. It should be noted here that a violation of the regulatory statutes referred to would be a misdemeanor under Nevada law. However, under federal law, a conspiracy to violate the Travel Act by individuals committing such niisde.- meanors would be a felony. The allegations against Emprise The original indictment contained ten Counts, but only Count One charged anything against Emprise. This Count charged Old Emprise, and the other de- fendants (and certain other persons who were not indicted), with conspiracy to violate the Travel Act in connection with the Frontier Hotel project, essen- tially by concealing the interests of certain persons in the project in violation of the Nevada laws regulating gambling. The subsequent "information" filed against New Emprise contained the same charges as Count One of the indictment. Only three events in the course of the alleged conspiracy were charged to have involved Emprise. The first was a "fictitious" loan allegedly made by Emprise to defendant Rooks and Alex Kachinko; it was alleged that the loan was made for the purpose of concealing the fact that the money for the purchase of 1/Pb stock by Messrs. Rooks and Kachinko had actually been supplied by, and that they were acting on behalf of, Zerilli and Polizzi. The second event alleged was a secret acquisition of 1/Fl stock by Emprise in the name of one Phillip M. Troy, PAGENO="0284" 1294 the father-in-law of Max Jacobs, Emprise's Executive Vice President. The third event involved a loan to defendant Bellanca. It was on the basis of these alleged acts of Emprise that it was charged to have been involved in the over-all conspiracy. THE EVIDENCE IN THE TRIAL The Rooks and Kaehinko loan As mentioned above, one of the two defendants who actually acquired VFI stock was Arthur J. Rooks. He, and Alex Kachinko (who is named in the indict- ment as "an unindicted co-conspirator") purchased a 10.8333% interest in VFI for $487,498.50. Rooks and Kachinko borrowed all of the money for this purchase from Emprise. The loan by Emprise to Rooks and Kachinko was thoroughly disclosed to the Nevada Gaming Control Board. Rooks and Kachinko each filed Invested Capital Questionnaires, dated April 6, 1966, stating that they were borrowing the money for the investment from Emprise. The Gaming Control Board requested copies of all the documents relating to the loan, and these were supplied on November 9, 1966. The documents supplied consisted of: a promissory note dated April 4, 1966; a loan agreement dated May 13, 1960; two mortgages both recorded June 22, 1966; a financing statement on corporate stock recorded September 8, 1966; copies of Emprise checks for the amounts advanced to date; an Emprise balance sheet; and a list of Emprise officers. The Gaming Control Board raised only one objection to these documents, which was that the promissory note was payable on demand. To satisfy this objection, the parties executed an amendatory agreement, dated January 17, 1967, providing that payment of the note would not be demanded before April 5, 1971. This amendment was filed with the Board on January 25, 1967. There was nothing secret or undisclosed about the loan from Emprise to Rooks and Kachinko, and it does not appear that the prosecution even claimed that there was. It was the prosecution's claim that Rooks and Kachinko were really holding the VFI stock on behalf of Zerilli and Polizzi, and that the loan from Emprise was a "fictitious" loan to facilitate that secret arrangement. However, it is clear from a thorough review of the transcript of the trial, that there was' absolutely no direct evidence that the loan by Emprise to Rooks and Kachinko was in any sense "fictitious"; on the contrary, the evidence was that the money was actually disbursed to Rooks and Kachinko, and that they actually repaid it after their interests were bought out by Howard Hughes. The uncontroverted testimony by a member of Peat, Marwick, Mitchell & Co., Emprise's accounting firm, was that the details of this loan were fully revealed and properly handled on the books of the company. Moreover, there was absolutely no direct evidence that Rooks and Kachinko were holding the YFI stock for Zerilli and Polizzi, or for anyone else; Rooks testified unequivocally that they were not doing so (Kachinko is deceased). Finally, even if there was a secret arrangement between Rooks and Kachinko and Zerilli and Polizzi, there was absolutely no direct evidence that Emprise knew anything about it. The Troy loan The second aspect of the Frontier Hotel project in which Emprise was involved concerned a purchase of VFI stock by Phillip Troy, Max Jacob's father-in-law. At the suggestion of Louis Jacobs, Emprise loaned Troy the money to make this investment in VFI. As Max Jacobs testified at the trial, the sole reason for mak- ing such an opportunity available to Troy was the family relationship between Troy and Max; this was not strictly a business transaction, since Troy did not have the capital even to consider such a substantial investment. The loan from Emprise to Troy was disclosed to the Nevada Gaming Con- trol Board. The Invested Capital Questionnaire (dated February 14, 1967), a copy of Emprise's check for $225,000, and Troy's promissory note (both dated February 13, 1907) were sent to the Board on February 27, 1967. The loan agreement (dated February 13, 1967) was sent to the Board about two weeks later on April 14, 1967. At about the same time, Emprise was advised by Virgil H. Wedge, Esq., legal counsel for YFI, that the provisions of paragraph 2.3 of the loan agreement, providing that the loan was to be secured by a pledge of the VFI stock and debentures, was contrary to Nevada gambling regulations insofar as it applied to stock. Therefore, on April 17, 1967, Emprise executed a waiver of the requirements of paragraph 2.3 as far as they applied to stock, PAGENO="0285" 1295 and sent a copy of the waiver to the Gaming Control Board. Emprise did not, however, send to the Gaming Control Board a copy of the Pledge Agreement between Troy and Emprise, which had been executed on February 13, 1967, because to the extent that it applied to stock, Emprise treated it as having been revoked by the waiver of paragraph 2.3. Since the Pledge Agreement also applied to the debentures, as to which it had n.ot been waived, it may be true, as the prosecution contended at the trial, that this Pledge Agreement should nevertheless have been submitted to the Gaming Control Board. However, it is undisputed that the Invested Capital Questionnaire, which was submitted to the Board, did completely disclose the fact that there was such a pledge: "Debentures of Vegas Frontier, Inc. [are] pledged to secure loan (see~ loan agreement attached) Thus, there was no concealment of the facts in connection with the pledge of debentures. There was another document in connection with this transaction which also was not sent to the Gaming Control Board. This was a Guarantee and In- demnity Agreement between Max Jacobs and Troy, dated February, 1967. Under the terms of that Agreement, Max Jacobs agreed to indemnify Troy "against any losses or liabilities resulting from an investment in" YFI. The agreement further provided that amounts received in payment of the debentures and the first $50,000 of dividends on the VFI stock (after Troy's taxes thereon) would be paid to Emprise, to repay the loan. Thereafter, it provided that Troy would retain 15.8333% of the dividends paid on the YFI stock, and that the balance would be paid to Emprise. This percentage represented the portion of Emprise's resources which was owned by Max Jacobs, since the loan was made solely be- cause of Troy's relationship to Max. Upon Troy's death, the stock was to pass to Max Jacobs and his wife (Troy's daughter). It was the contention of the prosecution at the trial that this (particularly the indemnity aspect of it) meant that Emprise was the "real" owner of this stock, and that this arrangement was illegal because it was concealed. It should be clearly understood that the claim was not that the Indemnity Agreemen't was illegal in and of itself, but only that it was concealed. However, although the Guarantee and Indemnity Agreement was not actually submitted to the Gaming Control Board, the evidence at trial indicates that the existence of the Agreement was disclosed to the Gaming Control Board investi- gator who looked into the matter. According to Mr. Troy, he told David Will, the investigator sent by the Gam- ing Control Board to make a routine investigation of this investment, the "entire story" of the investment and the Indemnity Agreement. He specifically testified that he had told Mr. Will that he was to receive only a small portioii of the dividends, and that he himself had insisted on the Indemnity Agreement. He further testified that he told Mr. Will that the stock was to go to his daughter and son-in-law upon his death. He stated that he was never told by anyone to keep the Agreement secret. Max Jacobs also testified that he had told Mr. Will about the Indemnity Agreement, and that the shares would pass to him and his wife upon Troy's death. The interview between Mr. Will and Max Jacobs occurred subsequent to Will's interview of Troy. Mr. Will was called as a witness for the prosecution and testified with respect to his interview of Max Jacobs. However, he was not asked any questions about his interview with Mr. Troy. He testified that Max Jacobs did tell him that the stock was to go to him (Jacobs) and his wife upon Troy's death, but that Jacobs did not tell him that Emprise was to receive any of the dividends. Thus, the evidence is uncontested with respect to Troy's disclosures to Will, although there is some dispute between the testimony of Max Jacobs and Will concerning the Indemnity Agreement. The Bellanca loan There is still one other transaction involving Emprise, which was mentioned as an "overt act" in the indictment; in fact, however, it had no relation to YFI, and it does not appear that substantial evidence on it was adduced by the prosecution. On November 9. 1967, Louis Jacobs gave defendant Bellanca two Emprise checks, one for $100,000, and one for $50,000, to use to obtain an `option to buy stock in Hazel Park Race Track from one Lester Smith. He was to offer first PAGENO="0286" 1296 $100,000, and then $150,000. However, difficulties arose, and Bellanca never did talk to Lester Smith; he returned the money to Emprise on November 20, 1967. Meanwhile, Bellanca loaned YFI $50,000 on November 10, 1967. Bellanca was paid back with interest out of the sale of Mr. Hughes on December 6, 1967, by 1/FT check in the amount of $50,277.78. Presumably, at the time of the indict- ment, the prosecution thought that the $50,000 loan by Bellanca was actually made with Emprise money, on behalf of Emprise, but it was unable to adduce, at trial, any evidence to support that charge. CONCLUSION In the view of Emprise, it is guilty of no crime or impropriety whatsoever. However, no purpose would be served by further protestations of innocence in this Memorandum, nor by pointing out weaknesses in the prosecution's evidence. Emprise intends to pursue all appropriate legal channels to vindicate itself and has every confidence it will ultimately prevail. However, since the conviction now exists, one very important comment upon it should be made: In all the evidence in this case, no connection was shown between Emprise and anyone associated with organized crime with respect to the Frontier Hotel project. Three defendants, Zerilli, Polizzi, and Giardano, are said to have reputa- tions linking them with organized crime, but no evidence was presented at trial that linked Emprise in any way with the involvement of these people in the Frontier Hotel project. On the contrary, the only people with whom it was alleged that Emprise dealt were Rooks, Kachinko, Bellanca, and Troy. None of these people have even rumored connections with organized crime. Of course, there have been business dea1ing~ between Emprise and Zerilli which were not related to the Frontier Hotel, particularly in connection with Hazel Park Race Track; but these have been straight-forward business dealings and there was no illegality or impropriety about them. Thus, the innuendoes and overt accusations which have been made to the effect that this case links Emprise with participation in illegal activities with organized crime are simply false. Certainly many of those who make such charges do so out of ignorance or misunderstanding of what this case was actually about- certainly excusable considering the mass of evidence on complicated issues in- volved in a nine week trial, and the sensational and misleading publicity which has been circulated about this case in the press. But others appear to be engaging in the most vicious type of guilt by association. In either case, it is hoped that this Memorandum will aid in setting the record straight. Mr. PHILLIPS. There was a jury verdict of conviction but sentence has not been imposed, and there are some posttrial motions. There had been a jury verdict convicting Emprise, finding them guilty of con- spiracy under the Federal law. Mr. MURPHY. You and I know the court does not enter judgment on the verdict. It is meaningless. Mr. Jacobs, there has been some reference about a certain attorney who works for Emprise Corp., I think his name is Leacy. Mr. Leacy testified that he went to New Orleans, at the suggestion of some politicians down there, to make a $10,000 contribution, in cash, to a former Governor of Louisiana, who, as I have learned, is since deceased. Do you recall ever having a Mr. Leacy in your employ? Mr. JACOBS. Mr. Leacy was in our employ. However, sir, I have never, to the best of my knowledge met Mr. Leacy. Apparently, he severed with our company before I ever began to work in the office. Mr. MURPHY. When did you start to work there? Mr. JACOBS. In 1968 when my father died. Mr. MURPHY. Do you have any record showing how long Mr. Leacy worked for your corporation? Mr. JACOBS. Sir, we have records of attorneys' billings. I do not have them with me. I would be happy to supply them to you. PAGENO="0287" 1297 Mr. MURPHY. Would you submit them to the committee covering all the years he worked for you? Mr. JACOBS. Yes, sir. Mr. MURPHY. Thank you. (The material requested was retained in the committee's flies. The billings covered the period 1961-66.) Mr. MURPHY. Now, Mr. Jacobs, we have heard testimony from cer- tain crime figures who are now in the custody of the Federal Govern- ment. They explained how they doped horses, fixed races, and fre- quented nightclubs like the Ebb Tide, where they would see sports figures who would provide information for the placing of money bets on allegedly fixed basketball games and fixed races. Does your corporation in its association with racetracks have any- thing to do with th everyday running of a racetrack in regard to the horses, the trainers, and the jockeys? Mr. JACOBS. Sir, we are stockholders in racetracks. Normally, to the best of my understanding, the backstretch, that involving the jockeys and horses, is under the direction of race secretary. There is normally a complete segregation, as I understand it, between the operation of the physical premises on which the races are conducted and the body of people running the races. Mr. MURPHY. Would any of your employees have access to the paddock area where they house, feed, and groom horses? Mr. JACOBS. Certain employees of the tracks would, sir. Mr. MURPHY. How about your employees? Mr. JACOBS. The concession employees, sir, unless they were em- ployed in the racetrack kitchen area, and that were near that area, would not, sir. Mr. MURPHY. Does your family or does your corporation own race- hoses, or have they owned racehorses? Mr. JACOBS. Sir, we do not own any racehorses to the best of my knowledge at this time. At one time I believe that we did in Canada and I also believe my brother Jeremy owned racehoses. He would be better able to handle this entire area than I would, Sir. Mr. MURPHY. We will save that question for your brother. Much had been made of a thousand dollar wedding gift to a Mr. Jenckes. Evidentally you gave a thousand dollar wedding gift to him. Mr. JACOBS. Yes, sir. Mr. MURPHY. In all fairness to Mr. Jenks, who I understand is an assistant U.S. attorney in Phoenix- Mr. JACOBS. He is an assistant U.S. attorney there. Mr. MURPHY. Does he head the office of Phoenix? Mr. JACOBS. No, sir; he does not. Mr. MURPHY. How long has he been employed in that office, to your knowledge? Mr. JACOBS. To my knowledge, sir, perhaps 3 years, 2 years. I do not know. . . Mr. MURPHY. Did he have anything to do with the grand jury investigation regarding wiretapping and Mr. Johnson? Mr. JACOBS. Sir, he did not have anything to do with that at his specific request, because he told his superior that he was a personal PAGENO="0288" 1298 friend of mine and had been for many years and that he just did not feel that he should be part of it. Mr. MURPHY. All right. Now let's get back to George Johnson and the Funks in Arizona. We heard testimony that George Johnson was employed by the Funks. Do you recall, or do you know of any checks written by Emprise that would go to pay the fees of George Johnson? Mr. JACOBS. Sir, there are none. I have checked our books and records and there are none that would have gone to pay George Johnson. Mr. MURPHY. Did you, or anybody with your corporation, to the best of your knowledge, ever see telephone records or bank records of Congressman Steiger? Mr. JACOBS. Sir, I never have, and I could not speak for- Mr. MURPI-TY. Have you ever heard it mentioned by any of your attorneys whether they had in their possession telephone records of in and outgoing calls of Congressman Steiger, or his administra- tive assistant, or any banking transactions? Mr. JACOBS. Sir, I really do not recall. I believe that when the matter of the grand jury being seated there in 1970 came about, that my attorneys may have mentioned something about this in connection with the grand jury, but I do not recollect any statement being made regarding Congressman Steiger's telephone records or bank records prior to that time. Mr. MURPHY. Do you have any knowledge of any conversations that you had with your attorney, Bri~an Goodwin from Arizona about tele- phone conversations, or records of telephone conversations, of Con- gressman Steiger or his administrative assistant? Did Goodwin ever mention that he had those in his possession or that he had seen them? Mr. JACOBS. Sir, he might have mentioned them. I just do not recall. Mr. MURPHY. As your attorney in Phoenix, did Mr. Goodwin ever report conversations held in their offices in Phoenix, with Mr. George Johnson and what the fruits of his investigation regarding Mr. Steiger were? Mr. JACOBS. Sir, he mentioned, `as I mentioned in my opening state- ment, he reported to me a discussion of June 23, 1970, and I have a memorandum of that conversation if the committee would like it. Mr. MURPHY. I would like to have that memorandum submitted to the committee. (The following memorandums were received for the record:) LEwIs & ROCA, June 24, 1970. MEMORANDIJM To: File. From: Brian Goodwin. Subject: Flmprise-Steiger. Yesterday morning George Johnson, an investigator hired by the Funks to look into Sam Steiger's dealings and possible motivations for his attacks on the tracks and Emprise Corporation, called Walter Cheifetz and asked if he could meet with Cheifetz sometime in the afternoon. Cheifetz scheduled an appointment for 4 :00 yesterday afternoon. Lyman Manser and I sat in on the conference because John Flynn of our office had advised that George Johnson PAGENO="0289" 1299 was unrealiable and a few weeks ago on the basis of Flynn's opinion Cheifetz had tried to get the Funks to reconsider their hiring of Johnson. Johnson began by alleging that the Funks had intervened everytime he was on the trail of something good on Steiger and had made him turn his attention to other items of interest. Our immediate reaction was that Johnson was simply making excuses for having failed to produce any information over the three or four month period be had been working on the case. However, Johnson said that he believes now that the Funks were tied in with Sam Steiger and Don Bolles in a conspiracy promoted by Vegas gambling interests to drive Emprise out of business in Arizona. He said that he could prove this allegation by per- forming wire taps for us on the Funks. At this point Cheifetz interrupted and made it clear to Johnson that he had presented us with no information that would justify a rift between the partners, Emprise and the Funks; that he did not intend to hire Johnson to perform wire taps and more importantly that he felt that since Johnson was an employee of the Funks that he should report to the Funks only. Johnson then shifted tactics. He said that if Emprise would hire him and let him investigate Sam Steiger fully that he could prove that Steiger was in- volved in a conspiracy with Vega's interests and that he could link Don Bolles of the Arizona Republic with it. lie made it clear that his information was that Eugene Pulliam had no knowledge of Bolles' tie to Vegas. At that point we explained that the Punks were `the local managers of the tracks and that they were his employers and that we were not free to hire him for anything. He told us that he understood that the Jacobs' family was paying 80% of his fees anyway. We told him that we bad no such understanding, but that we would check with our client. He then `seemed to get upset `and started `ranting `about Don Moores having a percentage in the tracks and bein'g the instigator of controversies between Emprise and the Punks. He realleged that most of his bills were being paid by the Jacobs' family anyway and he didn't understand why everyone wanted to stop him from making a thorough investigation. He also said that part of the reason that the Punks wanted Emprise `out wa's that they owned a ~)er- centage in B & N Enterprises which has the parking concessions at their tracks, but which could easily take over the lucrative concession contracts which Emprise has. He made a number of other allegations. One of them was that Commissioner Bo'b Kieckhefer was being groomed for taking over the financing once Emprise was pushed out. Further, that George Hall and Burton Barr had arranged for the whole legislative upheaval in an attempt to pass a final bill which would have only hurt Emprise. Johnson reported that Bob Kelso was `being used as a figure head when in fact George Hill was greasing the bill behind the scenes. Johnson also related a story that ties Steiger to Benny Gonzales and some gangsters. He says that he was on the verge of proving these charges `but that Don Moores tipped off Mike Jarvis, Sam Steiger's administrative assistant who in turn tipped off Benny Gonzales and Johnson could no longer prove his case. He also said that the Corporation Commission's files and the telephone company's files were closed to him shortly after reporting to Don Moores that he had sources in such places. We listened to the charges but eventually indicated to Johnson that we were uninterested. He left. At this point I discussed with Walter Cheifetz the seriousness of the charges that Johnson was making even in light of how fantastic and unbelievable the charges were. We decided that I should call and report to Buffalo what Johnson had said. Yesterday evening I called and spoke with Max Jacobs who was working late and told him the general nature of our conversation with Johnson and asked Max to call me in the morning when he had Jerry and a secretary avail- able. He said that he would. This morning Jerry and Max called and I related the above information to them. Jerry indicated that he believed the entire story to be ridiculous. Never- theless, he indicated that he would bring certain of the charges to Albert Funk's attention in Denver. He was most concerned with the allegations that Don Moores owned a percentage of the Punks Racing Circuit, Inc., and the Punks owned a percentage of B & N Enterprises and Jerry was also concerned as to who was in fact paying for this lunatic Johnson. Sl-O6S--73----pt. 3-19 PAGENO="0290" 1300 I informed Jerry that I would keep Max and him informed of any further developments on this score. B. G. Lxwis & boA, LAWYERS, Phoeni~v, Ariz., June 29, 1972. Mr. MAX JACOBS, Eceecutive Vice President, Emprise Uorp., Buffalo, N.Y. DEAR MAX: Enclosed are the August 17 and August 21, 1970 memos with re- spect to George Johnson. In the first, Bradley commits himself to getting rid of George Johnson and in the second, I relate that Albert assures us that the tracks will have nothing more to do with George Johnson. Understand that these memos came at the very end. Johnson in fact was paid his last check on August 18, 1970. The earlier commitments received by the Funks. were always with the understanding that Johnson would be terminated as soon as Bradley could get whatever material Johnson had cOmpiled. As I re- call, Bradley was very concerned that a good deal of money had been paid to Johnson without any objective signs of his having worked and Brad felt their family would be upset with him under these circumstances. Johnson came to our office on June 23, 1970, that meeting was immediately reported to you and shortly thereafter to the Funks. From that time on it was absolutely understood that Johnson would be terminated with the above qualifi- cation. From that time on he was not to engage in any further investigatory work but was merely to organize his material in some understandable fashion and turn it over to the Funks. The pressure to produce, in my judgment, led to further contacts to claimed involvement between Steiger and the Punks and was the major psychological force in his dreaming up the apartment robbery. I have checked one final point. As best I can tell from my records at a time near July 20, 1970 I saw copies of what Johnson said were telephone record readouts for various people's telephones. Having no understanding of the source of these copies I did attempt to give Brad Funk some direction as to how to have his secretaries verify what Johnson said these records would show, by way of criss-cross directories, etc. This was strictly preliminary and internal and at no time did I or, to my knowledge, anyone in my firm ever advise you of the existence of thes records. I am sure that I explained the matter to you after the newspaper stories appeared in September of 1970. At no time did I ever see or have any knowledge of wire taps or bank records of Mr. Steiger or anyone else. I did not, therefore, have occasion to advise you of the existence of any such things. I did write to you, on July 15, 1970, about a series of contracts with Mr. Johnson, not initiated by me, wherein Mr. Johnson mentioned having had wire tap tapes in his apartment. The full conversation was to the effect that be was calling to inform me that the only reason he could not put together the material that Bradley was pressing him for was because his apartment had been robbed. I warned him that as counsel for the tracks I would have them consider suing him for the monies he had been paid and for fraud if, in fact, he was using this alleged robbery to cover up his lack of work. He said that be could not call the police because his apartment had contained wire tap tapes. He asked my advice. I told him that I could not advise him but I sug- gested that the police had better substantiate that there had been a robbery. I also suggested that he seek his own counsel. I enclose a copy of that July 15, 1970 letter. Please note the second paragraph which says: "We both were prettty sure that Johnson was simply using the robbery as an unsophisticated means of covering up the fact that he had not done any work." Therefore, I was advising you that it was our feeling at that time that Mr. Johnson had done nothing, legal or illegal, and that nothing had been stolen from his apartment, again, legal material or otherwise. You will also note on the second page of the letter the following in regard to my conversation with Mr. Johnson's attorney: "He read a draft of a receipt and release to me but it was poorly worded from our point of view and would leave us open to a considerable amount of liability if in fact Johnson had taken anything illegally or had run up any large bills." Again, clearly you were being advised at that time by your attorney that there was no factual information to support illegal activity; but that because of the PAGENO="0291" 1301 type of person involved precautions would be taken to make it clear that had Johnson done something illegal he had not been so authorized. You were also ad- vised that his attorney agreed to that position, i.e. apparently Johnson was not taking the position that he was authorized to do anything illegal. I hope that this information will be helpful to you in piecing together the events of two years ago. My best wishes. Sincerely, BRIAN GOODwIN. Enclosures: (3) JULY 15, 1970. Mr. MAX JACOBS, Vice President, Emprise Corp., Buffalo, N.Y. DEAR MAX: I want to report to you some recent developments as to our con- tinuing problems with George Johnson. I received a phone call from Johnson on Wednesday, July 8, 1970. He informed me that his apartment had been robbed and that all of the material that he had put together on Steiger. including memorandum and wire-tap tapes and 251 supporting exhibits had been taken. He said that nothing else in his apartment had been disturbed. George also informed me that he tried to reach Brad Funk about the robbery but that Bradley was uncooperative. I told Johnson that there was nothing that I could do for him. He said to me that he was convinced that the Funks were in league with Steiger and that he wanted my help and advice as to what he should do about making a police report. I told him I simply could not give him advice. I immediately called Brad Funk and we talked extensively about this. We both were pretty sure that Johnson was simply using the robbery as an unsophisti- cated means of covering up the fact that he had not done any work. Brad was of course upset because Johnson had been paid a considerable amount of money in the past few months. Johnson had apparently told Bradley that there were some things in the trunk of his car and at the track office which had not been taken and which he was still willing to turn over to the track. When I hung up I though that Brad and George Johnson would make some arrange- ment to get together on this other material. Saturday, July 11, George Johnson called me and told me that he had had a falling out with Bradley the night before and that Brad had accused him of "selling out". He said he was absolutely convinced that the Punks and Steiger were in this thing together and he wanted to give the remaining material to me. I told him that I had reported his charges to the Buffalo office and that the de- cision had been made that the Punks were still in charge of his work and that he is to turn the work over to the track immediately. He said that be was afraid to do that because he did not trust the Punks and thought that he would somehow get hurt if he turned the material over to them. I suggested that in that case he see an attorney. Monday, July 13, I received a call from attorney Ira Broadman. 1-le told me that he was representing George Johnson and that he had all of the material that Johnson had put together (with the exception of what had been allegedly stolen). He said that he was advising Johnson to tarn it over to us with the stipulation that Johnson would not be sued for failure to do the work he had been paid for or that he was going to advise Johnson to burn time material. He told me that he thought that some of the material would be very helpful to us and that other of it appeared to be worthless. I called Brad and discussed the guidelines under which we should accept the material. I then called Broadman back. He read a draft of mm receipt and release to me but it was poorly worded from one point of view and would leave us open to a considerable amount of liability if in fact Johnson had taken anything illegally or had run up any large bills. I suggested to him flint the best we could do would be to agree to an itemized receipt stating exactly what was being handed over with no warrant on or part that we were receiving everything I hat Joimson Lad in fact assembled. Further we would agree to stipulate that we would not bring suit against Johnson for back wages provided that ime stipulate that he had nothing further coming. Broadman agreed to this and indicated we should have something in hand by Friday. Sincerely, BRIAN Goonwix. PAGENO="0292" 1302 LAW OFFICES, LEwIs, EOCA, BEAUCIIAMP & LINTON MEMORANDUM AUGUST 17, 1970. To: File. From: Brian Goodwin. .Subject: Yuma v. Jenkins-File No. 01141-003; Emprise-Sam Steiger-File ~No. 00375-018. i spoke with Brad Funk in regard to George Johnson's Activities. I told him that before I had left for Washington I had reported my most recent encounter with George to David J. Funk~ Brad said that he did not know what was on the tapes which Johnson offered to me but that Johnson bad made a similar offer to him with regards to my conversations with Johnson. Brad committed himself to getting rid of Johnson completely. BRIAN. MEMORANDUM AUGUST 21, 1970. To: File. From: Brian Goodwin. Subject: Yurna v. Jenkins-File No. 01141-003; Emprise Corporation-File No. 00375-018 Sam Steiger. I called Albert Funk today to inform him of the stories which we had picked up through Orme Lewis indicating that George Johnson had given tape record- ings to Sam Steiger. I told Albert that I was going to relate the information to Max Jacobs which I did by letter. I received Albert's assurance that the track would have no further contact with George Johnson. BRIAN. Mr. JACOBS. Sir, in that discussion he reported to me on the telephone that Mr. Johnson had come in and sat down with two other attorneys, a Walter Cheifetz and Lyman Manser. Mr. Cheifetz was aware of who Mr. Johnson was, due to the fact that Mr. Johnson had come to the office of the Lewis & Roca firm at the beginning of May request- ing that Mr. Cheifetz send a letter concerning some SEC information which was public record. Mr. Cheifetz then called Bradley Funk and said who is this individual, and Bradley Funk said he is in our em- ploy and I wish that you would comply with his request. Then he wrote the letter. Therefore, Mr. Cheifetz was familiar with who this Mr. Johnson was. At the meeting on the 23d, Mr. Johnson said that he believed that the Funks and Congressman Steiger, as well as some others, were in a conspiracy against Emprise and that he could prove this by tapping the Funks' wires and that he wished, therefore, that Emprise hire him as a double agent to tap the Funks' wires. This was reported to me almost immediately. I was working late that evening and I received a telephone call, I believe, from Mr. Goodwin. Mr. MURPHY. Mr. Goodwin is the one who conveyed this message to you? Mr. JACOBS. Yes sir; over the telephone. I was working late that evening. There was a 2- or 3-hour. dif- ference at that time. It is an amazing story. I suggested that my brother get on a conference call early the fol- lowing day and be informed of this. My brother was informed the following day via conference call, which I was on the call. My brother became extremely concerned and extremely agitated and he went- Mr. Mm~piiy. What did he say? PAGENO="0293" 1303 Mr. JACOBS. Well, he said you have a disloyal employee who has suggested doing a dishonest thing. Mr. MURPHY. What was Goodwin's response to that? Mr. JACOBS. Goodwin's response was, of course, that this gentleman had been retained by the Funks and that Jerry Jacobs would have to cover this, personally. Jeremy Jacobs got on a plane and went to Phoenix, went to Denver, and met with the Funks on June 26 and~ he said "Who is George Johnson ?" The Funks explained that they had hired him to acquire and accumulate data and information. He said I do not trust him-excuse me, sir-I am paraphrasing. My brother could probably use more exact terms. He said "I do not trust him, he should be dismissed, he should be severed immediately, he has accused you of conspiracy, which means he is disloyal, but more important he suggested doing something illegal. You cannot have a person like this in your employ; get rid of him." And Funks said that they would. Then several weeks passed before they did, although my brother and I individually and collectively became highly irritable about this matter on several occasions, saying "Why is this man still being retained?" Mr. Mrnirny. Did you put anything in writing to the Funks as to your wishes to dismiss George Johnson? Mr. JACOBS. Sir, I do not recall but I would be happy to search my files and see if there is anything in writing and submit it to you. Mr. M~i~pny. All right, let's get back to your concessions in New Orleans and in the States of Louisiana. There has been some testimony here that Mr. Marcello, who is a reputed crime figure in New Orleans, serves in some capacity in your concessions there. What is ybur setup, your comported setup as to suppliers to concessions that you have with regard to professional teams around the country. Do you have bids on that or do you leave that to local managers or are you directly responsible for it? Mr. JACoBS. Sir, we like to have three bids submitted to the local unit manager and then the person with the lowest reasonable bid, by that I mean the quality of merchandise has to be- Mr. MURPHY. I understand the price and quality. Who has the final say in that decision? Mr. JACoBs. Normally, sir, the unit manager. However, this unit manager is monitored by the office to the extent that the office reviews the prices being paid. Mr. Mtmpjiy. All right. Does the office ever intercede or have you ever interceded for any specific supplier of goods, foods, or services, to your concessions down in New Orleans? Mr. JACOBS. Sir, not to the best of my knowledge. That would not be normal. Mr. Muuriir. That is all the questions I have at this time, Mr. Chairman. . Chairman PEPPER. Mr. Jacobs, you will please remain available to call. Mr. Wiggins had to go but he will be back later and if you will remain so that Mr. Wiggins can ask you any questions he would like, we would appreciate it. Mr. JACOBS. I certainly would, sir. I have been honored to appear before you, sir. PAGENO="0294" 1304 `Chairman PEPPER. That is all. Thank you very much, Mr. Jacobs. The committee will take a recess until 1 o'clock. (Whereupon at 12:30 p.m., the committee recessed to reconvene at 1 p.m. this same day.) AFTERNOON SESSION Chairman PEPPER. The committee will come to order, please. Mr. Counsel, will you call the next witness. Mr. PHILLIPS. The next witness is Mr. Jeremy Jacobs. Chairman PEPPER. Mr. Jacobs, will you please be sworn. STATEMENT OP JEREMY JACOBS, PRESIDENT, EMPRISE CORP.; ACCOMPANIED BY WILLIAM 0. BITTMAN, COUNSEL (Having been duly sworn by the chairman) Chairman PEPPER. Have a seat. Do you have a statement that you would like to present? Mr. JACOBS. Yes sir; I do have a statement. I believe you have copies of it. Chairman PEPPER. All right. You may proceed, Mr. Jacobs. Mr. JACOBS. Thank you. My name is Jerry Jacobs, and I live in Eggertsville, N.Y., a suburb of Buffalo. I am 32 years old, married, and have six children. I am grateful for this opportunity to voluntarily appear before your committee and assist in the worthwhile and important objective of ascertaining the extent to which disreputable forces have infiltrated the Nation's sporting activities. The continued success of our business hinges on a healthy and honest atmosphere in all phases of professional sports and we, therefore, share in your mission. The business that is now known as Emprise was founded by my father, Louis M. Jacobs, and his brothers, Marvin and Charles Jacobs. All three are now deceased. My father started out as a shoeshine boy and newspaper boy on the streets of Buffalo and slowly, over the years, built a worldwide business. He took complete control of the operation of the business in the early 1950's and continued that control until his death on August 6, 1968. In all, we have `been doing business for over 60 years; today we employ approximately 40,000 people; and we do around $125 million in business each year. My father left a widow, and six children. At the present time, all of the stock of Emprise Corp. is owned by my three sisters, by two brothers, and myself. No person outside of my family owns any stock whatsoever in Emprise, or in Sportservice, its major subsidiary. At my father's death, I became the chief executive officer of the com- pany. My brother, Max, works closely with me. in the operation of the business. My brother, Lawrence, is a physician in New York City and does not participate in the activities of Emprise or Sportservice, nor do either of my sisters. Sportservice Corp.'s principal business is in the catering of food and beverages at all types of sports arenas, airports, theaters, and other food and beverage outlets in the United States, Canada, and England. PAGENO="0295" 1305 Sportservice also operates parking lots, sells books and news materials, programs, and other advertising space at various sports entities. Emprise also has extensive and varying degrees of ownership in licensed parimutuel facilities throughout the United States including ~at racetracks, harness tracks, dog tracks, and jai aiai frontons. We do everything within our power to insure that all such activities are conducted in a lawful and honest manner so that the public confidence can be maintained. Chairman PEPPER. When you said parimutuel there, do you own the totalizers, as it were, the boards that go up? Mr. JACOBS. No. An interest in the Totalizator Co? Chairman PEPPER. Do you own the totalizers, the ones that handle the odds and all that? Mr. JACOBS. You mean the mechanical equipment? Chairman PEPPER. Yes. Mr. JACOBS. No, sir. In all instances where Emprise is the controlling shareholder of a throughbred or `harness track, it has recommended and caused each such track to become a member of the `Throughbred Racing Protective Bureau and Harness Tracks Security. We take full advantage of the services of these highly professional security organizations. Very often we secure the services of outside individuals and firms to assist us in the security field so as to insure the honesty and integrity of those activities with which the Jacobses family is connected. We have never tolerated any irregularities or improprieties in the opera- tion of any aspect of our business. Mr. PHILLIPS. I hate to interrupt you. You say here that wherever you own a majority interest you cause that to be in the Thoroughbred Racing Association? Mr. JACoBs. Yes sir. Mr. PHILLIPS. Did we hear testimony previously one time you did own a major interest in Jefferson Downs? Mr. JACOBS. A majority interest in Jefferson Downs we did hold and John Masoni had an option back to us, or himself in the alternative, and he had voting control over the shares of stock at the period I owned them. Mr. PHILLIPS. It is going to take a longer period of time to develop. Mr. JACOBS. Do you want to develop them? Mr. PHILLIPS. No. Mr. JACOBS. I `am not a gangster. I am not a criminal. I have never been convicted of a crime. I have never been charged with a crime. I have never been arrested. I have never been engaged in criminal activities of any sort. I know the same can be said of my father, my mother, my brothers, and sisters. Yes, I find myself today in the posi- tion of having to defend myself, my family, and my corporation. Indeed, it is no secret that at least one of our critics, Congressman Steiger, has stated publicly that it is his avowed intention to put Emprise out of `business. . . . Mr. STEIGER. May I interrupt at this point. At this point in the rec- ord I will tell the gentleman I have never made this statement, and he may proceed then. Mr. JACOBS. I did not understand it. Chairman PEPPER. Very good. PAGENO="0296" 1306 Mr. JACOBS. I ~accept that challenge, fully confident that 1 can ex- plam to the satisfaction of this committee or to anyone else that we have done nothing wrong and that we have been victimized by unsub- stantiated charges of misconduct and unwarranted rumors of impropriety. The committee must, however, keep this in mind: much of the testi- mony which it has heard relates to transactions that occurred during my father's lifetime and concerning which I had limited, or no,: personal knowledge. I have tried, however, to familiarize myself with the relevant areas of inquiry by reviewing files and consulting with persons who might have knowledge of such areas in the time frame available. Should questions arise about matters with which I have no personal knowledge and am not familiar, I will make every. effort to determine the facts for this committee as promptly as possible. Let me now turn my attention to what appears to he the principal areas of interest to this committee. The first matter I wish to discuss is Hazel~ Park Racing Association. Hazel Park Racing Association, Inc., was formed in Michigan in 1949 and Sportservice was concessionaire when the track opened. At this time, I was 9 years old and my brother, Max was 12. In October of 1956, Mr. Anthony J. Zerilli secured twO separate options to purchase certain stock in Hazel Park Racing Association. He sought the help of my father, Lou Jacobs, to finance the exercise of these options. They involved 150,750 shares and a total price of $512,552. On October 30, 1956, Sportservice Corp., through my father, agreed to make a 3-year loan to Anthony J. Zerilli and Jack W. Tocco in the amount of $512,522 to enable them to exercise Zerilli's two options to purchase this stock. It was an interest-free loan because, in return, Zerilli and Tocco agreed to give Sportservice the right to purchase one- half of the stock at the option price, in April 1958, Zerilli secured an additional option to purchase 70,294 shares of stock at a cost of $3.50 per share. It was agreed that Sportservice could purchase two-thirds of the said stock at the option price, or 47,294 shares at a cost of $165,529. Emprise did not finance the remaining one-third. Overall, Emprise wound up acquiring 122,629 shares of stock at a cost of $421,805. Repayments on the loan were made by Mr. Zerilli and Mr. Tocco during the years 1958, 1959, and 1960, the last payment being made on December 16, 1960, and the stock was conveyed to Emprise shortly thereafter. Today, Emprise owns a 12-percent stock interest in Hazel Park Rac- ing Association. We have never participated in the management of the racetrack; we have never been on the board of directors; and we are only one of approximately 1,200 stockholders. Now it is charged that we have associated with organized crime at Hazel Park racetrack. In 1963, 2 years after the loans were repaid and the stock options exercised, Mr. George Edwards, then commissioner of the Detroit Police Department, testified before the McClellan com- mittee that: "A classic example of Mafia infiltration of legitimate enterprise is the Hazel Park Racing Association." Immediately thereafter, Mr. George Romney, then Governor of the State of Michigan, ordered an investigation by Mr. Berry N. Beaman, PAGENO="0297" 1307 who was racing commissioner. In cooperation with the Michigan State Police and the police department of the city of Detroit, Commissioner Beaman conducted a full investigation and reported to Governor Born- ney on February 13, 1964. One of the conclusion reached by Commis- sioner Beaman was that: There has been no evidence discovered by this commission or presented to it that any of the officers or directors are engaged in criminal activities. These facts have been confirmed to us by the Detroit Police Department, the State police and the Federal `Bureau of Investigation. Further, the report stated: In my brief experience as commissioner it is my opinion that the Hazel Park Racing Association has conducted its racing operation in an efficient, lawful manner in conformity with the rules and regulations of the racing commission and the statutes of the State. This opinion is confirmed by former racing commis- sioners and by experienced officials and members of our staff whose duty it is to see that such rules, regulations and laws are complied with. I would ask that a complete copy of this report to be made a part of `the record. Chairman PEPPER. Is there objection? Mr. STEIGER. I would object, Mr. Chairman. I would agree to make it a part of the file but in order to be fair we would then have to put in the other enforcement officer's reports that were different than this. So I think part of the file would be more efficient. Chairman PEPPER. We will receive it and it will be made part of the file in this hearing. Mr. JACOBS. The first real disclosures concerning the existence of a coalition controlling organized crime in this country came in 1961 with the McClellan committee and it was not until 1969 that Mr. Zerilli and Mr. Tocco themselves were listed by the McClellan committee as or- ganized crime figures. Even J. Edgar Hoover, the late Director of the FBI, denied in 1950-and again in 1962-that there was such a coali- tion known as the Mafia. This disclosure in 1969 by the McClellan committee involving Zerilli and Tocco came 20 years after we first became associated with Hazel Park; 13 years after we had acquired an ownership interest through Zerilli; 9 years after the loan by Sportservice to Zerilli had been fully paid; and 5 years after the racing commissioner had said there was no criminal element at Hazel Park. I did go to Zerilli, Tocco, and their attorney at that time seeking an explanation. They assured me that they were prepared to, and would, defend their reputations and that they had asked the Justice Department to advise them of any derogatory information it had so they could respond to it. The Justice Department ignored their request. Given these circumstances, I did not feel it was necessary for us to immediately dispose of our interest in Hazel Park, but I have, since that time, offered to buy all of the outstanding stock in Hazel Park or to buy all of the assets of Hazel Park. While my efforts did not materialize, an unrelated group has made an acceptable offer to the corporation which is pending SEC approval. Presently, all of the stock of Hazel Park owned by Emprise Corp. is in trust with the National Bank of Detroit where it will remain until it is sold or there is a change of status. Let me emphasize two things. First, neither Zerilh nor Tocco now have, nor have they ever had, any interest in Emprise or its subsidiaries. PAGENO="0298" 1308 Second, the uncontradicted testimony before this committee has been that racing at Hazel Park during this period of time was conducted in an honest and lawful fashion and consistent with the public interest. Let me also say that I think it is unfair for anyone to attempt to sug- gest that the loans to the Montreal Expos and the Milwaukee Brewers are in any way connected to Hazel Park or any stockholders of Hazel Park, other than Emprise. The funds used were funds of my company. They were obtained by us from banking institutions. In the instance of Montreal, Dominion Sportservice loaned the money and then borrowed from the Bank of Montreal and the Canadian Im- perial Bank of Commerce. In the instance of the Milwaukee Brewers- who were then in Seattle-the funds were borrowed from the Irving Trust Co. and the Central Trust Co. of Cincinnati. Let me turn my attention now to the conviction of Emprise Corp. in Los Angeles, Calif. As you gentlemen know, Emprise Corp. was found guilty by a Federal district court jury in Los Angeles, Calif., along with certain individauls on charges arising out of investments in a Las Vegas hotel and casino. I think it is appropriate for me to address myself to this verdict for the benefit of this committee since there are alleged implications of organized crime involvement which I am sure are of concern to you as they are to me. By way of background, let me say that when we were originally contacted by the U.S. attorney's office in California and were advised that a Federal grand jury was sitting and investigating the New Frontier Hotel. we fully cooperated and turned over all the records we had regarding the loan transactions in question. My brother and I both testified before the Federal grand jury in Los Angeles without immunity. Emprise was later indicted. I was not indicted nor was I named in the indictment. My brother, Max, was named as an unindicted coconspirator. At the trial, my brother and I both testified as Government wit- nesses without immunity as did a member of our accounting firm, Peat, Marwick, Mitchell & Co. Records of our corporation were introduced in evidence. At no time did anyone hide behind any privilege or immunity. I still believe that we are guilty of no wrongdoing and would hope to demonstrate that on appeal. It is not my intention today to reargue the evidence in the case or attempt to relitigate it before this committee. I will try, however, to summarize the evidence briefly as it relates to Emprise. I will try to show that the conviction does not mean that Emprise has become involved with organized crime as some people seem to be suggesting. The Emprise Corp. which is now in existence is not the same Em- prise Corp. which allegedly committed the acts upon which the prose- cution was based. This peculiar situation arose in this manner: The events upon which the prosecution was based all took place in 1966 and 1967. At that time there was a corporation in existence called Emprise Corp.-for reasons which will become apparent, we will refer to it as "Old Emprise." This corporation was a subsidiary of a diversi- fied company called High Park Corp. On March 1, 1970, long after the events out of which this case arose, and almost a year before the indictment in this case, Old Em- PAGENO="0299" 1309 prise was merged into its parent company, High Park Corp., and ceased to exist as a separate corporate entity. Later, High Park changed its corporate name to "Emprise Corp." We will refer to this company, formerly High Park Corp. as "New Emprise." It is New Emprise which presently exists, but it was the Old Emprise Corp. that committed the allegedly conspiratorial acts charged by the Government; New Emprise is merely in the case in or- der to pay the fine should the conviction become final. The individual defendants in this case are Anthony Joseph Zerilli, about whom I have previously testified; Michael Santo Polizzi; An- thony Giardano; Peter James Bellanca; Jack S. Shapiro; and Arthur J. Rooks. None of them are, or were, officers, directors, or stockholders of either Old Emprise or New Emprise. Zerilli was, at the time of the events with which this case is con- cerned, the president of Hazel Park racetrack. Polizzi was a manufacturer of plumbing fixtures and automobile parts in Detroit. Giardano was in the banana import business in St. Louis. Bellanca is a young attorney from Detroit, who represented Shapiro in negotiations in connection with the Vegas Frontier investment; he was also attorney for and a director of Hazel Park racetrack. Shapiro was a Detroit jeweler who had a substantial investment in the Silver Slipper in Las Vegas. Rooks was a Detroit businessman engaged primarily in the pav- ing business; he did paving work for Hazel Park racetrack. it has been alleged that Zerilli, Polizzi, and Giardano have or- ganized crime connections. I do not know either Polizzi or Giardano and, to the best of my knowledge, have never spoken to either of these gentlemen in my life. I do know Zerilli through our mutual asso- ciations with Hazel Park Racing Association. The prosecution which the Government ultimately brought against Emprise as a result of this project, known as the Vegas Frontier project, was founded upon an alleged conspiracy to violate a Federal statute, popularly called the Travel Act, 18 U.S.C. 1952. This statute is a Federal act passed to aid in the enforcement of State laws, and it makes it a Federal offense to use interstate commerce to violate, among other things, State laws. Thus, although a prosecution under the Travel Act is a Federal prosecution in Federal court, the substantive laws involved are State laws. In this case, the State laws allegedly violated were statutes reg- ulating the Nevada gambling industry. The indictment named two of these statutes in relation to Emprise. The first of these-Nevada Revised Statues, section 463.160-makes it an offense under Nevada law to operate a gambling institution or receive gambling proceeds "without having first procured, and there- after maintaining in full force and effect, all Federal. State, county and municipal licenses as required by statute or ordinance The other Nevada statue named in the indictment-section 463.200- directs the Nevada State Gambline~ Control Board to prepare license application forms and provides that the forms are to include "the names of all persons directly or indirectly interested in the business and the nature of such interest." PAGENO="0300" 1310 Emprise was charged with the other defendants-and certain other persons who were not indicted-with conspiracy to violate the Travel Act in connection with the Vegas Frontier project, essentially by con- cealing the interests of certain persons in the project. Only two events in the course of the alleged conspiracy were charged to have involved Emprise. The first was an allegedly fictitious loan made by Old Emprise to defendant Rooks and an individual by the name of Alex Kachinko for the purpose of concealing the fact that the morley for their purchase of stock in the venture had actually been supplied by, and that they were acting on behalf of, Zerilli and Polizzi. The second event was an allegedly secret acquisition of stock by Old Emprise in the name of one Philip M. Troy, my brother Max's father-rn-law. It was on the basis of these alleged acts of Emprise that it was charged to have been involved in the overall conspiracy. Philip Troy's involvement in the Frontier Hotel venture arose in the following manner: In 1966, while construction of the Frontier Botel in Las Vegas was in progress, my father was informed by Peter Bellanca that there was some stock available in the corporation which owned the Frontier Hotel. My father suggested to my brother, Max, that the family make a loan to Troy so that he could buy into the hotel operation. The reason for giving him such an opportunity was a sense of family feeling and affection since Max was married to Troy's daughter. Troy did not have enough money to make any purchase himself. Emprise arranged to lend him the entire $2~5,OOO necessary to pur- chase a 5-percent interest in the hotel corporation. The details of this loan were fully disclosed to the Nevada authorities charged with regulating investments in gambling casinos. The arrangement between Troy, Max Jacobs, and Emprise Corp. in connection with this transaction was that Troy would receive ap- proximately one-sixth of the dividends paid on the stock of the hotel corporation and that Emprise would receive the balance. Upon Troy's death, the stock was to pass to Max Jacobs and his wife, Helen. Troy also had an indemnity agreement with Max in the event Troy sustained any loss. As far as this aspect of the case is concerned, the Government's case was based on the charge that because of this arrangement Emprise obtained an ownership in the hotel which was not disclosed to the Nevada gaming officials. This failure to disclose was alleged to violate the gambling regulations of the State of Nevada. However, the undisputed testimony of Philip Troy at the Los Angeles~ trial was that he told David Will, the gaming board's own investigator, everything about his arrangement with Emprise and Max Jacobs, including Emprise's right to receive approximately five- sixths of the dividends, Max's right to receive the stock upon Troy's death, and his indemnity arrangement with Max in the event any loss was incurred in the venture. Mr. Will testified as a witness for the Government at the trial and he did not contradict or dispute Troy's testimony in this regard. The other connection of Emprise with the Las Vegas Frontier was a loan by Emprise to Arthur J. Rooks and Alex Kachinko to enable PAGENO="0301" 1311 them to purchase approximately 11 percent of the stock of the hotel corporation. This loan, too, was fully disclosed to the Nevada gaining authorities and all relevant documents relating to the loan wer& turned over to the gaming control board. The Government does not even claim that there was a failure to disclose the details of this loan. It was the Government's claim that Rooks and Kachinko were really purchasing the stock on behalf of Zerilli and Polizzi, and that the loan from Emprise was a "fictitious" loan to facilitate this secret arrangement. However, after a trial lasting 9 weeks, the Government was unable to produce a single piece of direct evidence that this loan was in any sense "fictitious." Quite to the contrary, the uncontroverteci testi- mony by a member of Peat, Marwick, Mitchell & Co. was that the details of this loan were fully revealed and properly handled on the books of the company. There was not a single piece of direct evidence that Rooks and Kachinko were holding the stock on behalf of Zerilli, or Polizzi, or anyone else. Most importantly, there was not a shred of evidence that Emprise had any knowledge or reason to suspect any involvement or interest of Zerilli and Polizzi in the Rooks and Kachinko stock, and I would welcome counsel for this committee verifying the accuracy of what I have just said. I want you gentlemen to know, in all candor, that I cannot sit here and tell you that this verdict against new Emprise has no legal basis, for I am not a lawyer and do not pretend to understand the ramifica- tions of conspiracy law, the offense of which we stand convicted. I can tell you this: I have been advised by legal counsel that this verdict cannot be sustained on appeal, and we are, therefore, going to pursue every appropriate legal channel to vindicate old Emprise Corp. I can also say this without any reservation: This verdict does not show that there has been any connection between Emprise Corp., or any member of my family, and organized crime, or anyone associated with organized crime. There were three defendants in this case who aie said to have organized crime reputations: Zerilli, Polizzi, and Giardano. However, no evidence was presented at trial that linked Emprise in any way with the involvement of these people in connection with the Frontier Hotel venture. The only people with whom Emprise was in- volved were Rooks, Kachinko, Bellanca, and Troy. Each of these pert- sons is reportedly free of any organized crime connection as far as I know and as far as the evidence in this case shows. Of course, I do not deny that Emprise and Mr. Zerilli both own stock in Hazel Park Racetrack. I have already discussed this, and as I previously indicated, I do not believe it shows any impropriety or illegality. Therefore, I want to state as emphatically as I can that the in- nuendoes and accusations which have appeared suggesting that this case links Emprise Corp. and my family with organized crime are totally false. Undoubtedly, some of those who have made these accusations have simply been misled as to what this case is actually all about, which is understandable considering the mass of prejudical and misleading PAGENO="0302" 1312 publicity that evolved from this 9-week trial. For these people, I pray that this statement today will aid in setting the record straight. As for the others, who are not simply mistaken and have chosen to engage in the vicious tactic of guilt by association, I know of noth- ing I can do except to implore this committee to reject these tactics as being repugnant to our American sense of justice and fair play. Even though I firmly believe that this conviction does not in any way mean that Emprise Corp. is involved with people connected with organized crime, we are fully cognizant of the problem of organized crime infiltrating professional sports. We would like to do whatever we can to find means of helping to combat it. Therefore, I have a sug- gestion to make at this point which I hope the committee will consider in formulating any recommendations to Congress. Legitimate businesses in the world of professional sports-and I most definitely include Emprise Corp. in that category-have a vital interest in avoiding even a suggestion of conneetion with the under- world. We are engaged in a highly regulated business; most of our activities require licenses issued by government agencies, or the ap- proval of various self-regulatory bodies. As Emprise Corp. knows very well, even unfounded charges of involvement with organized crime can jeopardize those licenses. But it is often very difficult to know whether a particular individual is connected with organized crime or not. And you have to know before you can refuse to do business with someone. You can't just refuse to do business with a man because of his name. We now have our own security services, which we are presently developing even further, for the purpose of checking the facts to make sure that we don't, inadvertently, get tied up with unsavory characters. But I truly feel that we can use some help. My suggestion to you is that there be a procedure set up so that people in professional sports or related businesses, who have some question about someone they are thinking of doing business with, can find out from the law enforcement agencies whether or not that per- son has connections with organized crime. I think a procedure such as this would be very helpful in preventing the infiltration of unsavory individuals into professional sports. I commend this proposal to your consideration. If you adopt it, I suggest that it will benefit-not only the public-but also the legiti- mate and honest businessmen who earn their living in the world of sports. There are several additional areas which I would like to touch upon very briefly-one is Lion Manufacturing, which has been a subject of discussion before this committee. It is a fact that my father owned a portion of Lion Manufacturing in the early and rnid-1960's. It is also a fact that he sold his interest in Lion Manufacturing for a profit in 1966. It has been alleged that my father had a knowing relationship with one Gerardo Catena in Lion Manufacturing and that he cooperated with Catena when he sold the shares which he owned. The fact of the matter is that the sale of the Lion stock owned by my father was in settlement of an ongoing lawsuit; the settlement was between Lou Jacobs and Lion Manufacturing; and Lion Manufac- turing paid my father a profit for his interest in that corporation. PAGENO="0303" 113 As to this alleged relationship between my father and Mr. Catena, I would like to make a part of the record a letter from E. J. Burke Security, Inc., the subject of which details that Lou Jacobs purposely avoided having a relationship `with Gerardo Catena in 1965 when it was pointed out to him that Catena had alleged organized crime connections. I believe that these two points are convincing evidence of Mr. Jacobs' conduct and direct refutation of any alleged knowing relation- ship with Gerardo Catena. Much of this committee's time has been taken up with allegations that an employee, George Johnson, of the Arizona tracks, which we have a 50-percent stock interest in, was hired to do certain criminal activities in regard to an investigation of Congressman Steiger. I am prepared to discuss this matter with you to the extent of my knowledge. First of all, let me state that, while we own stock with the Funks in these various tracks, there is a management contract giving to the Funks the exclusive right to run the tracks, to hire and fire all em- ployees, and to handle the day-by-day operations of the busi.nesses. I have never met George Johnson. I have never spoken with George Johnson. I did not participate in his hiring. I never authorized any activity of George Johnson. Mr. Johnson testified he was told the Funks had hired him to investigate Congressman Steiger only after the matter of his employ- ment was cleared through me. FTc claims that I cleared his employment sometime in January or February of 1970. This is false. The first I ever heard of George Harry Johnson `was in the closing days of June of 1970 when an Arizona attorney called to inform me that Mr. Johnson wished to expand his investigatory role to include my fellow share- holders, the Funks. Shortly thereafter, I met with Brad and Albert Funk and advised they terminate this man's employment. While I am advised that they did terminate his work promptly, I understand there was some delay in severing him because the Funks wished to acquire whatever mate- rial he had accumulated and because of a dispute over payment of his expense. I did not consent to these delays, but I had no control over them. Mr. Johnson testified he was told that 80 percent of his fees and expenses would be paid by Emprise. This is false. Mr. Johnson was paid by Arizona racing corporations. Some are 50-percent owned by Emprise and one is not owned at all by Emprise. Mr. Johnson has claimed that he did the following: First, he said that he wiretapped the phones of various persons. At times he said a man named Carl Morton did the wiretapping for him. I have no knowl- edge of any such activity, and I would never approve of such conduct. This matter of wiretapping is the subject of a libel suit in Arizona and I have been advised that the discovery to date is convincing that there was no wiretapping. Second, Mr. Johnson says that he acquired confidential hank records of Congressman Steiger and one other person. This, too, is involved in the libel suit. I have no knowledge of this whatsoever. I never author- ized anyone to acquire such records. I have never seen any confidential bank records of Mr. Steiger or anyone else. PAGENO="0304" 1314 Third, Mr. Johnson claims that he bribed a telephone company em- ployee to acquire toll call records of several individuals, including Congresman Steiger. I have no knowledge of this. But,. I wish to be totally frank with this, committee on this particular item. I have been advised that Mr. Johnson did acquire copies of some phone records, precisely whose they were and how they were obtained is presently being looked at in the suit. What records there were, I am told, were turned over to the U.S. attorney. I never authorized anyone to acquire such records, and I have never seen any telephone records of any of the people identified by Mr. Johnson. Finally, I would like to assure this committee that when these mat- ters came to public attention, I inquired of my partners, the Funks, as to. the nature of these allegations and I was advised that they had not authorized Mr. Johnson to do anything illegal. I am sure you gentlemen are aware that Sports Illustrated recently carried a feature story concerning Emprise Corp. and Louis Jacobs. The article contains numerous allegations of alleged dealings between my father and Emprise Corp., on the one hand, and variOus individ-. uals reported to have organized crime connections, on the other. Myself, my brother, my staff, my attorneys, and others associated with us have read and reread this article in an attempt to thoroughly digest all of the charges that are being made by Sports Illustrated.. Some of these allegations we have heard before; others are new. For example, we are hearing for the first time that an individual by the name of James Ph~meri, now deceased, is alleged to have told someone that: (1) Louis Jacobs furnished financial backing for boxers controlled' by Plumeri and Frankie Carbo in the 1950's. (2) In consideration for the above, Plumeri and Johnny Dio used labor clout to head off strikes-the implication is that these would have been strikes against Sportservice. (3) Louis Jacobs financed rum-running boats' during prohibition. We are hearing for the first time an allegation that Raymond Patriarca introduced Russell Bufalino to my father who allegedly' financed Bufalino's purchase of amusement parks in Pittsburgh in. 1959. We are hearing for the first time an allegation that Gerardo Catena arranged for my dad to finance Joe Cataldo to gain control of Finger Lakes Race Track in 1962. There are statements here that we have heard before: That my father arranged lines of credit to make it possible for Moe Dalitz' to acquire the Stardust Hotel in Las Vegas; that Gerardo Catena had an interest in Lion Manufacturing along with my father; that a Sam Tucker received a loan from my father in connection with River Downs Race Track in Cincinnati, Ohio, during the 1930's. One of the allegations noted above-that relating to the alleged financing of rum-running boats-goes back about 40 years. Another of the allegations-that my dad.helped finance Joe Cataldo to gain control of Finger Lakes-has already been refuted by Cataldo. himself in testimony before this committee. But, without taking each allegation separately, let me see if I can't. give you gentlemen an overall view of what we have done in an effort: to check out these allegations and the results of our efforts. PAGENO="0305" 1.315 Since some of the allegations go back many, many years and pre- date my association with the company, we tried immediately to get some information from the reporters who wrote the Sports Illustrated story and, particularly, the sources of the information which they were relying upon. One of our attorneys made this specific request of Sports Illustrated and was flatly turned down on the grounds that it was the practice of Sports Illustrated not to reveal the sources of its information. We conducted a thorough and exhaustive review of all available books and records since 1936 relating to loans, notes, lines of credit,. bank guarantees, investments, and the like, to determine if there were ever any dealings of any kind with any of the following: James. Plumeri, Frank Carbo, Johnny Dio, Russell Bufalino, Gerardo Ca- tena, Joseph Cataldo, Anthony Corallo, Moe Dalitz, Las Vegas Star- dust Motel, and Raymond Patriarca. My chief accountant, Millington Lockwood, who does the internal auditing for Emprise and its subsidiary companies conducted the review at my request and was unable to find any record of any deal- ings with any of the above. I would like to place on file with this committee an affidavit executed. by Mr. Lockwood, which explains the nature of the review which he~ conducted on our behalf in connection with the Sports Illustrated article. I might add that Mr. Lockwood has indicated a willingness-. indeed, a desire-to appear before this committee in order to ex- plain, firsthand, exactly what he did and the results of his review. In addition, Mr. Lockwood was instructed to interview key em- ployees of our companies who have been with us for an extended period of time in an effort to determine if they had any independent knowledge of any dealings with those mentioned above. Again, no evidence whatsoever was found . tending to support any such allegations. We have contacted the attorneys who represented us during the period of time covered by the allegations contained in the story to determine if they recall any of these individuals ever being men- tioned in the course of transactions which they handled for us. This effort met with the very same results. Let me suggest that, should there be any lingering doubt in your~ minds, a representative of this committee personally review our books and records and interview our employees. On the basis of what I now know, I can only say to von that this article, in my opinion, represents a scandalous and unjustifiable at-. tack on my father who, unfortunately, is no longer able to defend himself. I feel so strongly about this article and the damage it has done to our famil ansi our companies that I have placed the matter in the hands of my attorneys with instructions to consider whatever legal remedies are available to us under t.he circumstances. Mr. Chairman, I believe that the committee and its staff will agree that ever since it first appeared in the newspapers that. this committee was nianning to hold hearin~s o~ the subject. of the inflitretion cf organized crime into professional sports, the Jacobs family, Emprise 81-068-73-pt. 3-20 PAGENO="0306" 1316 Corp., and all those associated with us have endeavored to cooperate in every way possible in your investigations. Our counsel was directed to immediately come to Washington in order to confer with your staff to determine in what respects we could be helpful. You were told that books and records of Emprise Corp. would be available to your investigators and that offer still stands with no strings attached. We are instructing all of our employees to cooperate fully and to respond to your inquiries with complete candor and. frankness. Let me make it clear that it is our firm belief that, if you know all of the facts, you will reach the conclusion that we have done nothing to justify the criticisms which have been leveled against us. What concerns us, however, is that you may hear only part of the story. For example, you have called before this committee law-enforce- ment officials from all over the country to testify about our alleged activities, or our rumored connections, with various persons of un- savory reputation. You have not yet heard from law enforcement officials from the Buffalo, N.Y., area. For over 60 years now the Jacobs family and its businesses have been located in Buffalo and it seems to me that it is officials from this area who should know, better than anyone else, what our reputations are, what activities we engage in, and who our associates are. We have for many years now been very deeply involved in the ownership of harness tracks and thoroughbred tracks all over the country. We have had relationships with many others as conces- sionaire. I would think that it would be entirely appropriate to call before this committee representatives of the various security organi- zations that police the racing industry to determine if we have ever engaged in an activity that is in any way improper or detrimental to the integrity of the sport. I would further suggest that this committee consider calling before it appropriate representatives of the New York Racing Commission, or the Florida Racing Commission, or the Ohio, Kentucky, or Colorado Racing Commissions, or, for that matter, any other racing commission, to discuss the Jacobs family and Emprise Corp. In all fairness to us, Mr. Chairman, I believe that you should call some of these officials before you, for I am confident that they would portray a very different picture~-a more accurate one-from that painted by some witnesses who have appeared before you who do not know us as well and, in some cases, do not know us at all. I feel, Mr. Chairman, that the reputation of the Jacobs family has been placed squarely at issue by these hearings and it has beeii seriously injured in the eyes of the public. I hope that my appearance today has done something to correct that picture. and repair that injury. Reputation is not only what these hearings are about, it is what our business is about. It is essential that the people who do business with us have confidence in our reputation for honesty, fair dealing, and integrity. Moreover, because our business is so heavily concentrated in the area of professional sports, it is vital that th~ r~iblic, too, have confidence PAGENO="0307" 1317 in our reputations. People who do not know us, who know only what is said by some people before this committee, or what they read in the press, may question our reputation right now. But those who know us have not lost confidence. I have before me more than 80 letters from many people prominent in the sports and business worlds who have known the Jacobs family and Emprise Corp. for many years. At these hearings you have heard the Jacobs family and Emprise Corp. mentioned with names you are told are linked to organized crime. I ask you to take note of the men of standing, and integrity, in the sports and business worlds, men of unsullied reputation, who have come forward in these testimonials and attested to our reputations. These letters tell you what they think of the Jacobs family. Mr. Chairman, I submit these letters for the record. In closing, gentlemen, let me appeal to your sense of fairness. These hearings are not like a trial in which the accused is given a chance to hear all the charges against him and then present his defense. I have done my best to answer the charges that have already been made against my family and our businesses-but I do not know what new charges someone may put before you tomorrow. If such charges are made against us, I must rely on the fairness of this committee to make sure that the truth is not lost among all the accusations and to listen not just to our accusers but to our defenders as well. And truth is all that we ask. Thank you very much, Mr. Chairman. Mr. Munri-iy (presiding). Before we begin the questioning, is there any objection to the admitting of the letters? How many are there? Mr. JACOBS. There are about 88, sir. Mr. MuRPHY. They will be so admitted into the record. (The letters referred to follow:) CITY OF BUFFALO, OFFICE OF THE MAYOR, June 5, 1972. Mr. JERRY JACOBS, President, Emprise Corp. Buffalo, N.Y. DEAR Mn. JACOBS: I have been somewhat distressed at reading some of the things that have been said about your father and the company he founded. As Mayor of the City of Buffalo, I had occasion during his lifetime to discuss with him matters affecting our city. I remember that during my first term in office the City of Buffalo had reached an impasse with his lawyers concerning the pur- chase by the city of the former Frank J. Offermann Baseball Stadium, in order that the present Woodlawn Junior High School could be constructed on that site. I was impressed with his forthright manner and understanding which re- sulted in the discontinuance of the lawsuit between his company and the City of Buffalo. We were then able successfully to expedite the construction of the Wood- lawn Junior High School. While the City of Buffalo per se did not sign a contract with him for concession rights at our present War Memorial Stadium, I have had no occasion to complain about the service concerning food and beverages at the Stadium. I write this letter so that you may know that I am sure there are many persons such as myself who never questioned the integrity and personal conduct of your father. I do not know either you or your brother intimately but Dave Forman of the Buffalo Sabres tells me that he finds you both fairminded and honorable in your dealings with him concerning the concession rights at the Auditorium. PAGENO="0308" 1318 I hope this letter will give you and your brother some solace in knowing the- respect I had for your father and have for you and your brother. Sincerely, FRANK A. SEDITA. BIJFFALO, N.Y., June 2, 1972. MEMBERS OF buss SELECT COMMITTEE ON CRIME, U.s. House of Representatives, Washington, D.C. GENTLEMEN: May I begin by making it very clear that this letter is definitely unsolicited. In fact, knowing the members of the Jacobs family as I do, they would ask me not to go to this extreme or expense. However, I feel bound in conscience to take this action which I feel I should~ have taken several years ago when I first heard of the allegations of Mr. Sam Steiger against Emprise and/or Sportservice and/or members of the family of the late Louis M. Jacobs. You may ask what interest do I have to speak on behalf of the Jacobs family. First, I have known every member of this family for almost twenty years. I have known them as well as a close friend and an advisor could ever know anyone. I have observed their discussions on very classified business matters as well as on family and personal matters. I have personally observed their business "be-- havior" by the hours and by the days. Secondly, I have observed them in their roles as husbands, wives, father, mothers, and children in a most personal manner. Thirdly, I have witnessed their anonymous contributions and interests in people- in need and accompanying circumstances countless numbers of times. Fourthly, I have witnessed their ecotreme, I repeat, ecetreme cautious aware- ness of protecting the interests and integrity of sports-especially, baseball, foot- ball. basketball, horseracing, and jai-lai to the point where it has been an un~ written law in their household to never approach any place where their presenc~ may be misinterpreted, whether it be a gambling casino or whatever. Yes, I have observed and witnessed the members of the Jacobs family in ever:~ manner as I have just described as perhaps no one else could have ever observe ii. them. Also, it should be noted that because of my association with the Jacobs family, I have made it my business to observe the words and actions of Mr. Sam Steiger ever since he first began his crusade against Emprise and/or Sportservice and/)r members of the family of the late Louis M. Jacobs. On my own, I have obtainedL copies of his attacks in the august halls of the House of Representatives a:ad documented in the Congressional Record. On my own, I have obtained transcripts of all the hearings by racing commissions in the states of Florida, New Mexico,. Louisiana, Arizona, and Arkansas and which have concerned Emprise and/or the Jacobs family. I have read these transcripts several times. With this background, I feel I must speak at this time. First, I must make it very clear that there is one common theme in every,. I repeat, every word of testimony given by Mr. Steiger; namely, everythin7, I repeat, everything, he testifies as truth is never, I repeat, never confirmed by a single piece of evidence. Although I am a layman in legal matters, I must con- clude, as so many members of State Racing Commissions have concluded, that Mr. Steiger has based his attacks on Emprise and/or Sportservice and/or mem- bers of the Jacobs family on hearsay or on his opinions only or on evidence which he says he can't produce or on the anti-American principle of guilt-by association. I present only one statement, from among many, which agrees with my thinking in this regard. It is from the hearing held before the Racing Commission of the State of Florida in early 1970. On pages 222 and 223 of the transcript, I quote verbatim from Mr. L. B. Walker, a member of the Commission, who states: ". . . I'm getting very disturbed about this whole proceeding, and I agree with the representative who had to leave 100 percent, Congressman, Yo~i and I, we're on the wave length, as far as this organized crime being here, in the United States. We're on the same wave length but Congressman, when you, with the statements and the evidence which you do not have, you tear down an organization that has taken sixty-eight years to build up, and Congremman, PAGENO="0309" 1319 ~1've got to say you need to go home and get yourself more facts and come back and lay them on this table and let's-I will lead the way to run every damn one of these people out of Florida, sir, if I have evidence laying on this table in front of me that they are guilty of what you say. I'll lead the way and I want that understood, I'll lead the way." The decisions of. hearings in the other states have in reality repeated the sentiments of Mr. Walker. May I make it very clear that I also agree with the statement of the Chair- man of your committee, The Honorable Claude Pepper and which statement I read recently in the newspaper and which Mr. Pepper voiced when Mr. Sammy Davis, Jr. appeared before your committee. I quote from Mr. Pepper: the Davis case demonstrated how an honest, reputable and hardworking individual becomes a target of organized crime... . it is another example of how organized crime attempts to use reputable individuals to cover their illegal schemes." Sir, despite whatever impressions one may have at present of the Jacobs family because of the terrible attacks, Mr. Jeremy Jacobs and Mr. Max Jacobs have expressed this very same sentiment time and again for many years; and they have acted accordingly as much as is humanly possible, aware at every moment of possible implications and contaminations. At this point, I'd like to refer to the conspiracy case in California, which found Emprise guilty. I quote from an extensive article on the subject of conspiracy by Martin B. Margulies and which was printed recently in the Sunday newspaper: for conspiracy is surely one of the most elusive, open-ended concepts in Anglo-American criminal law. Yet it has become a favorite of prosecutors across the country. . . . Why the popularity of the conspiracy charge among prosecuting authorities? To understand that, one must know a little of its background. "Conspiracy has had a long and not always honorable history. It was first mentioned in an English statute just 700 years ago, but it is probably even older. In the first half of the 17th century, it was used often by the dreaded Court of Star Chamber, which served the Stuart kings in their quest for absolute power. It was during this period that it assumed its present form. "Over the following three centuries, men have been convicted for conspiring to commit seduction, hiss actors off the stage, lay false accusations of paternity, and raise the price of beer (in order to incite the people against the tax collectors. who were wrongly blamed for the increase.) "And in 1809, in London's newly rebuilt Covent Garden Theater, theater-goers blew horns, shook rattles, rang bells and sang `Rule Britannia' and `God Save the King' during the performance, to protest a rise in ticket prices. To be sure, said the court afterward, the audience was entitled to express its disapproval of a play by booing or other means. `But if a body of men were to go to the theater with the settled intention of damning a piece, such a deliberate preconcerted scheme would amount to a conspiracy.' "Some of these cases seem humorous enough today, though the defendants probably didn't think so at the time. But they help illustrate why authorities have dubbed conspiracy `the prosecutor's darling.' "In most of them, for example, the conspirators had done nothing whatever to carry out their purpose. But conspirators don't have to. The bare agreement is enough to make them guilty. In some states, it is true (and in the Federal courts), at least one conspirator must commit an `overt act' before be and his co-conspirators can be prosecuted. But the act can be completely innocuous. A phone call will do. "And in all these old cases, the conspirators planned nothing criminal. Seduc- tion, slander, and raising prices were not crimes. Yet conspiracy can be punish- able, even if the conspiratorial objective is not, if, as one court put it, the purpose is to do something `immoral,' or which would `injure the public.' In one of the earliest American decisions, for instance, a Maryland court ruled that directors and officers of the Bank of the United States could be prosecuted for conspiring to embezzle $1,500,000. Embezzlement, the court conceded, was not an offense in those days. But conspiracy to embezzle was. This principle has been reaffirmed many times since, though it raises grave constitutional questions today. "There are other reasons why prosecutors find conspiracy so much to their liking. One is its very vagueness. Conspiracy has been defined as `a combination for an unlawful purpose.' But the purpose needn't be spelled out in a formal agree- PAGENO="0310" 10 ment, as in an ordinary contract. All that is required is tacit understanding, a meeting of the minds. And this can be proved circumstantially, from the way the conspirators conduct themselves, and the things they do. "A person can't be convicted, say, both of attempted robbery and robbery. The two offenses are said to `merge.' But he can be convicted for robbery and con- spiracy to rob. And the punishment for conspiracy is sometimes greater than for the completed act. "One needn't know the identity of one's co-conspirators, or even know that they exist. Take, for example, the standard narcotics ring, in which one major `pusher' may deal through dozens of middlemen, each with his own stable of street-vendors. All may be treated as part of a single conspiracy, as long as they are aware that there is some sort of overall enterprise. To understand the implications of this, consider: As long as the conspiracy lasts, each conspirator is responsible for the crimes of his co-conspirators, when these are done to accomplish the conspiratorial purpose. Suppose, for instance, bank robbers agree among themselves that there is to be no violence. But, during the robbery, one thief mauls a teller to prevent him from pressing the alarm. All are chargeable with battery-even those who were nowhere near the scene. Out-of-court statements by co-conspirators, ordinarily excludable as `hearsay,' are often admissible in evidence against one another. A conspiracy can be tried any place where an overt act occurred. A conspiracy lasts until all its purposes are accomplished, no matter how many years that takes. "Result: let a prosecutor establish a conspiracy-a nebulous thing-and he can prosecute any member, almost any time or anywhere, for any act com- mitted by any other member, supporting his case with practically any statement made by any one of them. "As one lawyer, who asked not to be identified, remarked, `It certainly does save the prosecution a lot of homework.' "Does the conspiracy law, in its present form, serve a valid purpose? Is it consistent with traditional Anglo-American notions of fair play? "On the one hand, society has good reason to frustrate criminal plans before actual harm is done. This is why all countries punish individuals for attempted crimes, once the preparations pass a certain stage, even though the crimes; are never carried out. And perhaps it is true, as courts have said, that the mere existence of a `conspiracy is dangerous, because people who plot together ar? likelier to act than `one person scheming alone. "On the other hand, we have always been reluctant to sentence people for evil thoughts, `or for deeds committed by someone else. Yet Conspiracy la~i~ does just that. "The late Supreme Court Justice Robert Jackson, no radical by any stretch of the imagination, once warned against `the growing habit to indict f)r consipracy in lieu of prosecuting for the substantive offense.' "`Loose practice in this area,' wrote the justice, `constitutes a serious threat to fairness.' "More recently, Supreme Court Justice Potter Stewart, speaking for him- self, Chief Justice Warren Burger, and Associate Justices Harry Blackmun and Byron White, noted the Court's `disfavor' toward `attempts to broaden the already pervasive and wide-sweeping nets of conspiracy prosecution.' "And European countries, while they do punish certain unlawful combina- tions, have never found it necessary to `develop anything so sweeping as con- spiracy the way it is understood here. Yet no one who is familiar, say, with the French courts would accuse them of `coddling criminals.' "Perhaps the answer lies in new statutes, establishing stricter standards of proof, and eliminating responsibility for acts committeed by others. Then the more obnoxious features of the present law could be consigned to the history books, as relics of a harsher `age than our own." In view of the above extensive comment on conspiracy and in view of the members of the Jacobs family, as so many of us know them, the convictiois in the State of California for conspiracy is truly a miscarriage and violation of justice, fair play, morality, `and goodness in America as we know it should be. If you were `to read the triinscript `of this case, you would readily see that the judge who presided permitted so much to be included as evidence that it became a biased `and prejudiced conclusion before `one-fourth of the trial had PAGENO="0311" 13~1 been completed. I foresaw the verdict that early in the trial due to the using of the tools associated with interpretations of "conspiracy" by some. What is most important is the fact that the case involves Jeremy and Max Jacobs and the present Emprise Corporation all of whom had nothing, I repeat, nothing to do with the alleged charges. If the case of conspiracy against Emprise and/or the Jacobs family were to be viewed in the light of the above and in light of objective scrutiny of the evidence, I feel assured that the verdict would have to be, "not guilty." But what have these three years of constant, baseless, opinionated, lacking- in-foundation-in-fact, unjust, unfair, un-American, and obsessive attacks by one Congressman, Sam Steiger, meant to such good people? It has hurt the widow of Louis M. Jkcobs, a woman who is known by every- one who has met her as hard-working, gentle, and loving. She has worked side by side with `her husband since he sold peanuts and popcorn to begin his busi- ness about sixty years ago. She has learned every detail of the business to the present day. She saw the fruits of long days of work by her husband and his brothers. She knew her husband as described by his peers in the business world as one of the most knowledgeable businessmen who has ever lived in America. He and his brothers began at the tender age of nine-years to shine shoes, sell newspapers, and sell peanuts and popcorn. By working as long as fourteen or sixteen hours `a day, he establish an empire which is now world- wide. Until the day Louis M. Jacobs died in his 71st year, he was at his office every morning `by 7 :00 a.m. and didn't return to his home until the late evening hours. He did not believe in district supervisors or other middlemen between him and the immediate managers of his various operations. However be did believe that any of his managers of his operations, whether near or far, could call him personally any hour of the day or night to discuss business at hand. Further ,he demanded daily and weekly reports of operations and studied each one carefully. His knowledge of business and business law was the key that turned on his energy and his enthusiasm to his becoming more successful and to expand. His love for sports is now legend. How he would take his wife and his children to a ball game in a local park or to any athletic event, no matter what the game, is known to all of us who knew him. He believed very strongly that the future of a happy America could be guaranteed to some extent if Americans continued their love and interest in athletics. An outstanding example is the fact that any faltering baseball team could come to him for assistance and he was always ready to help it get back on its feet. In some cases, and I make it clear that not in all cases, in return for his financial aid and advice he would expect to have a voice in the operations of the team and to have the contract for the concessions. Mr. Steiger and more recently, SPORTS ILLUSTRATED, have, time and again, referred to this simple fact in the life of Louis M. Jacobs with an accusing and pointing finger. Is there anything wrong with any man who invests his money in any operation, whether it has to do with sports or not, to expect to have a voice in the operation of that endeavor in which he has in- vested his money? Any businessman of sound mind would have to answer "no." Further, since Mr. Jacobs was in the business of selling hot dogs and other refreshments, is there anything wrong with his asking to have the contract to promote his own business in the area where he has invested his money? Again, any businessman of sound mind will answer "no." Some years ago, a man who has gone down in history as one of the most strict, one of the most disciplined, and one of the fairest commissioners of any athletic endeavor, the late Judge Kenesaw M. Landis, former Commissioner of baseball, spoke of Louis M. Jacobs as being the only man that he would allow to lend monies to more than one baseball team in the same league at the same time because he said Jacobs didn't interfere with management; and it was that kind of integrity that carried him into the racing industry from baseball. Bill Veeck who has dealt with Louis M. Jacobs and his family and who has known them, for many, many years, and who is also highly respected in the sports world, even though he was engaged in litigation with Sportservice, Inc., on his own time and using his own money, felt a need to fly to Arizona a num- ber of months ago to speak for the integrity of the Jacobs family and against the allegations of Congressman Steiger. When Rabbi Martin Goldberg preached the eulogy at the funeral of Louis M. Jacobs, the father of Jeremy and Max Jacobs, almost four years ago, the Rabbi PAGENO="0312" 1322 extolled the praises of Mr. Jacobs for having been a good husband and father, an astute and successful businessman and recognized as such throughout the business world, and-all in all-for having been a "good man." The very same words of praise. must be spoken of his sons, Jeremy and Max Jacobs, who now operate Sportservice, Inc. and Emprise, Inc., and their subsidiaries. I could go on mentioning others who are known for their sincerity, their busi- ness acumen, and their interest in the sports world and who have respected the interests and expertise of the Jacobs family. All these attacks also hurt Jeremy and Max Jacobs and the members of their families. I don't have to tell you how hurt they are especially when they know they can't retaliate because it is almost impossible to counterattack untruths after public opinion has been aroused. Now, I hear Mrs. Louis M. Jacobs a~king herself: "What have we done to deserve these attacks upon us personally? What have we done to have a man like Mr. Steiger say of us that we are `not good' for racing, baseball, or anything else?" I see a good woman being hurt because of the attacksupon her deceased husband's good name and the good name of her children and their company-all attacks being made without a foundation in fact. I see a little boy coming into the house and asking his father: "Daddy, are you really a bad man?" All this because of detracting publicity. Now, let us look for a moment at just some of the statements of Sam Steiger. As I mentioned earlier, for some time now I have observed the words and actions of United States Representative Sam Steiger, Republican Congressman from Arizona, concerning his feelings towards Sportservice, Inc. and/or Emprise, Inc. and/or Jeremy Jacobs and/or Max Jacobs and/or members of the Jacobs family. I speak now simply because I know very definitely that those who know Mr. Jeremy Jacobs and/or Mr. Max Jacobs and/or members of the Jacobs family feel as I do, namely, that they and their families are being wronged by a man in. public office, Mr. Steiger, who should be made to establish proof for his accusa tioris or he should be ordered to cease these actions once and for all by his peen; and by the Supreme Court of our land. An objective, fair-minded person who has followed Mr. Steiger's accusations concerning the Jacobs family must conclude that, after so many hours of test~.- mony, after so many words, he has yet to produce one single fact to corroborate any of his accusations. Mr. Steiger testified before the Arkansas Racing Commission.. In his tesli- mony, Mr. Steiger states: "Corporations run by Jeremy Jacobs of Buffalo, New York, were bad for racing and the states in which they operate. Their associations and conduct make it advisable that the states review the manner in which they are in their states. He believed that Sportservice, Inc., Emprise, Inc., and the Jacobs themselves are bad for racing. They are bad for the states they are functioning in." Steiger continued: ". . . there is a pattern to the operations of Emprise and Sport- service, Inc." At the outset of the above statement, Mr. Steiger simply states, "corpora- tions run by Jeremy Jacobs-are bad for racing and the states in which they operate." I remind Mr. Steiger that it is un-American, immoral, and sinful to speak ill of anyone without any foundation in fact to such as he does here, even then it would be wrong to condemn anyone publicly, as anyone sensitive to the Eighth Commandment would testify. Does he feel that he can hide behind the shield of public office and that an elective office gives him the right to condemn, slander, and attempt to ruin the good name of people, such as the Jacobs family, who have learned from their good parents to do everything in their power to `maintain their good reputation and never to permit its being tainted by any association, person, or business? I know Jeremy Jacobs much better than Mr. Steiger does. I state here and now that corporations run by Jeremy Jacobs are definitely good for the states in which they operate. These corporations `have provided funds and encouragement to expand and improve everything concerning the racing interests in the ~;tates in which they operate. Both racing and the governments concerned (state and local) have profited when the Jacobs interests have been involved. The records prove this last statement. Mr. Steiger has `advanced no facts to prove his state- ment. PAGENO="0313" 1323 Mr. Steiger continued: "Their (the Jacobs family's) associations and conduct make it advisable that the states review the manner in which they are in the states." My reply Ls very simply: For what reason? Just because he says they are disreputable. Would that every businessman conducts himself as Jeremy Jacobs does! Also, since when is a man in America guilty by association? Mr. Steiger concludes: "There is a pattern to the operation of Emprise and Sportservice." This is very true. The pattern is one of good business, investment methods, and acumen. Sound business principles and ethical procedure combine to make Emprise, Inc. and Sportservice, Inc. and the Jacobs family a source of envy, disbelief, and wonderment-as no doubt evidenced by the continued suspicion of Mr. Steiger-but to no avail. More recently, the Florida State Racing Commission made it very clear to Mr. Steiger that he has yet to produce one foundation in fact to corroborate any of his allegations. In fact, like the Florida State Racing Commission, I, too, am shocked and appalled at the fact that Mr. Steiger has accused Jeremy Jacobs and/or Max Jacobs and/or Emprise, Inc. and/or Sportservice, Inc. of "guilt by association." This is about an un-American as tearing our American flag, spitting on it, and using it to wipe off the mire from the bodies of hogs. Also, over the years, highly respected men from various walks of life have always commended the Jacobs family for their impeccable reputation, even though they represent fine examples of hard-nosed businessmen. I again refer to Judge Landis and Bill Veeck. Please take the time to review all the testimony of Sam Steiger made before racing commissions in several states and note that not once-I repeat-not once does he ever produce one foundation in fact. Do you really want to know why? The answer very simply is because Louis M. Jacobs, Jeremy M. Jacobs, Max Jacobs, and every member of the Jacobs family connected with their company is not guilty and never has been guilty of any wrongdoing as alleged by Sam Steiger or anyone else. I am willing to stake my good name, my profession and vocation as a Priest, yes, even my treasured American citizenship on the above statement. And this is really something for me to state, especially in view of my work on behalf of Patriotism, having initiated the Independence Day ceremonies in down- town Buffalo to proclaim our flag as sacred and to counter the attacks made upon it in recent years. It is also very difficult for me to state, since in all my talks, television and radio programs, discussion groups, et al, I have defended the role of the Police and law-enforcement agencies to the point where I am accused of being a conservative where I actually feel I am just defending American prin- ciple and Divine Intention. This is also difficult for me to state in view of my positions as Chaplain of the Niagara Frontier Chapter of the United States Navy League for the past teii years and thus a defender of America's Defense policy; as Chaplain of the Western New York Alumni Club of Notre Dame Uni- vesity; as Pastor of a Roman Catholic Church in downtown Buffalo and which serves almost two hundred Black students-90 per cent of whom are not of my faith but whom we lovingly serve in education; and as Director of a Roman Catholic school in the heart of our Black Community and which has an enroll- ment of almost 700 Black students, again 90 per cent of whom are not of my faith but to whom I dedicate myself. After nineteen years in the ministry; after having spent many years in the unique work of giving Retreats and thus arbitrating and delving into thousands of lives from all walks of life; I feel I am well-qualified to offer my study of Sam Steiger and to offer my unqualified recommendations of Jeremy and Max Jacobs. I shall not refer to Sam Steiger's revelation of his character when he spoke on the Joe Pyne Show on September 24, 1967, in which he must have embarrassed his colleagues in the House of Representatives by his "eye-widening comments about his colleagues," as described by the Evans-Novak column in the Wash- ington Post on October 7, 1967. Only an unstable, publicity-groping, naive, and lonesome man could speak of his brother-members in the House of Representa- tives as he did. I shall not refer to Mr. Steiger's personal life or his finances; even though he attacked the personal lives of good people, the members of the Jacobs family, by stating that they were ". . - not good . . ." as I pointed out above. I would challenge Mr. Steiger on this allegation, namely, that the Jacobs family is "not good for racing" or anything else. However, if he accepted, he would have to define his terms and subject them to juridical approval and then be prepared PAGENO="0314" 1324 for cross-examination. I believe Jesus Christ said it best when He stated: "Let .him who is without sin cast the first stone Yes, by such constant, unfounded attacks, the good name of Emprise and/or *Sportservice and/or the late Louis M. Jacobs and/or Jeremy M. Jacobs and/or Max Jacobs and/or other members of the Jacobs family is being questioned by the Court of Public Opinion even though the `books of Emprise and the Jacobs family have been audited by the Internal Revenue Service through the end of 1970. Other Federal Departments and other men such as Sam Steiger, although 1 know of no other, may ask more questions and literally harass those concerned. All this is happening because of an un-American, illegal, unfair, unjust, and sinful tactic combining guilt by association, calumny, and detraction. To wit, gross evidence of my previous statement is contained in every attack by Sam Steiger and now also by SPORTS ILLUSTRATED in a recent issue. Further, isn't it a sad state of affairs when a man is attacked who cannot defend himself because be is dead, such as Louis M. Jacobs is being attacked now? Where is the adherence to our age-old principle: "Of the dead let nothing but good be `said !" Its violation has always been scorned by those who respect `the dead. Yet, Sam Steiger and the magazine have portrayed a dead man as "the godfather of sports" with everything the term implies today-a man who, despite what Steiger or the tabloid states, was a good man, a sound businessman, an honest man, and a man respected and highly regarded by people from all walks of life. Can't you see how insidious it is to attack a man who is defenseless, a man who is dead? Why not attack Jeremy M. Jacobs or Max Jacobs, who are alive, and can defend themselves? Further, if anyone attacks them, their good name, or their business, let them present facts, not baseless innuendo and falsehoods as Steiger or the tabloid does, but real, doubtless, hard-core facts. Do you know why the attackers of Jeremy or Max Jacobs can't wage their war with facts? The answer very simply and categorically is because there aren' any such facts. Jeremy and Max Jacobs are perhaps the finest caliber of men one woUld ever want to know. Their business acumen, business astuteness, moral convictions, honesty, integrity, sense of fair play, personal discipline, love for their fellow- man, respect for others' opinions, and keen sense of competition make them whit they really are: unquestionably good men! And not how Steiger and the tabloid portray them. I stake everything I am and the little I have on this statement! In view of all these hours, days, weeks, and months-in view of all these charges made by Sam Steiger and by jealous and envious men who would perhaps like their hands on some of the entities of Emprise and/or the Jacobs family;. in view of all the anguish suffered by the members of the Jacbs family and by those of us who love and respect them; and in view of the fact that I know no proof of any allegation will be offered or concluded as a re:mult of your present hearing. I make only one request: For the sake of justice, decency, forgiveness, and truth as we know it should be in America, at the end of your bearings, will you please announce to America and to the world, an apology to the members of the Jacobs family and beg all concerned-Racing Commissions, Liquor Authorities, Athletic Commissions, Governors, Mayors, and Judges-to know the Jacobs family as one which has been maligned and raped by injustice and to whom apologies and respect are due as retribution. As an American, as one who cannot sit idly by and watch the good name of good people maligned by false accusations, as a Clergyman who has witnessed the anonymous goodness of Jeremy Jacobs, Max Jacobs, and the Jacobs family, as a friend who knows the goodness and honesty of Jeremy Jacobs, Max Jacobs, and members of the Jacobs family, as an avid student of the world of sports who knows what the Jacobs family has done for sports, including racing, in the past years, and as a businessman who has observed with keen eye the astuhe and ethical principles and procedure of the Jacobs family, I highly recommend every- one interested-states, racing commissions, et al-to consider it a privilege and a boon to their economy and reputation if the Jacobs family and/or any of their enterprises shows an interest to establish themselves within their (the states, racing commissions, et al) domain. At this point, I challenge Mr. Steiger to be a gentlemen, to be an American, and to be a child of God; since he can't substantiate any of his accusations with just one foundation in fact, then please be fair enough to stop wasting his time and PAGENO="0315" 1325 words in this manner. I hold no bitterness toward him; I do not resent his un- American action; but, I must add that I shall pray for him and all those who may think like him and perhaps attempt to harm the good names of other innocent people in the future. This should never happen again! Please don't let it happen again. At this point, I thank God that one such as the Honorable Claude Pepper is the Chairman of this hearing. I have followed him for a long time, especially since I once lived in his State of Florida for a full year, while I was recuperating from a paralysis. I have every confidence in his fairness and good judgment. The statement he made and which I quoted in this letter confirms my feeling about him. I thank you for your kindness in reading my letter. I appeal to your sense of objective and fair judgment. In the name of American goodness, justice, and honesty. Very truly yours, Ruv. FRANCIS B. BARATTO Pastor, Our Lady of Lourdes Church. W. D. HASSETT, INC., Buffalo N.Y., June 7, 1972. Mr. JEREMY JACOBS, President, Emprise Corp., Buffalo, N.Y. 14203 DEAR JERRY: First, I am writing to thank you for the outstanding work that you are doing in the United Fund Campaign. It might interest you to know that thus far, you have submitted more new members to the Major Gifts Division (Thousand Plus) than any of the other volunteers. I exclude myself from this eompetition because I've had several months running time on you. On behalf of the community, I want to thank you and tell you how grateful I am. My second reason for writing, is simply to express to you my very disturbed feelings concerning the media coverage of investigations into Emprise and the Jacobs family. Not only because I have known you for so many years, and also your brother Max, Larry, and your three sisters, and your mother, but also, because I had such deep affection and admiration for your dad during the years when I performed Real Estate consulting work for him and several of the corpor- ations. Although, I knew your dad on an acquaintance basis for some years prior, it was in the years of 1966 and 1967 that I spent a great deal of time with him. He asked me to analyze some of the real estate procedures in the Sportservice picture, and also make evaluations as to how land could be utilized where it was peripheral to the operation of a given sporting enterprise. I also made a thorough analysis of an office building in which your family held an interest. Throughout that time period, I spent many many hours discussing these projects with him. I spent many additional hours discussing business life in general, and often specifically, the problems of the absence of business morals in some dealings. I felt your dad had a very acute sense of what was the proper way and the moral way to do things. In some of the work I did for him, there could have been meaner or harsher ways to approach individual situations. When these were indicated as alternatives, he never chose them. Rather, he always those the more humane course, even if it was a little less than the very bqst business course. I do not mean that he would favor a bad business proposition to accomplish a humane end, but rather he did not try to get every nickle out of a deal at the cost of some individual's position. I feel I learned a lot, both in these dealing with him, and also in these conver- sations. I had great affection for him and I think he knew it. Perhaps this is why he was willing sometimes to spend hours talking about business, even if it did not bear down on a specific project that I had been asked to work on. As time went on, and my own business grew and demanded more and more of my attention, I found it impossible to devote as much time as the real estate aspects of your family's businesses warranted and required. It was for this reason, that I finally had to beg off accepting any more assignments. I recom- mended that a very high caliber person be employed, who would deal solely on real estate matters, since I felt there was sufficient business of this type to PAGENO="0316" 1326 justify such an executive. Unfortunately, it was not too many months after that that your dad passed away. Perhaps, I'm getting more detailed than need be. My main point in writing,. Jerry, was to personally state to you the deep affection I had for your father, my total satisfaction with the integrity of any dealings that we bad, and my upset at the media. presentations. On the basis of my relationships with you, Max, Larry, your mother, your sisters, and most particularly, your father, I hold you all in the highest respect and esteem. I am perfectly willing for you to use all or any part of this letter if you wish, should you find it desirable to let those in other places know how this friend, at least, reacts to the current situation. Yours very truly, WILLIAM D. HA5SETT, Jr., President. I, Bill Veeck, of RD. 4, Easton, Maryland, and Suffolk Downs, Boston, depose and state as follows: I knew Louis M. Jacobs, the founder of Sportservice Corporation, and his two' brothers who helped operate Sportservice Corporation, for forty years. I had business with Louis M. Jacobs, personally and corporately, from 1941 until his death. I borrowed money from him to help finance the Milwaukee ball club in the American Association, the Cleveland Indians in the American League, the St. Louis Browns in the American League and the Chicago White Sox. Before I borrowed money from Louis Jacobs, knowing that he also had loaned money to many other major and minor league ball clubs, I checked with the late Judge Kenesaw Mountain Landis to find out if this would in any way violate baseball rules. Judge Landis was, as everybody knows, a strict and care- ful admini~trator a man of great moral rectitude `idvised me that he had con sidered this pioblem The results of his investigation showed th'it Louis Jacobs and Sportservice, were interested solely in the operation of concessions, and at no time had ever given any suggestions or acivice as to how to conduct the opera tion of a ball club. Sportservice and Louis Jacobs weie much easier to do business with thin a bank, they charged less interest, and, of course, because of the duality of in- terests between a ball club and its concessionaire were much more conscious o~ the problems of repayment. As stated above, I took advantage of his line of' credit in all of my baseball operations In this I am not unhl e the majority o minor league clubs and a great number Of major league teams. All of these bang have been made with the knowledge and approval of the then Commissioners of Baseball. / My long association with Mr Jacobs g'ive me I believe a very close insigi t into the man himself He was in my opinion a man of im~eccabie integrity `t man of honor, a man of truthfulness and a man of honesty, and this is as much as I could say about anyone. I particularly resent the attacks that have beon. made in some quarters on his integrity. I can state without qualification from~ my own experience that they must be untrue. I currently operate a racetrack in Boston. In the process of purchasing this racetrack, we followed `the customary procedure of borrowing funds from a con- cessionaire; in this case, not Sportservice, but Ogden Foods, from whom we borrowed the sum of one and one-quarter million ($1,250,000) dollars, at rea- sonable rates. During the course of these many years, I have gotten to know, quite intimai ely many other people who have had business and personal associations with Louis Jacobs. These people are not only from the world of baseball, but from football, hockey, basketball, sports stadia, race tracks, and any other area in which tickets are available for sale. I have yet to hear anyone make any damaging remarks about LOuis M. Jacobs' character. My association with Gerald and Max Jacobs has been considerably less extensive, and I am not in a position to dis- cuss their business, as I am not directly involved with' their business or the business of Sportservice Corporation in any way. However, I am sure that they are trying to carry on the tradition of great business integrity left to them by their father. BILL VEECK. Subscribed and sworn to before me `this 14th day of May, 1970. GEORGE B. L0URIE, Notarjj Pu~lie. My commission expires April 16, 1975. PAGENO="0317" 1327 MERCER ISLAND, WASH., June 6, 1972. Mr. JERRY JACOBS, President, ~Sportservice Corp., Buffalo, N.Y. DEAn JERRY: I am deeply concerned about the reports that your family and you are associated with disreputable persons in the concession business and I can- not accept these as truths. I first met your father, L. M. Jacobs, in 1948, when I first went into the admin- istrative end of baseball. He helped me by offering many excellent suggestions about the concession operation. He offered to take over our concession operation at a very fair percentage to the club, but we decided to operate the concession on our own. But all through the years, until his death, we were great friends. When I became President of the Pacific Coast Baseball League, I went to your father and asked his help in operating the concessions in various parks in the League. He always worked out agreements that were very fair to our clubs. He told me he even advanced some money to help one of our clubs get to spring training. The integrity of your father was, in my opinion, irreproachable. I have never met a finer person. He was unselfishly interested in seeing that the sports enterprises were successful in their own cities, even if he did not get the concession account. When major league baseball was to expand to the Pacific Northwest, I became President of the Seattle Pilots of the American League. Before signing an agree- ment with a concessionaire, we talked with many of the large concession com- panies, such as ABC, Restaurant Association, Servomation, Volume Service, Canteen Corporation, etc. These companies all promised us everything until it came to signing a contract-then, they all wanted to change the contract around. Your father bad suggested we contact all concession companies to be sure, if we contracted with you, we were getting the best agreement possible. We met in Buffalo with your father and Jack Zander on several occassions. Then we received the sad news of the death of your father, L. M. Jacobs. We thought possibly this would terminate the negotiations with Sportservice Corporation. However, shortly thereafter, I received a call from Jack Zander which enabled the Seattle Pilots Baseball Club to secure a loan from your organization which was absolutely and completely fair to us in every way. This transaction involved over Two Million Dollars. Since the discussion was on the phone, it had to be reduced to writing for the protection of each party. I would like to state that each and every detail agreed to with Mr. Zander verbally was included in the contract which we signed with your organization. Jerry, I have never dealt with a firm whose business and personal integrity could exceed that of the Sportservice Corporation and the people who run it. A good example of this is when your company agreed to spend up to $75,000 to remodel the concession stands at our interim stadium. When the final bill came in, after the work was completed, it totaled approximately $115,000. Since our company had spent more money than your company had agreed to spend, Jack Zander and you came to Seattle to discuss this matter with us. Jerry, I'll always remember what took place at our meeting. I stated to Jack Zancler and you that if you felt you did not get value received from the expenditure in excess of $75,000 that the baseball club would pay the difference. After Jack Zander and you conferred, you returned to the room and stated that even though you did not want to spend over $75,000. in this case you would pay the extra cost because your company and ours expected to be associated for a long time and you knew this would help the financial position of our club. Jerry, if there is anything I can do to assist your organization in any way, please do not hesitate to call upon me. With fondest regards to Jack Zander and you, Sincerely, DEWEY SORL&NO. BOSTON CELTICS BASKETBALL CLUB, Boston Mass., May 30, 1972. Mr. MAx W. JACOBS, Enecut'ive Vice President, Emprise Corp., Buffalo, N.Y. DEAR MAX: I never had the privilege of meeting your late father who was, nevertheless, very highly thought of by the late Walter Brown, the owner for many years of the Boston Celtics. Needless to say, his name was mentioned during PAGENO="0318" 1328 numerous conversations and I can assure you that nothing but good was ever spoken of him. As for you personally, may 1 say that in all of the many meetings we have attended together and during our long association in basketball, I have found you to be a person of integrity and always a gentleman, acting primarily in the best interests of basketball. As a matter of fact, I always felt a little closer in that I recommended Bob Cousy most highly to you and have never regretted doing so. Bob has always spoken to me of your wonderful organization, which merely justified my feelings. Kindest regards. Sincerely yours, ARNOLD "RED" ATJERBACH, President-General Manager~ FALLS CiTy TOBACCO Co., INC., Lowisville~ Ky., June 2,1972. Mr. MAX W. JACOBS, Eceecutive T7Ice President, Emprise Corp., Buffalo, N.Y. DEAR MAX: I welcome the opportunity to respond to your letter of May 2& Our local paper has been covering, with its own reporter, the bearings in Wash- ington of the Pepper Sub-committee. I am wondering if our investigative system has been extended beyond the realm of propriety. I was a member of the Kentucky State Racing Commission during the years 1038-1971. During this period we licensed two racetracks. under your ownership.. The quality of your operations was satisfactory. The operating personnel that you selected were above reproach, and well qualified. During this period, our Commission was acquainted with the charges brought by Congressman Steiger. We could find insufficient evidence in those charges to warrant any action against you. We recognize that your Company was licensed. under several state racing commissions, all of which, are empowered by statE statute to conduct inquiries and investigations. To our knowledge, none of these agencies uncovered or surfaced any illegal activity. Sincerely yours, JEAN S. FRIEDBERG. WOODBRIDGE, CoNN., May 29, 1972. SIRS: Yellow journalism has long been the major curse of a free press, and~ it is seldom more reprehensible than when an heretofore reputable publics-. tion, like Sports Illustrated, stoops to it. In an age when millions of people ha'ce cause to believe that the Government conspires to delude the Press, and there5y the People, it is tragic to those of us with half a brain to realize that the pre~s, more often than riot, conspires to delude the public in order to bilk it of its. money. I address myself to your May 29 number, and the cover story on Loiis Jacobs. A more disgusting example of self-righteous hypocrisy on the part of tiny magazine I cannot remember. Do you seriously expect a discerning reader (or* do you hope you have none of those?) to fall for your pious air of "informing the public"? You pr.etend to a modest, non-partisan stand in presenting the "facts", hut the only fact in the whole affair is that you present not one concrete, prcven fact in the whole story. You rely solely on innuendo, rumour, the ~ei1ed hints of scandal, the hysterical and unsubstantiated accusations of a minor politi~ian attempting to find a cause to hitch his star to-rather in the manner of the late Joe McCarthy-and do you hope a wise reader will do other than suppose you: are merely trying to smear this man's reputation? Face it, boys. You're trying to sell magazines, in a competitive and dying market, nothing more. Let me illustrate some of the tricks, and some of the whole-cloth, out of which. you have pieced your story together (though of course you'll never print this letter). Let's take the title; you hope to capitalize on the current rage for "the Godfather" theme. Considering the current interpretation of that ancient title,. we may see that the very headline on your cover is a tacit accusation of wrong-. doing. Now to the story itself, and our first indication of your intent it your persistence in calling Mr. Jacobs "Louie." Let me assure you, no one ever~ called him "Louie." He was Lou to his wife, "L. M." to close friends, Dad to his.. PAGENO="0319" 1329 kids, and Mr. Jacobs to everyone else. But your use of Loule quite effectively denigrates him, and a credulous mind already begins to see hoods lurking round the corner. On to page 45, where we meet a typical "fact" of your finding- an accusation by one James Pluineri, deceased. Thats a fact?! Allegations and alleged reminiscences by someone who is dead and cannot verify them? And then you continue in the very next paragraph (a neat and deadly trick of lesser jour- nalists as if Plumeri were still speaking, to say that Jacobs financed some amusement parks for a Russell Buffailno. But Plumeri isn't saying it-who is? I could find no footnotes, reference books, or any other corroberation of that para- graph in your article, or for countless other such paragraphs. Again on 47, there are long involved stories by your reporters about Lion Manufacturing, presented as fact until, in one small line at the end of the passage, Max Jacobs is quoted on the subject, saying why his father was involved there, and thereby presenting the only "fact" in the whole paragraph, unless indeed SI. is able and willing to prove what he says is a lie and what they say is "fact." But the construction of a long paragraph of vague innuendo, refuted by only one small fact from the other side, quite effectively weights a reader's opinion is not wary about such brain washing from the start. Courtney Goodman's stories of being threatened-because he says he was, was he in. fact? Can he prove it? Are there tapes? You neglected to say. Isn't it just as possible that he is lying, or that he was put on to it? Is he more credi- ble than the Jacobses? Is his word worth more because it accuses rather thaii defends? You give short shrift throughout your article to the Jacobs' side of every question. In so doing, you insult your readers' intelligence shamefully. On page 52 you quote one Robert Leacy, a former employee of Emprise, as saying he bribed Gov. Long of Louisiana and Commissioner Pete Menefee on behalf of Emprises. The Jacobses deny it, Menefee denies it, and Long is dead. Yet you go on to say "Eniprise gat what it wanted in Louisiana", implying, of course, that the bribes did in fact occur. Very clever, fellows, but dirty. Well, well, it goes on in this vein, does it not, gentlemen? Suggestion, rumour, accusation, innuendo, and minimal opposition from the Jacobs' side. A very cleverly written, very plausible article, and so reprehensible, such a shamefully bald-faced pitch to corner a piece of the gossip market and hypo sales I have seldom witnessed. Let me tell you something of Louis Jacobs and his family that is fact: neither he nor his sons have ever knowingly consorted with proven criminals; the Jacobs family and the Jacobs foundation annually contribute thousands of dollars to every major and minor charity in the country; Mr. and Mrs. Louis Jacobs raised and educated twenty children, six of their own and fourteen adapted from orphanges and foster homes around the country. Louis Jacobs and his brothers literally pulled themselves up by their boot- straps, in the time honoured American tradition which you, gentlemen, choose to ignore. They were paupers on New York's lower East Side, contending with malnutrition and disease every day of their youth. Yet they ran, when nature and powerful, among the most upright and honest family-owned corporations ever established in this country. Their love for the game of baseball directed their lives into the sports area, and true, they loaned money to teams, extracting in return their concessions contracts, but where in that lies the calumny? Their "loan" to Connie Mack was a gift-at least it has never been returned, and isn't expected. Mack was good for baseball. If baseball was good for Jacobs, it was good for lots of other people as well. There is no crime in good business, is there, gentlemen? Or do I ask the wrong people? You have gathered by now, no doubt, that I am a friend of this family's. I am, in fact, Max Jacobs' best friend, as he is mine. I see upon rereading that some of my "facts" leave themselves open to attack, so I'll merely ask the obvious question of anyone who cares to consider such an argument; whom would a decent, thinking person rather believe? A man with nothing to gain hut the continued love and friendship of another man, in whom he believes, or a corn- merical magazine, of dubious ethics, which is desperately trying to make its weekly put to stay alive, with nothing to fear from the dead whom it attacks with impunity. Is the fact that I am a friend of the family's, mother then a dis- gruntled ex-employee, enough to give credence to his words and take it away from mine? I hope not, gentlemen. I hope your story is read and believed only by those so fettered with the tragic smallness of their own lives that they laugh to see any giant bleed, regardless of how unjustly. PAGENO="0320" 13~3O Gentlemen, please-stick to box scores and sore arms. Character assassination is no honourabie road, and it springs from the same impulse as any other kind of of assassination. I hope the profit motive in such an understaking is never again too strong for you to resist. You have saddened by life considerably, and I dare say wiser heads than mine will be moved to ignore your publication in the future. I hope so. Sincerely, DAvIn SABIN. TEMPLE BETH ZION, Buffalo, N.Y., May 31, 1972. Mr. MAX W. JACOBS, Emprise Corp., Buffalo, N.Y. DEAR Mux: I cannot tell you how distressed I was to read of the publicity con- cerning the hearings presently underway in Washington, D.C. where the integrity and character of your late father as well as your own and your brother were impugned. I am proud to have known you and your family as a clergyman and friend for more than fifteen years. Not only I but so many others regard the Jacobs family as constructive, positive members of our community and we were shocked to read of the aspersions that had been cast on your reputation. Your contributions to our community were, by desire, not heralded, but your family could always he relied on for generous support in any worthwhile endeavor. I have always been impressed by the generosity which you, your brother and your mother, although of the Catholic faith, displayed toward the Jewish community on so many different occasions. I understand how difficult it must be to live with derogation and innuendo. Please know that you have my complete support and sympathy in this most try- ing time. My warm wishes to your mother and your family. Sincerely, Dr. MARTIN L. GOLDBERG, Rabbi. KENTUCKY QUARTER HORSE RACING Co~iMIssIoN, Ilopkinsville, Ky., June 3, 1972. ~Mr. MAX W. JACOBS, Eniprise Corp., Buff alo, N.Y. DEAR Mr. JACOBS: I am most happy to reply to your letter of May 26th. I am experiencing now, as I have in the past, a very favorable relationship with you, Emprise, and your employees. I first became acquainted with Emprise in an indirect way in the fall of 1068. At that time, Tn-State Quarter Horse Racing Association was applying to this Commission for Quarter Horse dates for the year 1960. Their application was contingent on obtaining a suitable contract wtih Emprise to lease the facilities at Latonia Race Course. An acceptible lease resulted, and Tn-State opened its quarter horse meet in October of 1969. Tn-State, to say the least, did not have a banner year, and was allowed by Emprise to pay considerable less for the lease than was spelled out in the contract. I remind you, that there was no obligation on the part of Emprise to ease the terms of this contract, except for their generosity and eagerness to see a struggling business succeed. I think this lashing out at large corporations is a trend in America today. Many people who have not been successful in business, whether through mis- fortune or lack of ambition, can only surmise that anyone who has succeeded, has done so only through devious and dishonest acts. Others, hoping to achieve political success or self satisfaction in discoloring a company's reputation, do so under the guise of cleaning up a not so clean America. After observing the employees of both Latonia Race Course and Miles Park Race Track for the last three years, I can only conclude that they take extreme measures to insure the integrity of racing at these two plants. In turn, I feel that these ideas must have been instilled in them by their employers-Emprise, Sportservice, and the Jacobs family. Cordially yours, Bsw S. WooD, III, Chairman. PAGENO="0321" 1331 CHICAGO WHITE Sox, Chicago, Iii., June 7, 1972. Mr. JERRY JACOBS, President, Emprise Corp., Buffalo, N.Y. DEAR JEnny: 1972 marks the 22nd year the Chicago White Sox and Illinois Sportservice have been working together under a concession contract. It also marks the 2nd year of the 3rd ten year contract for the concession operation at White Sox Park. I have been associated with the White Sox since 1959 and in my capacity as treasurer, I have stayed very close to our concession business. Our concession operation has been handled in an outstanding manner and has been recognized as one of the best in the country. Your cooperation from the home office in Buffalo has been excellent. The Chicago White Sox and I personally have had great respect for you, your brother Max and your company over the years. All of our dealings have been on a very business like, arms length basis. Our faith in your honesty and integrity is indicated by our entering into a profit participation arrangement under the present contract. We are very satisfied with our present contract with Sportservice and have no doubt that our concession operation will be as successful in the future as it has been in the past. Very truly yours, LEO M. BREEN, Vice President. KANSAS CITY ROYALS BASEBALL CLUB, Kansas City, Mo., June 5, 1972. Mr. MAX W. JACOBS, Eccecutive TTice President, Emprise Corp., Buffalo, N.Y. 1)EAR MAX: I first met your father, Lou Jacobs, hack in 1948. 1 was most im- pressed at the time by his sincerity and helpfulness that he exhibited to me and others in the minor leagues who were struggling to place minor league cities on a soimd financial basis. Your father's advice and in some cases financial help enabled many privately operated minor league clubs to survive. My contacts, not only with Lou Jacobs, but representatives of Sportservice have always been productive from the knowledge I gained in concession operations and management. Also, my association with Sportservice in certain cities where Sport- service managed concessions was conducted on a high level and resulted in efficient concession operation. In conclusion, I have always had the highest regard for Lou Jacobs, yourself and Sportservice Corporation. Sincerely, CEDRIC TALUS, General Manager. MADISON SQUARE GARDEN CORP., ]~,Tejv York, N.Y., June 7, 1972. Mr. MAX W. JACOBS, Eccecutive Vice President, Emprise Corp., Buffalo, N.Y. DEAR MAX: From my early days as a promoter, and then as head of operations for Madison Square Garden, Lou Jacobs was a warm friend of mine. His death I considered a great personal loss, and certainly a blow to everyone in the sports business. It was indeed fortunate that Lou had you and your brother Jerry to carry on the tremendous business that over the years he had built into one of the biggest and most respected operations in the sports world. When I started out developing basketball in the Garden, Philadelphia and Buffalo back in the 1930s, I first encountered Lou who gave me all kind of helpful ideas. I was able to carry over these ideas to the Garden when the direction of that building was given to me, a relatively inexperienced young man in the early 1940s. 81-008-73-pt. 3-21 PAGENO="0322" 1332 Whenever a question of concessions operations came up I felt free to call on Lou for advice even though we never had an agreement. His opinions were always sound and despite the vicissitudes of war-time operations, his judgment was good. I have never heard any reflection on his business or personal integrity. I can only hope therefore that you and Jerry will be on hand for years to come in continuing to make the Jacobs name an outstanding one in our business. Sincerely yours, NED IRISH, Vice President. NATIONAL BANK OF DETROIT, Detroit, Mich., February 5, 1970. Mr. JOHN GOODMAN, Chairman, the Racing Commission, State House, Phoenicc, Ariz. DEAR MR. GOODMAN: Certain newspaper articles have come to my attention con- cerning a possible investigation by your state attorney general into the "possible questionable connections" of Emprise Corporation, Buffalo, New York. Our rela- tionship with Emprise Corporation and its subsidiary, Sportservice Corporation, and the Jacobs family, dates back to 1934, and we thought that a resume of our experience might be of some assistance to you in this investigation. As you undoubtedly know, the principal asset of Emprise Corporation is 95% of the stock of Sportservice Corporation, with the other 5% owned by the Estate of Louis M. Jacobs. This New York corporation, principally through wholly- owned subsidiaries, operates food, beverage, program, catering and parking con- cessions at over 350 installations throughout the country. Principal locations in- clude numerous minor and major league baseball stadiums, race tracks, airport terminals, sport and civic arenas, and indoor and outdoor movie theatres. In addi- tion, it owns and operates several restaurants and bowling establishments in vari- ous parts of the country. The consolidated financial statements of Sportservice are submitted to us in strict confidence, but for your information, the December 31. 1968 audited financial statement indicates that the company had a net worth in excess of $25,000,000. The company's total liabilities are fairly modest in relation to its overall size, and operations have always resulted in good profits. For many years we have extended a $3,000,000 unsecured line of credit to Sportservice Cor- poration, and borrOwings have always been handled completely to our satisfaction. It is our understanding that the company's other principal banking relationship is maintained in Toronto, Ontario, and from time to time we have consulted with that bank, which has always indicated that it had a favorable regard for this company and its management. I personally have known the Jacobs family for a number of years, and was particularly well acquainted with the company's founder, Louis M. Jacobs, who died about a year ago. Since Mr. Jacobs' death, the company's management has rested with his two sons, Jeremy and Max, both of whom 1 have known since they became active in the company's affairs a number of years ago. The company's financial statements attest to the Jacobs' ability as businessmen, but in addition, I have the highest personal regard for their integrity and honesty. I would be pleased to answer any question you might have about either the company or its management. Very truly yours, RICHARD H. CUMMINGS. CHICAGO STADIUM CORP., July 30, 1968. Mr. JAMES ROBERT BEST, Chief, Office of Special Investigation, Department of Revenues, State of Arkansas~ Little Rock, Ark. DEAR MR. BEST: I wish to acknowledge your letter of July 24, 1968, inquiring about Mr. Lewis M. Jacobs, President of Sportservice, Inc., Buffalo, N.Y. About thirty-five years ago when my partners and I took over the Olympia Stadium in Detroit, I met Lewis M. Jacobs and made a contract with him for the operation of the concessions in the Olympia Stadium, Detroit, Michigan. He did a very fine job of increasing our revenue at Detroit and when we increased our operation to Stadia in Chicago and other cities, we always engaged the PAGENO="0323" 1333 services of Mr. Lewis M. Jacobs. Preseiitly we are operating only Chicago Stadium which has a seating capacity of approximately 20,000 people, and Sportservice, Inc. has had the concession contract since 11935 when we took over the building. In our opinion Sportservice, Inc. is the finest operator of concessions in this country and we unhesitatingly recommend their services. In addition to run- lung a fine operation, Sportservice, Inc. has a very substantial capital and a very fine credit rating. Mr. Lewis M. Jacobs, President of Sportservice, Inc., is a fine gentleman and a top executive. He is responsible for the building of his company. He is a person of outstanding ability, unquestioned integrity and is financially very sound. If there is any further data you would like about Mr. Lewis M. Jacobs or his company, I would appreciate hearing from you. Yours very truly, ARTHUR M. WIRTz, Chairman. BUFFALO, NEW YORK, June 1, 1972. My DEAR Max: The tardiness of this reply is explained by the fact that your letter, directed to me, was addressed to the Braves-an organization I left on 3-17-71. It was delivered to my home yesterday. One of the first men with whom I bad contact when I started sportscasting in Buffalo on 2-10-35 was your Dad. Soon thereafter I was fortunate to meet your Uncles, Marvin and Charley, and through those beginning years until those men passed on our associations were rich, warm friendships that I would not exchange for anything in the world. Many times I went to your father for counselling and for advice. I-Ic was found wanting at no time and he became a great favorite of the Hubbells you can be sure. Charley, who was everybody's pal, was mine, also, and there never was a time he wouldn't hustle home from the world series with an autographed ball for each of my boys. Marvin, who devoted so much of his life to other people, and his equally compassionate wife, Peg, were special favorites and I can say-and do gladly-that no twosome ever thought more of others than Marvin and Peg. It would be only natural, then, that my interest and devotion to the Jacobs family would linger and transfer itself to the generation succeeding these pioneers. With you, as with the triumvirate which marched before you and Jerry, the same affection holds and will, I am certain, for the years to come. In all truth my association has beeii one of the general camaraderie with you and your family which means that there never have been any business deal- ings involving us. However, and I cannot make this emphatic enough, people of the Jacobs calibre cannot walk a path in the sunlight and another in the dark. A proud boast of the Hubbells has ever been that we have been called friends by the Jacobs. There is no reason at all to believe that this affection will ever change or diminish. My very best to all of you. Sincerely, RALPH HUBBELL. STATE OF ISRAEL BONDS, New York, N.Y., June 1, 1972. Mr. MAx WILLIAM JACOBS, Bnffalo, N.Y. DEAR MAX: This is in response to your letter of May 26 in which you ask that I give you my opinion concerning your reputation, integrity and business and personal conduct. We have known each other and worked with each other over the past year. I had several meetings with you in Buffalo, New York and in Miami at which we had extended discussions about the State of Israel and the State of Israel Bond Campaign. It is my firm belief that you are deeply and emotionally committed to Israel. In all of our dealings, you were entirely reliable and forthright. You were willing to put your beliefs into practice and you were helpful in our Israel Bond Campaign, in ideas and efforts and in personal activity. PAGENO="0324" 1334 I noted also that you were most helpful in enlisting the participation of other influential persons. The manner in which they responded to you speaks well for your reputation and the esteem in which you are held by others. With my good wishes. Sincerely yours, MORRIS SIPSER, National Campaign Director. HOCKEY HALL OF FAME, Toronto, Ontario, May 31, 1972. Mr. JERRY JACOBS, President, Emnprise Corp., Buffalo, N.Y. DEAR JERRY: Tonight's Montreal Star carried a story on the hearings at Washington. I had not known previously that your company was affected. There is always a danger of becoming involved when you have concessions in so many Sports ventures. Because of my age and retirement from competitive sport in 1DM I have not had the privilege of working with you and your brothers to any extent. But in `the matter of your revered father I had many contacts with him in Buffalo- The American Hockey League, The Arena Managers Association, and most important' of all the founding and erection of Cincinnati Gardens. In every instance L. M. Jacobs `insisted on honest dealing and the highest ethics possible in Sport. After I left Toronto-I was unemployed for several months. It was my privilege to represent Mr. Jacobs on a number of occasions. He offered me a salary but I insisted on doing anything I could on a voluntary basis. On at least two occasions Mr. L. M. Jacobs told me "Bear in mind-~because of my faith-I frequently have two strikes against me before I start. In `any deal you make for me-I want you to he sure and give the other fellow a little the best of it. Then I can rest easily." Mr. Jacobs was proud of his parents and grateful for their kindly advice. He wanted his children to have an easier childhood than his own-but he always stressed their keeping the good name of the company in mind. I sincerely hope that the `Subcommittee in its wisdom will find Mr. Jacobs n good father-a sound business man and a true American. Sincerely yours, FRANK J. SELKE. MONTREAL Exuos, Montreal, Quebec, June 1, 1D72. Messrs. JERRY and MAX JACOBS, Emprise Corp., Buffalo, N.Y. DEAR JERRY AND MAX: Portions of the attached newspaper article somewhat expresses, yet too briefly and not expansively enough, the feeling I had for your father, and your company. Lou Jacobs was a man of sensitivity and deep compassion for other people. His work day was long and consuming, but be gained strength and relaxation from knowing that `be helped someone almost every day of his life. In some way, his helping hand was extended, either in direct financial help, advice and counsel, or just plain sincere interest and concern for you. Many persons in this world, not only in the United States, and not only in the sports profession, have become better citizens for having known Lou .Jacobs. I can most sincerely say that my life, personally, was enrichened by knowing him, experiencing moments of priceless `business discussions and observations of his philosophy of life and men. Men of the stature of Lou Jacobs do not come across the horizon too often. He was a man of intelligence, incisive mind, tenacity, capacity for work and above all a man of feeling. No one can question the integrity of Lou Jacobs, of his organization, or of his Sons without arousing in me some suspicion as to their motives. We all know that witch hunts are the hazards of those who become publicly prominent. But I strongly resent the inferences and innuendoes being leveled PAGENO="0325" 1335 against a man of his quality after lie has passed on and unable to confront the jackals face-to-face. I seriously question if they would have had the temerity to do so. `With my best wishes. Sincerely, DANNY MENENDEZ, Assistant General Manager. Two STRIKES AGAINsT PRINCE CHARMING? (By Dick Bacon) The romance between the Expos and Montreal baseball fans has been almost too idyllic for more than three years, some sort of a record in these days of social change when brief encounters are "in" and classical love affairs are camp. Some cynics insist this succession of Happiest Summers has been living on borrowed time ever since tile early months of this love-at-first-sight infat- uation. Events this past week only served to confirm what they knew all along, that the shining knight with the funny hat and riding his white charger were really tattle-tale grey after all. Classical couplings achieve immortality only in fiction. First, it was revealed, through a U.S. Congressional, hearing that the Expos had borrowed $2 million dollars from a concessions company currently charged with consorting with the underworld. A few days later the baseball players association, flushed with new-found: bra- vado in its strike victory over the owners, filled a grievance against the Expos for scheduling a split doubleheader in which separate admissions would be charged-allegedly a no-no in the fine print of the basic agreement between baseball's labor and management. All of a sudden, Prince Charming had two strikes on him and batting with the added pressure of a lengthening losing streak on his mind. The Expos weren't even gulty of being naive in their association with the Jacobs Brothers-Jerry and Max-who own Sports Services, a subsidiary of Lrnprise the finn under attaci in Washington The Jacobs f'imll3 h'is been the best friend baseball has ever had for several decades. So staunch, in fact, that even such an arch-conservative, self-styled watchdog of the game as The Sporting News has suggested a special niche should be found in the. Hall of Fame for the Jacobs family. Bill Veeck, who formerly operated the St. Louis Browns, the Cleveland Indians and the Chicago White Sox quite clearly states that he couldn't have survived without the financial help of the Jacobs. "When you've got Louis Jacobs (the late father of Jerry and Max) for a friend, you've got a friend for life." Hardly a team in baseball and that par- ticularly applies to the minors, has not shared the fiscal faith of the Jacobs. Ask Danny Menendez, assistant general manager to the Expos' Jim Fan- ning. Danny probably has been associated with more minor league clubs than any man in the game, either as a GM or an owner. With the help of a loan from Lou Jacobs, Danny bought the Toledo Mud Hens from the Detroit Tigers for $75,000 in 1972. "I'd borrowed $25,000 from him and already paid him back," Danny recalls. "But by early June of that year I'd spent $76,000 and was in danger of losing the franchise. "One day I got a call from Lou and he asked me how things were going amid I told him, `not so good.' "`I'll get back to you,' he told me." Sure enough, a few hours later he called back from Chicago and asked if I could meet him at 4 o'clock. "Four o~clock tomorrow afternoon?" "`No, four o'clock in the morning. My train will be stopping in Toledo then. Be there,' "he told Menendez. When the train pulled in, Lou Jacobs got off in his dressing gown and slippers, handed Danny a cheque for $10,000 and patted him on the back. "`Now go to it,'" he said, climbed back on the train and went back to sleep. "His lawyer told nie later that's the first time he ever knew Lou to do a timing quite like that," Menendez added somewhat wistfully. A few years earlier, Danny had a chance to buy control of the Denver Triple A club from the Flowsams, Lee and Earl, but he couldn't come up with the needed financing. "`Why didn't you come to me?'" Lou Jacobs asked him sometime later. PAGENO="0326" 1336 ~`I didn't know you," Danny replied. `Well, I knew all about you," Jacobs said. "I'll tell you something," Danny said returning to the present, "the minor leagues couldn't have survived as long as they did without Lou Jacobs and later his sons. I don't know anything about bow be made his money, but as far as Lou Jacobs the man is concerned, I always found him to be a man who had compassion for his fellow human beings." So the Expos traded their concession rights to the Jacobs brothers in 1969 in exchange for a $2 million dollar loan. Club president John McHale insists it was nothing more than a good business deal by both parties. "I'm convinced of their reliability and distressed by the Washington inves- tigations," added Mdllale, who has also known the Jacobs for many years. Our Prince Charming in flannel knickers became further tarnished over the split-doubleheader issue a few days ago. The Expos were painted as an arrogant, money-grubbing employer who completely ignored the player-owners agreement, went ahead and scheduled the makeup game as a separate admis- sion "and didn't even bother to notify us," according to executive director Marvin Miller. That's not quite the whole truth, either. Expos GM Jim Fanning personally contacted the player reps of the two teams involved-Bob Bailey of the Expos and Tom Seaver of the Mets. And both, according to the Expos, offered no objection. National League President Chub Feeney, at whose suggestion the Expos scheduled the split twinbill, argues that he has the right to do so when, under a clause which stipulates "there's no practical alternative" to doing otherwise. Well, my mother always told me the road to true love would be a little rocky. ORCHARD PARK, N.Y., June 2, 1972. MAX w: JACOBS, Ecoecutive Vice President, Emprise Corp., Buffalo, N.Y. DEAR MAX: For most of 30 years I knew your father ~nd your uncles, Marvin and Chancy, quite well, They were kind men and I feel honored to have known them as friends. As a long-time baseball writer I believe that the game should do something to honor your father, especially. He bailed out so many baseball men and fran- chises when in trouble and so quietly one never knew about it until years later. Like the moguls who made America in the 80s, only to be criticized, Lou Jacobs was a genius who had a great deal to do with the boom of major sports in our country. I never knew a soul who worked so hard. Many times after midnight I'd pick him up at his office or Club 31, have a drink or coffee and a sandwich and drive him home. He amazed me with his depth of Shakespeare and the way he could quote the Bard to fit an anecdote. His friends like Bill Veeck had absolute trust and a great love for your father. Bill was virtually broke when he joined the Marines and turned over all his affairs to your father. Lou paid his bills and sent monthly checks to meet Bill's obligations. Bill told me this, not your father. Many years ago Jack Zeller, then general manager of the Detroit Tigers, told me how your father at the end of the first season of operations, handed Frank Navin, the owner, a check for a considerable sum (I believe it was $20,000) which was over and above the contract. Others like Barney Dreyfuss, Pitts- burgh, let similar stories be known. The Jacobs Bros. founded their business on implacable honesty and their willingness to make an investment others shied from. When Jimmy Dunnigan went broke and bankrupt on his track in Arizona, Lou Jacobs did a wonderful thing I only heard of a few weeks ago from one of Jimmy's associates. Lou arranged it so that Jimmy could keep his Hamburg home and the acres he owned around Buffalo Raceway. In the bank foreclosure, these assets should have gone to your company or to the banks. Horse racing and racetracks were not in my range as a sportswriter, so I never knew much if anything about that phase of y&ur company's operations. But I do know that the Jacobs family had too shining a reputation ever to do anything that would damage it. We're living in such strange times that I wonder whether such a reputation can be clouded on innuendoes from a Sub-Committee, Congressional hearing. PAGENO="0327" 1337 I have confidence there are truly honest and perspective men on that com- mittee who'll measure I. M. Jacobs for the great man he was and accord him what he deserves-a clean bill. There are many in the field of radio, TV, sports and banking who owe their stature to the early recognition your father saw in them. I think this was one of his foremost satisfactions in life, to help worthy young men to advance. Your father had a great depth and spread to his friendship, especially when someone was down because of poor health or in a financial bind. I have been away on vacation doing research on a book that was commis- sioned some time ago. My apologies for the delay in answering yours of May 26. May whatever I had to say in this be of some aid in your appearance before the Congressional Sub-Committee. Best regards to your mother and to your brother Jeremy. Sincerely, C~ KEITZER. MEMPHIS PRESS-SCIMITAR, Memphis, Tenn., January 27, 1069. ARIzoIc~ RACING CoMMIssIoN, Phoenix, ~Ari~. GENTLEMEN: The reporter I have assigned to cover the Southland Greyhound Racing Park at West Memphis, Arkansas (the city directly across the Mississippi River from Memphis) informed me yesterday that he learned questions have been raised by some citizens in Phoenix regarding the Emprise firm which either owns or is attempting to gain control of the greyhound racing park in or near Phoenix. I thought you might he interested to know that citizens in West Memphis also raised some questions about Emprise when that organization took over con- trolling interest in the dog track there. For that reason, my newspaper con- ducted its own investigation of Emprise to see if any reasons for attempting to keep Emprise from controlling the dog track were valid. I personally spoke with about 30 people in the sports field, ranging from owners and general managers of major league baseball teams to city officials who operate coliseum-type buildings in which the Emprise or Sportservice firms conduct business. In no instances were we able to substantiate allegations by a few West Memphis citizens that an "unwanted element" would Control the West Memphis dog track if the Emprise firm took over its operation. To the con- trary, the gentlemen I spoke with had nothing except high words of praise for the operation of the Emprise and Sportservice firms and for its owners, Jeremy and Max Jacobs. We published our findings in our newspaper and, for the most part, criticism of the Emprise firm ceased. Since Emprise took over the operation of Southland Greyhound Park we have heard no criticism about its operation or that an `unwanted element" is involved in any way whatsoever with the operation. Southland, in fact, has undergone a massive modernization and reconstruction program. If you desire any additional information we have regarding this matter please do not hesitate to call me. Sincerely, GEORGE LAPIDES, Ewecutive sports Editor. STATE OF MICHIGAN SPORTS HALL OF FAME, INC., Detroit, Mich., June 1, 1972. Mr. MAX M. JACOBS, Ewecutive Vice President, Emprise Corp., Buffalo, N.Y. DEAR MAX: Thank you for inviting me to write this letter in behalf of my experience with the Jacobs family, Mr. Lou M. Jacobs in particular, Sportservice and now, in more recent years, Jerry *and Max Jacobs. I first came to know Lou Jacobs in 1948. That year, I resigned from the faculty at Michigan State for employment with the Detroit Lion.s of the National Football League. Eight of my 10 years with the Lions were as tile Club's General Manager. Throughout this entire tenure, I found Lou Jacobs and his Company most competent, most trustworthy and most delightful with whom to do business. PAGENO="0328" 1338 As I have come to know them over the past several years, I value to the highest level the acquaintance and friendship of both Jerry and Max Jacobs. Very sincerely yours, M. NIcHoLAs KERBAWY, Commissioner. ST. Louis BLUES, St. Louis, Mo., March 31, 1970. Mr. SEYMOUR H. Kxox III, President, Niagara Frontier Hockey Corp., Buffalo, N.Y. DEAR SEYMOUR: Please excuse the tardiness of my reply to your letter of March 13, but I have just returned from a two-week absence from the office. Sportservice has been our concessionaire not only at the Arena but when we had an interest in the old St. Louis Browns baseball club. I am happy to commend them as I feel they are the most outstanding concessionaire in the country. Of course, when dealing with food one can always expect a certain amount of criticism from the public, but in our experience with Sportservice such criticism has been minimal. As for the Jacobs family, both Dad and I personally knew the late Lou Jacobs. Now we have ~a fine relationship with his sons, Jerry and Max, as well as with Mr. Jack Zander and other members of Sportservice, and I can assure you that if they are chosen as your concessionaire they will do an outstanding job for you and you will be very well satisfied with their operation. If I can be of an further help to you, please call upon me. Sincerely yours, SID SALOMON III. DETROIT BASEBALL CLUB, Tigertown Lal eland Fla Mai oh 21 19~0 Mr. SEYMOUR H. KNox III, `viaqai a F? ontmr Hoe! cy Coi p Buffalo, N.Y. Dear Mr. Kxox: Thank you for your letter of March 13 requesting informa- tion regarding the Detroit Baseball Club's affilation with Sportservice Corpora- tion and the Jacobs family. Tiger Stadium (then Briggs Stadium) was the first major league baseball concessions operation to be associated with Sportservice Corporation. I'm not sure of the exact date but it extended back many years before I joined the club in 1949. The Jacobs brothers, Lou, Charley and Marvin, and their company. have served the Detroit Tigers well over the .years. We have recommended their operation to many of our baseball friends, both on a major and minor league level. To me, personally, Lou Jacobs was one of the finest friends I had in baseball. He was more than a business associate, he was a confidant and a trusted ad- viser-tough but fair. In the past few years I have come to know Jerry and Max Jacobs as fine young men and I feel they are well qualified to assume leadership of this corporation. Jack Zander, of the Buffalo office with whom we work closely in our day to day operations, has always impressed me as being an outstanding executive. Never once has a member of the Jacobs family or any of their person- nel ever gone back on their word nor have they ever given us anything but the best of service and top value for our concession rights. With kindest regards, I remain, Sincerely, DETROIT BASEBALL CLUB, Detroit, Mich., July 31, 1968. Mr. JAMES ROBERT BEST, Chief, Of7lee of Special Investigation, State of Arkansas, Department of Revenues, Little Rock, Ark. DEAR Mn. BEST: Sorry that I could not answer your letter of July 24th sooner, but I have been out of town since your letter arrived. I have been persom~ahIy acquainted with Mr. Louis M. Jacobs since 1935, at which time I negotiated a new concession contract pfrSOnahlY with him for the PAGENO="0329" 1339 Detroit Baseball Club. Actually, Mr. Jacobs entered into his first contract with the Club in 1930, which ran along on a year-to-year basis until 1935, when a long-term contract was entered into. Since 1930. Detroit Sportservice (Mr. Jacobs) has held concession contracts continuously with the Detroit Baseball Club under four different ownerships. Needless to say, they have handled our concessions in a most successful and satisfactory manner for us. I believe the Detroit Baseball Club was the very first major league baseball club to enter into a concession contract with Mr. Jacobs. Because his operations here were so satisfactory, he was able to secure concession contracts w-ith `almost all major and minor league. clubs exclusive of the Atlantic Seaboard. In our opinion, Mr. Jacobs has done such an outstanding job for baseball concessionwise that he is unequalled in this field. We just can't say enough by way of recommendation of him in this area. Very truly yours, H. M. SIssIoN, Secretary-Treasurer. BUFFALO, N.Y., May 30, 1972. To T'VhOm It May Concern: I have personally known Mr. Jeremy Jacobs for at least 15 years. He has been `i friend of both of my sons who `ire appioximately h s `ige for ~it least this period of timc T1ie~ iode and showed hoises togetner `it the Buffalo Saddle `md Bridle Club `mmd in other boise shows thioughout the W estein New Xork cU'cuit During this period of time I got to know him and felt that he w `is a fine 3 oung man I h'td no business dealings with Sport eu ice or Jerry Jacobs until I becime Adrninistiatii e ~ ice President of the Buffalo Sabres Sportservice w as appointed is ub concussion'uie for `\Iemoual Auditoiiurn on July 10 1970 by the Sabres `Since that time I have dealt directly with Jerry Jacobs and the Sportservice or- ganization in connection with the operation of the concessions. I have found Sport- service to be a very competent concession operator and have found the organiza- tion to be i cii ii eli qu'ilified in its field and cooperatii e in correcting any of the minOr difficulties w-hich we have encountered. Jerry has impressed me as a very bright young man who assumed the large responsibility in operating the Sportservice. operation when his father died. It is my opinion from w-hat I have observed that he has done a commendable job in assuming the direction of this operation and from my association with him- both in his youth and since becoming President of Spoitseiiice Corpoiation-I h'mi e nei ci ericounteued `ins thing of a questionable natuie in ouu de'ilirgs Sineeu el's DAVID G FoR'suA~ DENVER, COLO., June 1, 1.972'. Mr. JERRY JACOBS, ` ` EmprIse Corp., ` . ` Buffalo, N.Y. DLAR Mx J~cons You hTse uequested that I rendeu my opinion as to the uepnta lion, integrity anti business and personal conduct of your company as well as your brother, Max, and yourself. I am most happy to do this and I will set forth herein the facts on which my opinion is based. I was reappointed to the Colorado Racing Commission in June of 1968 w-hich u-as about the time your company acquired effective control of Centennial race track in Littleton, Colorado. In my capacity as Racing Commissioner, I have had considerable contact with you and your brother and employees of the corporation and I can safely say that your operation of Centennial race track has been of the highest type. The Racing Commission has from time to time requested that certain improvements be macic and that adjUstments be made in the mode of operation, anti these requests have been promptly made by management. I have talked with many people. including horsemen u-ho race at Centennial, about you and your business operation, and I can reliably say that your reputation for honest and fair dealing is excellent. I am aware that Colorado Sports Service has had the concession contract at Centennial for approximately 20 years and I also have the opinion that this com- pany has an excei1ent reputation in the community for honest and fair dealing. Further, I can state that at no time have I ever become aware of you, your bratlier or Emprise Corporation doing business in an fashion in this State with individuals who are considered to have connections with organized crime. We are PAGENO="0330" 1340 all aware of the vigorous efforts of the management at Centennial race track to exclude from the premises persons of questionable character. I have been interested in the progress of Centennial race track since it started some 22 years ago, and the only real progress the track has made has been over the past 3 years under your management. I doubt this could have happened. had you and your company had a bad reputation. I hope that it is clear from this letter that I have an opinion as to the reputation, integrity, business and personal conduct of you, your brother and the company which is of the highest and which is based on the above and foregoing comments. Very sincerely yours, F. RICHARD HITE. TRANSAIRCO, INC., Akron, Ohio, May 31, 1972. Mr. JERRY JACOBS, President, Emprise Corp., Buffalo, N.Y. DEAR JERRY: I must say that it is hard for me to believe that anyone who thoroughly knows your company's operation as developed by your late father could seriously question the source of your funds or the business ethics under which it is conducted. Over the past years your company and I have transacted business together and at no time has there been any hint of a suggestion that we were not dealing on the highest possible level. Charges and allegations of the type to which your com- pany has been subjected are most distressing to me as a businessman, for it gives both me as well as my fellow businessmen the uneasy feeling that even today no one is safe from costly and damaging irresponsibility. Jerry, I sincerely extend my condolences to you and your family for the embar- rassment to which you are currently being subjected. Best regards. Sincerely yours, A. J. ANDREOLI, Chairman of tiw Board. SOUTHLAND CoRP., West Memphis, Ark.. June 8, 1972. To Whom It May Concern: I have known of L. M. Jacobs since 1956, and during his lifetime he bad the reputation of being a good businessman and a man of his word. His reputation was good. As the constructural steel fabricator for the erection of Southland Racing Corporation for its original building in 1956, the promoters of the Track were unable to pay the contractors. Sportservice and Mr. L. M. Jacobs made two (2) substantial loans and purchase of stock in order that these contractors might be paid. Speaking as a sub-contractor for this job, I feel highly indebted to Mr. Jacobs that he would risk his capita,l on what was, at that time, an unknown venture. All the contractors for the original Southland building were local West Memphis people, and I know all of them personally. You may rest assured that they have the same feeling as I do regarding Mr. Jacobs being able to make the loans to the Corporation in order to pay the contractors. I have known Jeremy Jacobs and Max Jacobs since 1964 or 1965. Both Jeremy Jacobs and Max Jacobs have a good reputation and are men of integrity. I have had occasion to observe both of these gentlemen, and their business conduct and personal conduct is excellent. They are astute businessmen and conduct themselves in an honorable manner. A. V. SPEAR. PHoENIx GIANTS BASEBALL CLUB, Phoenix, Ariz., May 31, 1972. Mr. MAX W. JACOBS, Executive Vice President, Emprise Corp., Buffalo, N.Y. DEAR MAX: It has been brought to my attention thru the madia that the reputa- tion of your late father, L. M. Jacobs, your brother and yourself, as well as the integrity of your company, has been called into question due to recent hearings. These statements come as a shock to one who has done bu~iness with L. M. Jacobs and Sportservice over a "forty" year period. PAGENO="0331" 1341 I considered L. M. Jacobs one of my closest friends and a man who endeared himself to so many because of his honesty and integrity. During the depression yea,r and in later years it is doubtful if Minor League Baseball would have survived if it were not for the generosity of Mr. Jacobs. It is my personal wish that Sportservice and the Jacobs family will be right- fully exonerated of any charges effecting the excellent reputation of Sportservice and the Jacobs family. Sincerely yours, W .D. RYAN, Vice President and General Manager. MILWAUKEE, Wis., June 6, 1972. Mr. MAX W. JACOBS. Ewecutive Vice President, Emprise Corp. Buffalo, N.Y. DEAR MR. JACOBS: I was surprise to read in several publications, reports of the hearings of the Subcommittee of the House of Representatives regarding the integrity of your family and your company. My relations with you and your company, both on a personal and business basis, have been above reproach. Your business dealings with our baseball team, of which I am one of the owners, to my knowledge, has always been excellent. Your personal conduct regarding business, philanthropy and concern for other people less fortunate than we is generally known throughout the community. I do hope that this matter will be brought to a just and quick close on the merits of your fine company and yourself. Cordially, ALBERT B. ADELMAN. POST OFFICE, HOUSE OF REPRESENTATIVES, TJ.S., lVashingtoii, D.C., May 30, 1972. Mr. MAX W. JACOBS, Em prise Corp. Buffalo, N.Y. DEAR MAX: Having known you for a number of years through the late John F. Kelly, I have been much distressed by the recent charges and unfair accusa- tions to which you and your family have been subjected. As you know I was first introduced to you by Pat Kelly, whom I had known for over twenty five years and who was one of my dearest and best friends. He also was one of the most honest and personable men I have ever met. He was a leading figure in the founding of the Jockey Guild, which helped bring out better benefits and conditions for riders and was long associated with racing in various capacities. He was with the Kentucky State Fair Commission, as well as the Kentucky Racing Commission for a number of years. He enjoyed a fine reputa- tion for integrity in business and personal relations. During his association with you and your brother as manager of the Latonia Race Track at Latonia, Kentucky, which position he held at the time of his un- timely death, I never heard him do anything but praise the manner in which you were conducting your business and to tell me how glad he was to be an em- ployee. Like another mutual friend, who is a Member of Congress, who once told me that if Pat Kelly worked for Emprise and told him like he once told me, they were a great company to be associated with that that in itself was sufficient for him to know that you and your family were as "clean as a hound's tooth" in your business dealings. If you think that this opinion of mine is of any value now during these hearings or at any future time, please feel free to use it however you may so de- sire for it is exactly the way I feel. Hope to have the opportunity of seeing you again soon, Sincerely, H. H. "HAP" MORRIS. I)UNTREATH FARM, Leaington, Ky., June 1, 1972. To Whom It May Coneera: I have known the Jacobs Brothers for 8 to 10 years. I met them when I was president of Michigan division of the H. B, P. A. PAGENO="0332" 1342 I have been associated with Latonia Race Track since the old corporation and am the only one left. When the new corporation was formed, I was made Vice President, Mr. Bishop was president. When he died I was moved up to presi- dent of the race track. When Emprise bought controlling interest in Latonia Race Track, I was left on as president. We still have the same board,'with excep- tion of two men, one bad died, one resigned as general manager, and taken him- self off the board. The Jacobs brothers have been to only one director meeting since they bought controlling interest in the track. We have spent one and one half million dollars -on the race track, grand stand and parking lot. They have not told what to spend, our board has made all recommendations. During this time we have more than doubled our mutuel handlings. The dealings I have had with the Jacobs brothers and their father before them, has been a very pleasant association. I have never been asked by them or their father to do anything but the best for any business. To give you a part of my background, I have raced since 1947, had the leading stable for 4 years. `I' own and operate a large breeding farm, just out of Lexing- ton, Kentucky. We have some 160-165 head of horses on the farm at all times. We have 7 Stallions of our own. We still race a good size stable of horses. Sincerely, T.A..GRissoM; DIESEL PO~\ER SUPPLY I1\C Commerce City, Cob., May31, 1972. To TVhoin It May Concern: ` ` ` `. Since 1959, I have been actively engaged in the breeding and racing of Quarter Horses and in `such occupation I have been financially associated with the Rocky Mountain Quarter Racing Association.- -This Association was organized and foimed to fuither the iacing of Quarter Horses in the Rod y Mountain Area by loc'il 1 esidents E~ ci since 1959 I ha~ e been fimiliar w ith the services `md personnel of Colorado Sports Service Inc. They have furnished the concessions for both our Quarter Horse Meet and also the Thoroughbred Meet. In our business dealings with this company (owned by the Emprise Corp.) we have always had the' best of~' relations' and `~ve" could' never ask for better co-operatiolt or finer treatment. In 1960, the Emprise Corp: acquired controlling interest in Centennial Race Track, Littleton, Colorado. Centenniai owns the track and facilities used by the Quarter Racing Meet.' At that time' I became personally acquainted with Jerry Jacobs, the President of EmpriseCorp. ` :. , -. -` In the past six years'i have met business -and personal friends of Mr. Jacobs many' times and I `cannot speak too highly of Mr. Jerry Jacobs' and his friends. Hisiconduct has been of the highest calibre and I `hold him'in the highest regard. `Our' business deals with Mr. ~Jacobs through' Centennial Race Track have been of the finest.' H'e' has been more than fair' with: the Quarter `Horse' owners and has consistently over the past five years improved our grandstand area, the barn area and' raised the purses to the owners of the Quarter Houses. Again. in closing, I wish to state I have the highest regard for' Jerry `Jacobs and the Corporation he heads. I feel his integrity is beyond reproach. Sincerely J B ~HAMBLRS Thesident ARLINGTON-WASHINGTON, June 2, 1972. Messrs. JERRY and MAX JACOBS, ` : , Einprise Corp. Buffalo, MY. ` ` DEAR JERRY AND MAX: I am writing you because of my deep concern over what I consider highly unjustified criticism to which both of you and your late father and uncle are being subjected in the current alleged investigations of the sporting world. While I did not know your father very well, my limited dealings with him left me with the impression he was a man of high principles. Of course, I knew Uncle Chancy and had great resnect for him. He indulged hi long hours of work and considerable travel iii building up the family business. PAGENO="0333" 1343 In the many positions I have held in my 26 years of association with both the standard and thoroughbred racing industries, I have had occasion to do business with the Jacobs Family at many race tracks, and never at any time did I have any reason to question their ethics or integrity. Your devotion to your mother and to your respective families is a clear indication of the fine gentlemen you are, and I hope this unjust criticism will not discourage you. Florence joins me in expressing our kindest I)ersOflal regards to your mother and to both of you and your families. Keep your chins up! Joiix F. Loo~IE. CAn0KIA Dowxs, March 16, 1970. Mr. JERRY JACOBS, PresIdent, ~portservice, Inc., Buffalo, N.Y. DEAR JERRY: I have been reading newspaper reports for the past several weeks of the investigation that the New Mexico Racing Board and some congressmen have been making trying to prove, or at least make some very broad statements about your company and its officials. I cannot refrain from expressing my own feelings and the type of treatment I have received from Sportservice over the past nineteen years. Early in 1951 we started to build a three-quarter mile race track with barns, grandstand and a clubhouse and named it Cahokia Downs. I personally con- tacted your Father, Mr. Lew Jacobs, as we needed financial assistance and we also needed a concession contract which I made with Mr. Lew Jacobs. The finan- cial help he first granted Cahokia was $1,400,000 and we agreed we would pay back this amount over a four-year period. We proceeded with the construction and late in 1952, found we again needed financial assistance and borrowed an- other $400,000 from Sportservice. I made many trips to Buffalo to meet with Mr. Lew Jacobs. He bought an interest in the Cahokia Race Track and it was our policy from the beginning that no one person would be privileged to buy more than one land trust which consisted of a land trust certificate and 3500 shares of stock for a unit price of $5000.00. Over tIme next five years our business continued to grow and I have given Mr. Lew Jacobs credit for his fine guidance and helpfulness he gave me during our many meetings. I incorporated his good suggestions info the track and will al- ways remember that his word was as good as his bond. He was most honest in every deal and his integrity and loyal support will always remain with me as a business executive who gave more to other people than he did to himself. Jerry, amy friend, I can truthfully say that the empire your Father built was done be- cause he knew his business, he had ability to pick more good deals and very few bad deals and his ability is a big challenge to you. I know that to fill his shoes gives you the desire to do a good job and with the assistance of your brother, Max, I know you will come out on top regardless of all the investigations they ever can make against you and your company. Very sincerely, yours, GEORGE EDW. DAY, President. MIAMI, FLA., June 2, 1.972. Mr. JERRY JACOBS, President, Enrprise Corp., Buffalo, N.Y. DEAR JERRY: It makes me sad to hear of all the l)ubhicity and smear program that seems to be directed at Emprise Corporation and your dad. I can go back and remember the first dealings that we had w-ith your dad when I was a mi- nority stockholder in the Miami Marlins, the baseball club that your dad w-as instrumental in moving from Syracuse to Miami. It is truly a shame to have someone smear and bandy your dad's name around when lie is not here and able to defend himself. If there was a man that did so ranch for sport enterprises when they needed help, it was certainly him. It is strange to me that no one seems to point out that 99 percent of his dealings were with people who were franchised by the Baseball and Football Commissioners or approved for permits by the State Racing Commissions. I just finished reading the article in "Sports Illustrated". No intelligent person that reads this article will know that they are accusing your dad of being a very PAGENO="0334" 1344 good businessman, and a man that took calculated risks to help others when they needed it. This is really the way this country grew. . . with enterprising people like your father that helped it grow. I am sure there are many sport enterprises that never would have succeeded if it were not for your dad. It is a shame that such a smear program has been allowed to start. It is, also, a shame at this time for them to bring something up like this even if there was one iota of truth I see where it serves no purpose. As a matter of fact as I understand it the "old" Emprise Corporation is dead. Why the, harassment against you and your brother? Who is behind this and what do they have to gain? Both you and your brother, Max, are to be commended for the job that you are doing in running the new Emprise Corporation as well as all the other ventures that you are in. I do not know how many other young men in this country today that would have wanted to accept such an obligation. I, for one, feel you are deserving young men and want you to know if there is any way I can be of help all you have to do is call me. Your friend, ISAD0RE HECHT. BUFFALO, N.Y., June 5, 1972. Mr. MAX L. JACOBS, Eccecutive Vice-President, Emprise Corp., Buffalo, N.Y. DEAR MAX: I am pleased to respond to your recent note `asking for my com- ments as to your integrity and reputation in this community, as well as that of your brother Jeremy and your late father, Louis. As you know, I have lived in Buffalo all my life and have been active in business and community affairs. I have known you and your brother and your father during this period of time. The reputation of you and your family in the community is excellent. Indeed, you are known to give generously to charities and are active participants in char- itable and other community activities. I know that you and your brother, as was your father, are fine gentlemen and over the years you have all been held in high regard by me and by your many friends and acquaintances in this community. With very best regards, Sincerely, LEONARD ROCHWARGER. CINCINNATI, Ouio, June 2, 1972. Mr. MAX W. 3ACOBS, Emprisc Corp., Buffalo, N.Y. DEAR MAX: I have recently written to you asking you to consider serving as a Trustee of the Cincinnati Playhouse in the Park for another year. I did so because our acquaintanceship over these last 10 years has convinced me that your business ability and theater experience allow you to make a unique con- tribution to Cincinnati's newest cultural endeavor. It was approximately 10 years ago that we first did business together. At that time you became a lessee of one of the newly rehabilitated apartments our Company, Towne Properties, Inc., was constructing on Mt. Adams as part of its private urban renewal program. As a lessee, one who was interested in the arts, and later as the Owner's representative of the Cincinnati Royals, you continually showed sincere interest in the growth and well being of our city. We appreciated your address before our Determined Young Men's group, which as you know is an organization of young Cincinnatians dedicated to assisting Black businesses. Your talk was one of the most stimulating we heard and your follow-up was most helpful. In sum, having known you in various capacities, I must state that our rela- tionship has been a very sound, honest and worthwhile one. Sincerely, NEIL K. BORTZ. CINCINNATI, OHIO, May 30, 1972. Mr. MAX W. JACOBS, Buffalo, N.Y. ` DEAR MAN: I find it most difficult to understand how it is possible for you to be accused of any questionable activities. As I am sure you know, every personal ~ontact I have had with you-and during the period while you were the most PAGENO="0335" 10. 1~) important actor at the Cinncinnati Playhouse in the Park and I was it president these contacts were frequent-you constantly exhibited the highest kind of integrity and responsibility. I must believe that you will be able to prove that these accusations are false. Sincerely, MORSE JOHNSON. GINSBERG, GTJREN & MERRITT, Cleveland, Ohio, June 5, 1972. EMPRISE CORP., Buffalo, N.Y. GENTLEMEN: Our law firm over a period of years has had occasion to repre- sent various companies that held the franchise for fiat racing in the Cleveland, Ohio area. We initially represented Randall Park Jockey Club and then sub- sequently, Cleveland Raceways, Thistledown Jockey Club and then the most recent owner, Mr. DeBartolo, when he acquired Thistledown Jockey Club. Over the past 20-years, our office has had a number of negotiations with Sport Service, Inc. and with Mr. L. M. Jacobs who is now deceased. We handled the contracts for the owners in connection with the concessions which included programs, parking, food and beverage. Over the years, I can accurately state that we found Sport Service and the Jacobs family honest, sincere, and decent people. They were hard negotiators but nevertheless always kept their part of the bargain and as far as we were concerned, their conduct of their personal affairs and their integrity was never in question. I know Max W. Jacobs personally and have found him to be a fine, conscien- tious, sincere individual and I would have no hesitancy in recommending him to anyone. Very truly yours, EDWARD GINSBERG. CENTRAL BANK & TRUST Co., Denver, Cob., May 19, 1970. Mr. J. JACOBS, President, ~portserviee Corp., Buffalo, N.Y. DEAR JERRY: Mill Lockwood was kind enough to mail us some material last month regarding the "Steiger affair". We want you to know that we appreciate your frankness and the openness with which you have l1andled these "so-called" charges. It is difficult enough to conduct your ordinary business affairs without having to defend yourself against charges of this nature. When we commenced doing business with your company, we believed you and your staff to be honest, reputable business people. Our experience with you has not led us to believe otherwise. We compliment you for the personal efforts you have expended to bring all the facts out into the open in the wake of criticism, publicly. Best of luck to your fine company for continued success. Sincerely, MARK NORWALK, Assistant Vice President. AUTOMATIC TOTALISATORS, INC., Wilmington, Del., June 6, 1972. Mr. MAX JACOBS, EEeeutive Vice President, Emprise Corp., Buffalo, N.Y. DEAR MAX: It has been with a great deal of concern that I have been reading the newspaper and magazine stories concerning city, state and federal investiga- tions and hearings into Emprise and Sportservice. I am disturbed that this kind of inequitable harassment should be occurring to some of the most respected members of our industry. In all of the many years that we have done business together, and in all of the contacts that we have had with you, your brother Jerry, and all of tl1e other members of your organization, you have always conducted yourself with integrity and honesty. Your reputation within the industry is impeccable. PAGENO="0336" 1346 I consider it a personal privilege and a pleasure to be doing business with you. The operations with which you are associated are certainly run in the most businesslike and knowledgeable fashion. I want to write this letter to you to let you know how I feel. I think it is a shame to see something like this happening to some of the finest people I know and to a company which has been such an asset and credit to an industry on which so many people depend. - If there is ever anything I can do to further show my support for you and your organization please do not hesitate to let me know. Warmest personal regards. Sincerely, MARTIN L ZWERIN. TOLEDO Ouio Ju ie 2 1972 Mr. JERRY JACOBS, Preside-at, Emprise Corp., Buffalo, N.Y. DEAR JERRY: I received your letter of May 26 and am most happy to comply with your request. As you know, your father and I had been friends for many years prior to our becoming associated in our joint venture business. I always found your father to have the unique quality of inspiring those busiqess associates with whom he bad contacts. A great many of our business transactions in the early years were done on a verbal understanding basis which eventually, were recorded according to those understandings. On many of my visits to Buffalo to discuss business with your father, we eventually found our way into the family dining room having a late dinner pre- pared by your mother. On these occasions I had the opportunity to observe a family working and living together attempting to build an image in a unique industry in which your father was a pioneer. I am familiar with some of the problems you, your brother and the family are living with at the present time through the Publicity in the news media. This is very unfortunate as I am sure it does not reflect the image or philosophy that your father intended. I hope it will be only a matter of time until your problems are resolved, and if I can help in any other manner, I'll be glad to do so. Yours truly, VIRGIL A. GLADIEUX. AMERICAN TELETIMER CORP., New York, N.Y., June 2, 1972. Mr. JERRY JACOBS, Buff a-b, N.Y. DEAR JERRY, I have followed with sadness the newspaper accounts of the recent hearings on race tracks held by a sub-committee of the House of Representatives, in which the Jacobs family's actions seem to be called in question. I met the first member of your family, your Uncle Charley, at Batavia Downs in 1955, at opening night of the meeting for which we installed our timing equip- ment, and used to see him thereafter at various tracks where both of us-had our respective services. I have never heard an unkind word said about him or about your Organization, and, in fact, track management in most places seemed so pleased to see him that i'd hoped to enjoy a similar welcome! My wife and I had the pleasure of meeting you, -as host at the Woodbine tracks, not many years later. There too, we heard nothing but kind words about you and your service, amid, over the many years since, there seemed to be a refrain of the same attitude where you and your lovely Peggy's name came under discussion. I did not have the pleasure of meeting your parents till sometime in the late `50s, at a convention. We spent many hours together, reminiscing about the years of - struggle in building your Company, and I came away with a feeling that a world of pride permeated both your mother and father in the Organization that they had built and of which they were so ardently fond! Apparently your parents, too, were held in esteem by important members of track operators. Mr. Taylor, the Chairman of the Board of the major Ontario tracks, for a while after installing our timing service at his tracks, frequently addressed me as Mr. Jacobs and I would correct him, of course. On one occasion, PAGENO="0337" 1347 when I had corrected him, Mr. Taylor said that I should not feel offended, that Mr. Jacobs was a very fine gentleman and addressing me as Mr. Jacobs was not denigrating me! I heard from some of your father's associates of the long hours he spent at his desk and of the prodigious amount of work he did till the very day he died at his desk! Is a man so pround of his accomplishments and so devoted to the best interests of his Organization capable of any but the finest deeds for his Company! Somehow, that does not make sense! And, finally, a few years ago, we had the pleasure of meeting your brother, Max, and, last winter, at Boca Raton, at the Harness Tracks of America con- vention, his lovely wife, Helen. Seventeen years covers a large span of our life cycle, and few blemishes can remain undetected or undisclaiined during such a long period of time! From the time we met your late Uncle Cliarley, your late father and dear niother, you and your wife, Peggy, and your brother Max and his Helen, we have never known any of you to have done anything that did not reflect honesty, kindness and con- sideration toward your fellow man! My wife and I wish you all the good things in the world, and sincerely hope that when the full story is told, all of you will have shown what wonderful people you really and truly are! Sincerely, A. F. SMUCKLER. DEVELOPMENT CORPORATION FOR ISRAEL, STATE OF ISRAEL BONDS, Buffalo, N.Y. June 9, 1972. Mr. MAx WILLIAM JACOBS, Buffalo, N.Y. DEAR MAx: This is in response to your letter of May 2Gth in which you ask that I give you my opinion concerning your reputation, integrity and business and personal conduct. In my capacity as a professional of the Israel Bond Organization. I consider it a rare privilege to have had the opportunity to know you and to work side by side with you on a number of campaigns and special projects. I can state, unequivocally, that you have been of extreme assistance tO me in formulating my thoughts and npproaches in promoting time objectives of time Israel Bond Organization's programs. This helpfulness and thoughtfulness on your l)art, I am sure, springs from a sincere commitment emotionally, spiritually and financially, to the State of Israel and Her people. Your willingness to be of service at any time you have been called upon, coupled with your great understanding of peoples' needs, have made an indelible imnpres- sion on me and the other volunteers who know you. Your ability to involve your personal friends and business acquaintances in our work has been especially appreciated. Your hard work, sincerity, good humor, and thoughtfulness has, I am sure, earned you the same respect among your civic acquaintances that you enjoy as an individual. Sincerely, MORITz W. FRIEDLER, Area Manager. DENvEn, Coi~o. Mr. JEREMY M. JACOBS, Buffalo, N.Y. DEAR JERRY: As discussed with you, I am aware of the various unfavorable comments in the news media regarding your organization. I am writing this letter to describe my personal observations with regard to my contacts with you over the past four and one-half years. I went on the Board of Directors of Centennial Turf Club, Inc., with you in February of 1968. During this period of time, it has been a pleasure to work with you. I have particularly noticed that you have constantly made every effor~ to be absolutely fair in your relationship with Centennial. I have never seen you take advantage of your stock position to influence the Board of Directors'. 81-068-73-pt 4-22 PAGENO="0338" 1348 Your organization has made a tremendous contribution to Centennial in ad- vice and help through you and your associates. As an office, director and share- holder of Centennial Turf Club, Inc., I thoroughly approve of your participation in this organization. With kindest regards, I remain, Very truly yours, W. T. BLACKBURN. DENVER, CoLo., May 31, 1972. Mr. JEREMY M. JACOBS, President, Emprise Corp., Buffalo, N.Y. DEAR JERRY: My first acquaintance with your father, L. M. Jacobs, his two brothers, and yourself, dates back to a T R A Convention at the Plaza Hotel in New York about fifteen years ago. At that time I was General Manager and an officer of La Mesa Park, Raton, New Mexico, a member of T R A. My first business contact with Sportservice was when they took over conces- sions at Sunland Park race track, near El Paso, Texas, in the 1960 fall meet. Sunland had operated its own concessions in the previous opening season-quite unsatisfactorily I served as Director of Racing at Sunland the first year, and as General Manager for the next three or four; during these years I also con- tinued as General Manager of La Mesa Park. Sunland's relations with Sport- service were satisfactory; there was a small loan negotiated from Sportservice by President Riley Allison during my years as manager of Sunland but it was small and there were no problems in regard to it. I resigned at Sunland to devote full time as President and General Manager of La Mesa Park, because I was a major stockholder there. During the years I divided my time between the two tracks, La Mesa had not made satisfactory progress. Business improved at La Mesa, and in the spring of 1966 most of the original directors of La Mesa joined with me in selling our interest in La Mesa. I moved to Denver in the spring of 1968 and shortly thereafter Ivan Thomas, General Manager of Centennial Turf Club, died. I applied for this position and was hired. Emprise is a major stockholder in Centennial Turf Club, you were a member of the board of directors and directed a lot of attention to the affairs of Centennial. As a result of this association, I have great admiration for your integrity, business ability and personal conduct. This admiration is shared by my wife and children, as a result of your visits in my home. Because of a minor health problem, I did not choose to continue as general manager at Centennial, despite two years of good progress. Nevertheless, I have followed very closely the business policies and practices instituted at Centennial under your guidance. As a result, Centennial is a strong, healthy business show- ing steady growth, in contrast to its earlier record of many years. Please be assured of my highest regard for you and your family. I am proud to have had the opportunity of being closely associated with you and hope to be helpful in the future. Sincerely, R. W. ERWIN. GEORGETOWN, Ky., May 31, 1972. Mr. MAX W. JACOBS, E.reeutive Vice President, Emprise Corp., Buffalo, N.Y. DEAR M&x: Pursuant to your letter of May 26 requesting that I indicate ni~ opinion concerning the reputation, integrity, and business and personal conduct of your family and business concerns, I would respond as follows: My family has been breeding and racing horses for some 30 years and I have reported racing for periodicals over the last 18 years. During this time I have visited, by reason of my family's horses racing there or in the course of report- ing assignments, the following tracks owned in part by Emprise Corporation or serviced by Sportservice: Woodhine, Finger Lakes, Detroit Race Course, Hazel Park, Thistledown, River Downs, Scarborough Downs, Latonia, Hawthorne, Miles Park, Bay Meadows, Golden Gate Field, El Commandante, Batavia and Audubon Raceways. My impression as a customer is that the food, drink, and service at the above tracks is good and indistinguishable from that provided by concessionaries at other tracks I have visited. PAGENO="0339" 1349 My impression of the racing at these tracks is that it generally is inferior and less enjoyable than racing at major tracks in New York, Los Angeles, and Miami. These tracks may be classified generally as minor racing operations, attracting lesser crowds which result in lower pari-mutuel handle, and con- sequent low purse distribution which necessarily fails to attract top horses on a day-to-day basis. That the racing at these tracks is less interesting to me does not, however, reflect on the management of these tracks. I must presume that minor tracks, because of less operating revenue, as a general proposition require more ef- ficient management practices. Members of the Kentucky State Racing Commission have told me they were impressed by the alacrity with which Miles Park and Latonia, the two Emprise owned Kentucky tracks have instituted policies and followed suggestions made by the commission. I have been introduced to Mr. Jerry Jacobs on one occasion, and I have con- versed with Mr. Max Jacobs several times during the last three years. Mr. Max Jacobs has been helpful in providing all data I have requested concerning Em- prise, Sportservice, and the Jacobs family. I have found Mr. Max Jacobs to be intelligent, courteous, and a businesman with whom I would not be hestitant to enter into a contractual relationship. I am familiar with allegations made and derogatory opinions expressed against the Jacobs family, which must be considered as integral to the current reputa- tion of the Jacobs' business concerns, but I have no personal knowledge of any wrong doing on the part of any member of the Jacobs family. Further, I have no reason at this time to believe that the Jacobs' continued association with racing as concessionaries could in any way serve to the detriment of Thorough- bred racing. Sincerely yours, KENT H0LLING5wORTH. THE THOROUGHBRED RECORD, Lexington, Ky., June 6, 1972. Mr. MAX W. JACOBS, Emprise Corp., 703 Main Street, Buffalo, N.Y. DEAR MAX: Thank you very much for your recent letter and your request for a letter indicating my opinion of your reputation, etc. As you remember, we first met over the phone in the spring of 1970 when Congressman Steiger first made his allegations about Emprise/Sportservice and we began to look into the situation. As you also remember, I met you and your brother at the Annual Meeting of the National Association of State Racing Commissioners in San Juan in the spring of 1971. On all occasions I have found you and your brother to be very personable and highly cooperative in answering our questions, and I would especially like to commend two of your people at Latonia, John Battaglia and the late Pat Kelly, for being so frank and cooperative during our rather limited investiga- tion into Congressman Steiger's charges. Although I don't believe we have ever done any business with you all directly, we have done some with Latonia, and our relationship there has always been amicable. And, while I am on the subject, I might add that Latonia carries a very nice reputation with local horsemen as one of the most businesslike opera- tions among the nation's small tracks. Thank you again for your nice letter, and I hope that whenever you or Jerry come to Kentucky you will do us the honor of joining us for dinner. Sincerely, ARNOLD KIRKPATRICK, President/Publisher. JIM ELLIS OLDsMoBILE, INC., West Memphis, Ark., June 5, 1972. To Whom It May Concern: It has come to my attention that the reputation of Emprise Corporation and the Jacobs family has been called into question due to hearings held by a Sub- committee of the House of Representatives in Washington, D.C. PAGENO="0340" L35Q My association with the Jacobs family dates back some thirty-five (35) years. As a stockholder, officer and director of Southland Racing Corporation, I have been closely associated with Mr. Max Jacobs and Mr. Jeremy Jacobs for the past three and one half years. I have always found the Jacobs family to be honest, sincere, conscientious, hard-working people. To my knowledge, their business as well as personal conduct has always been exemplary. They have to be the greatest benefactor the sports world has ever had. JAMES C. ELLIS. JUNE 5, 1972. To TV/torn It May Concern: I, Freddie N. Bollinger, a director of Southland Racing Corporation, West Memphis, Arkansas, have known Jeremy Jacobs since 1968. With reference to all matters of which I am familiar, he has always conducted himself as a person of the highest integrity. As a director of Southland Racing Corporation, he has never asked me to do anything except use my best judgment for the benefit of the corporation. He has never asked me to vote a particular way on any matters presented to the board. My opinion concerning his reputation as to business matters and personal conduct is the highest, and he can be trusted. FREDDIE N. BOLLINGER. RACING MANAGEMENT CONSULTANT, INC., Forest Hills, N.Y., June 6, 1972. To TVlIom It May Coizcern: Inasmuch as the reputation of the the late L. M. Jacobs and his family are in question as well as the integrity of the company founded and prudently operated by them for well over a quarter of a century, due to recent hearings held by a Sub-committee of the House of Representatives in Washington, D.C. I feel that it is the duty and responsibility of those persons who knew L. M. Jacobs as to his character and business ethics. It is because of this that I wish to unequivocally state that I personally knew L. M. Jacobs, his family and have had business contacts with his company for the past fifteen years and that during this time I have found them to be upstand- ing, responsible people and a credit to their community. Also, that I have never heard or known of any practices carried on by L. M. Jacobs, his family or company that were not honorable and above reproach. Very truly yours, RONALD H. MOONEY, President. FLEISHMAN-HILLARD, INC., St. Louis, Mo., June 5, 1972. Mr. MAX W. JACOBS, Entprise Corp., Buffalo, N.Y. DEAR MAX: I am very happy to respond to your letter of May 26 with reference to your late father Lou Jacobs. I first met Lou Jacobs about twenty years ago when Missouri Sportservice began to do business with the Cardinals and Anheuser-Busch at the old Busch Stadium. I recall personally going to Buffalo to inspect the operation there and spending several days at the home of your father. Our firm also did business with Mr. Jacobs and Sportservice when they operated the airport facilities in St. Louis. In all of my dealings and in all of my associations with your late father and his brother, I have found the operation to be conducted on the highest levels and with careful attention to details, quality and service and with unquestioned integrity. Unfortunately, I have never had any association with the Emprise Corporation which I assume is the successor to Sportservice. But, I can certainly attest to the relationships which I personally had with the Jacobs brothers. With every good wish. Cordially, ALFRED FLEISIIMAN. PAGENO="0341" 1351 HEATH & SCARBROUGH CONSTRUCTION Co., INC., West Memphis, ~ June 2, 1972. Mr. JERRY JACOBS, President, Eni.prise Corp., If itffaio, N.Y. DEAR JERRY: I have been regarding the investigation of Emprise very lightly and considering it as a means of harassment by a disgruntled minority simply because of personal reasons and the fact that they were in a position to do so, however, after reading the testimony of the "gentleman" from Louisiana and knowing from personal experiences how fraudulent it was I was suddenly shocked into reality that other testimony was probably as fraudulent hence the follow- ing facts. * First of all let me assure you that I do not question the reputation or integrity of the Jacobs family or the management of Emprise and consider both above reproach. As a family I consider you to be a normal, typical American one with love and respect existing where it should. Secondly as Secretary of Southland Racing Corporation I want to express my apprecintion for the confidence you have placed in me and other directors in that we have had complete control of the management of Southland, and you as a major stockholder have never questioned our policy or decisions. Finally Southland is considered the major industry in West Memphis and the local officers and directors have been in position to receive the thanks and credit for the many liberal contributions that Southland makes to the various com- munity projects, and of course this is only possible through the generosity of Emprise and the Jacobs family. You have my deepest sympathy for the persecution that you and your family have unjustly endured and if' I can ever be of assistance to you in any way please let me know. Sincerely yours, J. A~ HEATH FIRST CALIFORNIA Co., INc., Kansas City, Mo., June 1, 1972. Mr. JERRY JACOBS, ```` * President, Empri~e Corp., * Buffalo, N.Y. Du~~a JERRY: I have been aware, in recent weeks, through the news media, of the obvious campaign on the part of the news media and others to question the integrity of you and Max and your late Father, as well as Emprise Corporation, in your business dealings with others. Knowing you as 1 do, I know .this must be a continuing .source of grievance and distress. Therefore, I w-anted to write and assure you that' we at First California Company, Inc., and/or Midland Securities Co., Inc., and those of us at Fortuna Corporation are conscious of your concern and would like for you to know that in all our business dealings with you and/or Emprise Corporation, we have only the highest regard for your integrity and* personal conduct in all your business dealings with any of the three above mentioned entities. I u-ant you to know my personal feelings and I am sure I am joined by many, many other people across the country who feel as I do. I shall look forward to a continuance of our association. Sincerely, M. J. CORN, President. SKIRnALL PRonucTIoNs, Century City, Los Angeles, Calif., May 5, 1972. Mr. MAX W. JACOBS, Bnipris~ Corp., Buffalo, N.Y. DEAR MAX: I have read with great concern of the problems that have arIsen over the reputed associations of your late father and I am tremendously concerned. As you know, my brother Bill and I have had a long association with Sport- service, in that the company had the concessions at our drive-in theatres. While my brother Bill handled the theatre chain, it so happened that your father and I became rather close friends. The fact of the matter is he used to call me PAGENO="0342" 1352 very often on Sundays just to chat and talk about nothing in particular except about conditions, generally, on the West Coast. I bad a feeling at that time that Sunday was a lonesome day for him and he called me because he had nothing better to do. In all the years we have done business with Sportservice there has never been a single incidence of which I know where there was any kind of a dispute, or where we ever felt that we were not treated with complete integrity and fair~ ness. I had a personal experience when Sportservice and we entered into a joint venture in operating the concessions at the Convention Center and Theatre for the City of San Diego. It was not a successful venture but the experience with Sportservice could not have been any better. It seems impossible to me because of the relationship that we had that the accusations against your father, and later on your brother and yourself, should. be true. I am sure that my brother Bill has had much more personal dealings with Sportservice than did we and will be happy to testify to the same things t~ which I have testified. I might add one thing: I have never met a person who did business with your father who did not say that his word was better than any contract that any lawyer could write; that in his business relationship his integrity was never- doubted! With kindest regards, I am, Sincerely yours, JACK H. SKIRBALL, General Manager. GENE MESH Co., L.P.A., Cincinnati, Ohio, June 5, 1972.. Mr. MAX W. JACOBS, Eceecutive Vice President, Emprise Corp., Buffalo, N.Y. DEAR MAX: The advent of the recent congressional hearing into the character and integrity of your family as well as the Emprise Corporation certainly stunned many of your friends. My own exposure to you and your family both: through Israel Bonds and through a mutual Cincinnati friend has only led me to believe that you have lived up to your responsibilities in all areas, and have, in fact, discharged your obligations, both to your own business community and to your heritage with great diligence. The matters which come to mind at first reference concern the State of Israel and your unrelenting concern for Israel's welfare. Through the use of your family name and your pocketbook you have set guidelines for. all of us: in that regard. You have my best wishes as well as the best wishes of the entire Cincinnati community and our sincerest hopes that you will overcome this immediate problem. Very truly yours, GENE MESH.. R. C. CRI5LER & Co., INC., Cincinnati, Ohio, June 5, 1972. Mr. MAX JACOBS, Eniprise Corp., Buffalo, N.Y. DEAR MAX: I was out of town most of last week and this is the first opportunity I have had to reply to your letter of May 26. I have read the story in Sports Illustrated as well as those in The Wall Street Journal and local publications. It certainly seems to me that most of the allega- tions are based on ancient history and your main problems as emphasized by Sports Illustrated is based upon "associations" and the vague implications in connection with same. I can state without reservation that my association with Emprise involving the purchase of the majority interest in Kentucky Jockey Club, Inc., has been coni~ pletely straight-forward and extremely businesslike. The whoie thing was acconi- pished through your attorney, Robert Dreidame and completed within 24 or 48 hours to the satisfaction of all parties concerned, namely the Bishop Estate and Montgomery Fisher. PAGENO="0343" 135.3 I would also like to say that I have enjoyed being a director of the Kentucky Jockey Club which has been greatly improved since Emprise took control and is now one of the outstanding racing plants in the country. Very sincerely yours, R. C. CRI5LER. UNITED JEwIsH FEDERATION OF BUFFALO, Ixc., Buffalo, N.Y., Ju/ne 7, 1972. Mr. MAX W. JACOBS, Buffalo, N.Y. DEAR MAX: I am responding to your letter of May 30, 1972. I'm glad to do so because your family has supported the United Jewish Fund campaign for many years and particularly in periods of stress when their gifts were increased tremendously to meet the emergencies existing at the time. This set an example for others and helped us materially in gaining our objectives. In 19d7, and again last year and this year, your family's gifts were exemplary. In addition, I want to indicate to you how much we all appreciate your participa- tion and that of the members of your family in various other important community activities. You have added much to our deliberations in trying to meet more eff cc- tively many of the problems facing community service agencies. Your interest and participation in the work of some of our national organizations has also been very helpful. Your willingness to give time, effort and funds for the betterment of the community, I know, has earned you the respect of people who come in contact with you and has been an inspiration to our upcoming young leaders. It has cer- tainly merited the appreciation of our people who benefit by the services sup- ported. by the Jacobs family. In my personal contact with you, I have admired and respected your honesty, integrity and sincerity, and appreciated the straight-forward manner in which you approached important issues. With best regards, Cordially yours, SYDNEY S. ABZIJG, E~recutive Director. OMAHA, NEBR., June 2, 1972. Messrs. JERRY and MAX JACOBS, Emprise Corp., Buffalo, N.Y. DEAR JERRY AND MAX: I have been somewhat surprised, and I must say, a little infuriated at the recent attacks in the press and by a member of Congress from Arizona on your late father and my good friend, Louis M. Jacobs. Like so many other people in the sporting and business world of America, I knew your father as a man of high character, and one who had the implicit trust of everyone with whom he did business. In some two decades of dealing with your father, I never once found him to be unreasonable in working out a contract or in modifying an existing agreement. My association in racing for more than thirty years as one of the founders, and a director of the Thoroughbred Associations of America brought inc in contact with many of the leaders in this sport who, likewise, did business w-ith your father. All had the same high personal regard for him as I did. His befriending of men like Connie Mack, Bill Veeck and others in baseball is evidence of his uni- lateral affection for people in every walk of life. I know, too, that he was a very charitable man and gave freely to every worthwhile cause. It would be well to look behind the people w-ho are making the attacks on your father and find what is their ulterior motive. It could well be that it is some dis- appointed competitors who were unable to cope with his ability and his generos- ity in the business field. Let me assure you, Jerry and Max, you can be proud that he was your father, and proud of the heritage he left behind. It has been a source of prjde to me that I even knew him. Sincerely, J. J. I5AAC5ON. PAGENO="0344" 1354 VELVET O'DONNELL CORP., Livonia, Mich., June 5, 1972. To Who;n It May Concern: As long ago as 25 years, this writer, as the head of a small business, had been doing business with Mr. L. M. Jacobs in servicing the local Sports Stadium with peanuts and potato chips. We had always found that company to be honest and fair in all their dealings with us. The writer is also the General National Chairman of the United Jewish Appeal and in the last few years has been closely associated with Mr. Max Jacobs. I have found him to be most generous and personally involved in the welfare of the needy and underprivileged. I felt this was very unusual for a young man of his age and he is to be considerably admired louis ~ ery truly PAUL ZUCKERMA~ GALLOUPR'S POINT, SWAMPSCOTT, MASS., June 6~ 1972. Mr. MAX W. JACOBS, .. Em'eutive Vice President, . . . Buffalo, iv ~ . . . . . .. DEAR MAX I am both surprised and chagrined with recent stories of your organization arid the current hearings being held in W'ishington Throughout the years I ha~ e had the highest respect for your father and your organization on all les els He w as helpful to me as he was to many others ri the sports field and therefore am unable to understand the current attacks My w ork at most of the professional baseball clubs I have been associated w it'i (Milv~aukee Brewers Cleveland Indians St Louis Browns Baltimore Orioles Toronto Maple Leafs and the Chicago White Sox) placed me in close contact with concession operations `md never in all that time did I hame any reason to doubt his integrity. That he (and your organization) is n~w being placed in an unfavorable light disturbs me and that is what has prompted me to w rite If there is anything I can do, please let me know. Sincerely, RUDIE M. SCHAFFER. CAHOKIA DowNs, Lye., June 6, 1972. Mr. JERRY JACOBS,. Pics~dent llpoitscrnce Inc I uffalo N I DEAR Mr J &COBS After reading many nems sp'mper articles regarding Emprise Corporation in the last few months I a~ an individual find it m ery disturbing to note that they ful to publicize the m cry fine things you have done for the sports irenas in the country I can s'u~- is ithout resei m ation that I h'mm e been `issociated mm ith Sportserm ice here at Cahokia Downs for the past ninteen years, and have nothing but praise for their operation. At no time during my tenure have I received. anything from them but their full ëooperation in every respect. I would like to point out a few of the fine things that I think you have done foi the sports w orid `md `ilso the people of this country 1. Employment-no doubt you have thousands of people on your payroll all over the country. 2. Taxes-no doubt you have paid millions in taxes-not only federal but to perhaps many states individually where you operate. 3. Supplies-you have spent in our area alone a great deal of money on merchandise. 4. No doubt many arenas would not be in business today if your organiza- tion had not helped theni when they had difficulty. I think that when an organization who has at the head of it astute knowledge- able people are not encouraged to grow or progress along business lines then this country in my opinioii has a very bleak future. PAGENO="0345" 1355 I wish you every success in any venture that you undertake and hope that everyone recognizes the above facts-which I am sure are just a few of the fine things are being done for people as well as organizations. Yours very truly, ANN DETACHEMENDY, Seeretary-Gcn era 1 Manager. GREATER BUFFALO INTERNATIONAL AIRPORT, July 21, 1972. FEDERAL AvIATION ADMINISTRATION, National Capital Airport, Tfashington, D.C. GENTLEMEN: Regarding Sportservice Corporation, please be advised of the following facts: I. The undersigned has been employed at the Airport for approximately 18 years and during that period, has had the opp.ortunity to observe the operation of Sportservice Corp. at this facility. 2. During that period of time, the quality and performance of the food and the service rendered has been excellent. 3. The cooperation between this Airport and Sportservice, especially with their supervisory personnel has been excellent, also. 4. As far as this Company's ability to handle the food and beverage con- cession at this airport, there has been little or no problem in this area. When- ever a situation arose which required remedial action, it was accomplished forthwith to the satisfaction of the Authority and the complainant. Finally, I would not hesitate to recommend this Company to be given the opportunity to perform this identical type of service at any airport or any other entity that may be interested in their services. Sincerely, RIchARD F. REBADOW, General Manager of Airports. GREATER BUFFALO INTERNATIONAL AIRPORT, March 20, 1.970. Mr. WILLIAM KELLY, Vice President, Director of Airport Operation, ~S~portservice Corp., Buffalo, N.Y. Dr~n Mn. KELLY: The undersigned has been employed at the Greater Buffalo International Airport for the better part of two decades. In that time we have had the opportunity to work closely with and evaluate your organization and personnel. We have never had any cause to be concerned with your operations. Your reputation and service, over the years, has been excellent. `We compliment your company for establishing this fine record. Sincerely, RIcHARD F. REBADOW, General Manager of Airports. UNITED Am LINEs, Scptciu 9cr 19, 1909. Mr. WILLIAM KELLY, Vice President, Air Terminal ~S'ervices, Buffalo, N.Y. DEAR Mn. KELLY: As you well know a fire broke out in our Salt Lake City flight kItchen on September 3. The damage was sufficient to prevent our con- tinued operation there and the repair is being completed today so that tomorrow we can resume operation from that facility. Dale Peak has told me of your unwillingness to accept nny rental from our com- pany for the kitchen facilities which you made available to us the day of the fire. I don't know that I can tell you how impressed I ama with the attitude of your company and the spirit of all your employees. Your people and ours worked PAGENO="0346" 1356 together since then with no friction or antagonism. Alex Kallimanis is truly a wonderful person to work with and our people respect him greatly. Thank you, Mr. Kelly, for helping us. If ever there is an opportunity we would like to reciprocate in some way. Sincerely, DAVID H. ROBERTSON. UNITED Aix LINES, Chicago, Iii., September 23, 1969. Mr. JERRY JACOBS, President, Sportservices, Bvffalo, N.Y. DEAR Mx. JACOBS: Our Regional Vice President for the Mountain Region has just advised me of the prompt and generous assistance provided to us by Air Terminal Services at Salt Lake City when our flight kitchen was temporarily put out of service due to a fire. It is very evident your people went above and beyond the general expectations of a business relationship in order to provide us with much needed assistance. For this we are deeply appreciative. Please accept my personal thanks. We look forward to a continuation of this fine relationship in the future. Sincerely, B. F. DORSEY, Vice President, Sales and Services. UNITED Aix LINES, Chicago, Iii., September 24, 1960. Mr. WILLIAM J. KELLY, Director, Airport Operations, Sportservice Corp., Buffalo, N.Y. DEAR BILL: I have just recently returned from Salt Lake City where I was gratified to witness one of the finest examples of unselfish cooperation I have ever seen in my 37 years in the food business. I guess that only in times of emergency do you really find out the type of character people have. Dale Peak, our Manager at Salt Lake informs me that the day that we had our Flight Kitchen fire, Alex Kallimanis volunteered to assist by making the facilities in his kitchen available for our personnel to use in the preparation of our in-flight service. The transition was so smooth that within 24 hours the food service out of Salt Lake was back to normal and none of our passengers had any idea that our Flight was out of operation. In addition, we understand that neither you or Alex will accept any remuneration for the use of your premises. This I think you should reevaluate. In conclusion, If we were to write a plan for use in tl1e event of a fire in a Flight Kitchen, we couldn't think of a better one than the way the situation evolved. While I am sure, Bill, you will hear from others, please accept my heartfelt thanks and those of the rest of us in the Headquarters office for the spirit in which your people came to the front for us when we really needed help. If you feel it desirable, I am providing you with another copy of this letter for you to send to Alex with my compliments. With kindest personal regards. Sincerely, B. L. SENN, Director, Dining Service Planning. UNITED AIR LINES, Salt Lake City, Utah, September 16, 1969. Mr. ALEX KALLIMANIS, Manager, Air Terminal Services, Salt Lake International Airport, Salt Lake City, Utah. DEAR MR. KALLIMANI5: You have no idea how much United Air Lines appre~ elates the wonderful cooperation on your part and on the part of your company, Air Terniinal Services, for making available to us the facilities to carry on the planned meal services scheduled for our Salt Lake City flight operations. The mere fact that our Flight Kitchen personnel have been able to work in harmony with your employees, is a tribute to you personally for the leading and PAGENO="0347" 1357 directing of our important Salt Lake City International Airport fine services offered to the public in both the Kitty Hawk Room and the Coffee Shop. I am providing a copy of this letter to Commissioner Conrad B. Harrison, with the request that it be read, if possible, at a City Commission meeting, for I believe that you not only have rendered United Air Lines a service, but also made a tangible contribution to the community because you made it possible for us to maintain the inflight service which we advertise and have sold to the public. I should like also to compliment your organization for enrolling you as a member of the Salt Lake Area Chamber of Commerce, and appreciate your loyal attendance and participation in the affairs of the Transportation Council. Sincerely, B. D. PEAK, Manager, Customer Services. DEPARTMENT OF TRANSPORTATION, Presno, Calif., March 19, 1970. i~Ir. WILLIAM J. KELLY, Vice President, Air Terminal Services, Inc., Buffalo, N.Y. DEAR MR. KELLY: Attached is a copy of a letter dated December 29, 1969 to Roy B. Bayless, Airport Manager, Riverside, California in answer to his inquiry relative to the character, financial stability aud performance of Air Terminal Services, Inc. Since April 1, 1962 when your firm started operating the food and cocktail lounge services concession in the passenger terminal building at the Fresno Air Terminal, this office has received numerous similar inquiries from other air- ports around the country and it has always been my pleasure to respond to such inquiries in the same general manner as that given to Mr. Bayless. This office has never experienced any serious difficulties with your firm's operation from Buffalo when any problems did arise. Sincerely, WILMER J. GARRETT. A.A.E., Director of Transportation. DECEMBER 29, 1969. ~Ir. Ro~ B. BAYLESS, Airport Manager, Riverside Municipal Airport, itiverside, Calif. DEAR Roy: As a follow-up to our recent telephone conversation, I submit the following: Air Terminal Services, Inc. is a wholly-owned subsidiary of Sportservice, Inc. of Buffalo, New York and has held a lease agreement with the City of Fresno for the operation of a restaurant and cocktail lounge in the passenger terminal building at the Fresno Air Terminal since April 1, 1962. ATS acquired this concession through competitive bidding and its sole cost and expense, made equipment and other installations in excess of $120,000. Our experience with this firm has been most satisfactory as they have been an excellent tenant which pays its bills and utility charges right on time and provides a good quality of food and beverage service at this airport. I would have no hesitancy whatsoever in recommending this firm be given every ~consideration in negotiation or bidding procedures to effect a similar facility on the Riverside Airport, and if you execute an agreement with this firm, I am -certain that your experience with ATS will prove as satisfactory as has that of the City of Fresno. Sincerely, WILMER J. GARRETT, A.A.E., Director of Transportation. READING MUNICIPAL AIRPORT AUTHORITY, Reading, Pa., March 20, 1970. Mr. WILLIAM J. KELLEY, Vice President, Sportservice, Inc., Buffalo, N.Y. Dear BILL: I have been in the aviation business for over twenty years, and during this period of time, I have encountered many companies and organiza- tions that have made proposals to do business with us. Some were good, some -were bad, and there were sonie that I have other names for. PAGENO="0348" 1~3i58 About ten years ago I first learned of Sportservice, Inc., and what they had to offer. At that time, as you know, we were interested in paid parking. S~veral companies were contacted, and after much investigation and many conferences, as you remember, Sportservice was selected to serve at the Youngstown Munici- pal Airport, of which I was the Manager at that time. I found over the years that every request and condition that was either agreed upon in writing or by phone was honored by your company. The per- sonnel were courteous always kept in uniforms, and your relationships w~itl1 the local communities were always of the highest. Naturally, when I became Manager of the Reading Municipal Airport, I again felt that your company should be given some consideration in creating paid parking at this airport. However, in order to serve the community properly, several other companies w-ere also called. Again, through the well-mannered presentation of the principals of your organization. Sportservice was awarded this project also. Again, I wish to commend your company for the rapid completion of the parking lot, the good supervision of the contractors so as not to disrupt nor- mal aviation actiivties, and again, as I sit and look out my window at the park- ing lot, I am well pleased. I wish at this time to say "thank you" for an out- standing contribution and service to this community. There are two more parking lot programs that are being thought of in Reading, and I am hoping your company will be interested. Thank yOu very much. Very truly yours, DONALD F. GLASS, Airport Manager. AIRPORT DEP &RTMEi~ I ~liilwav1~ee County, T'Vis., March 20, 1970. Mr. F. W. Ryox, Manager, Wisconsin Sportservice, Inc., General Mitchell Field, Milwaukee, Wis. Dear Mr. RYON This letter is in response to a memo from Mr. Kelley to you indicating that Sportservice's basic reputation is coming under fire and the consequent intention of the company to solicit letters from a number of Sportservice's landlords around the country commenting upon their reputation and the manner with which they do business. I have been Airport Director in Milwaukee for only two years, and, not having any prior association with Sportservice, my remarks must be viewed in this light. Your company, on the other hand, has been doing business at General Mitchell Field for nearly 15 years as the parking lot and restaurant and gift shop concessionaire, and to the best of my knowledge its reputation (as distinguished from quality of service) has never been under question locally. In 1967, Sportservice invested over $400,000 in a major remodeling of the restaurant facilities and is just now completing another $100000 remodeling of the adjacent gift shop facilities. The overall improvement in facilities and image has also been matched by a continuing improvement in the level of service rendered to the traveling pbblic, and I can personally attest from a review of the public comm~nt cards completed by your patrons that those cards complimenting Sportservice for either its food or service, or both, out- weigh the critical cards by a factor of at least 4, and I think this is a meaningful point. With regard to Sportservice's present reputation and integrity at the airport, I consider the company to be hOnest and straightforward, and at no time have I personally detected any attempt to be otherwise. In the last two years. my relationship with your organization has been excellent, and I have no rea- son to feel that the future should bring anything to the contrary. If the man- agement of balance of your organization is the equal of its Milwaukee unit, I am certain you will weather this storm without difficulty. Very truly yours, ROBERT S. MICHAEL. 4 irport Director. PAGENO="0349" 1359 RIJoDE ISLAND Divisrox OF AERONAUTICS, March 20, 1972. To TV/tom It May Concern: This will certify that Air Terminal Services, Inc., has operated the restaurant in the T. F. Green Airport Terminal Building for a period of over five years, during which time I have become familiar with the operations of this company as they apply to an airport facility under my jurisdiction. On the basis of close personal observation and through other reliable sources, I have found the firm reputable to do business with, its employees and representa- tives to be of good character, and the attitude of its management to be fully cooperative. ALBERT R. TAVANL Administrator of Aeronautics. [Aired by Tom Decker, 6 :15 p.m., Mar. 12 1970; WROC-TV] We'd like to take a moment this evening to pass on a "personal observation." A headline can represent a succinct method of disclosing the main issue of a story-that is its prime purpose. But a headline can also be deceiving and at times damaging-when viewed by a person who does not go beyond the headline- and forms a judgment on nothing more than a brief phrase. A case in point-a headline which appeared in last Saturday's I)emocrat referring to the Finger Lakes racetrack. It reads: "Track Backer Linked to Mafia." The "backer" being the Emprise Corporation-concessionnaire at Canan- daigua's thoroughbred track and a co-sponsor of the new track ownership plan. Emprise Corporation is a conglomerate which loans money to race tracks, major and minor league baseball teams, professional hockey and basketball clubs. It also has concession contracts with these professional sporting enterprises. Its dealings with major league baseball clubs include Baltimore-St. Louis- Cleveland-Montreal-Detroit-Seattle and Kanas City. Closer to home-"Sportservice", a part of the Emprise conglomerate-has loaned pre-season money to the Red Wings in recent years-so that our com- munity-owned baseball club could open spring training-could open the season and the ball park. Sportservice has been paid back by the Red Wings-from their share of the concession-at NO interest. This then, is a brief description of the operation of this conglomerate known as the Emprise Corporation . . . financially aiding and operating with major and minor professional sports enterprises in cities throughout the country. Now then, about this headline "Link with Mafia." A Republican Congressman from Arizona-Sam Steiger-who is a breeder and trainer of horses-wants Emprise barred from dog and race tracks in his state. He contends that a BCI report received from the New York State police in Albany, indicates that Emprise has been investigated regarding alleged ties with hoodlums-but Rep. Steiger, added that the person from whom he received this report-G L Infante, assistant deputy superintendent of the BCI in Albany- said: QUOTE "to my knowledge, no prosecution has ever developed." According to the article, Steiger, also said that the Emprise Corporation loaned money to three directors of Hazel Park, a race track in Michigan. BUT (and here is a matter of alleged guilt by remote association) Steiger in the same breath brought up the name of a 4th director who was indicted by a Grand Jury for extortion and resigned the next day-an indictment, NOT a conviction, concerning a man who was not involved with this financial dealing by Emprise. It would be naive to suggest that gambling interests are not drawn to sporting events. It may not be right, but it is fact. However, to imply that organization such as Emprise, which is openly operating with and aiding major, bona-fide sports enterprises-is guilty of Mafia links because of remote and unproven alleged associations-is discrediting a business concern which is obviously re- spected by many of the nation's largest sporting enterprises. The correlation of the Red Wings being guilty of pandering to hoods because of its tie-in with Sportservice-which is a part of the Emprise Corporation-would be not only odious but downright ridiculous. PAGENO="0350" 1360 As we said at the outset-a headline can be a dangerous thing-when the story it highlights contains merely innuendos and suggestions of "taint" by far reaching associations. SAN DIEGO BASEBALL Co., July 26, 1968. Mr. JAMES R. BEST, Chief, Office of Special Investigations Department of Revenue, Revenue Building, Little Rock, Ark. DEAR MR. BEST: Thank you for your letter of July 23, relative to Lewis M. Jacobs. I have known and been in very close contact with Mr. Jacobs and his con- cession operation for the past twenty-five years. Sportservice is the premier concession operation in sports. Mr. Lewis Jacobs' personality, honesty, integrity and character are above reproach. He is an outstanding citizen, as well as an outstanding business man. The State of Arkansas is indeed fortunate to have Mr. Jacobs as a business man in their State. Very truly yours, EDDIE LEISHMAN, Ceneral Manager. CONNALTGHT PARK JOCKEY CLUB. Aijlmer, Quebec, Canada, March 17, 1970. Mr. JERRY JACOBS, Sportservice Inc., Buffalo, N.Y. DEAR JERRY: In evaluating our position at the end of our 1969 fiscal period which is under review at the present time it has come to our attention that we are now in the twenty-fifth year of our association with Sportservice and we would like you to know how much we have appreciated your cooperation and from time to time, your financial assistance during that period. During that time we have been associated with you as concessionnaire for our many arena ventures such as the circus, rodeo, ice show and hockey attractions and for the past fifteen years in our night harness racing venture. This latter venture has become highly successful, particularly during the winter months, when you had to learn new food techniques as we did operating techniques. To attract the growing numbers who now realize that this sport can be presented on a year-round basis. We are probably the most northerly operation to conduct such an operation successfully. We look forward to many more years of cooperation with your organization and trust that you will have the opportunity of inspecting our new facilities in the near future. Sincerely yours, FRANK GORMAN, Secretary-Treasurer. HOUSE OF REPRESENTATIVES, Wa8hington, D.U., ,T'une 12, 1972. Mr. MAX W. JACOBS, Executive Vice President, Ern~prise Corp., 703 Main Street, at Tupper, Buffalo, N.Y. DEAR MAX: I am pleased to advise you that it is my opinion that your repu- tation for integrity and that of your father and brother in my community are good. My opinion has been formed for `a number of years now as a result of numerous conversations with the people in my community that have known you and your family for a longer period than I have and people with whom you have worked with closely over the years. I was particuiarly impressed with the appointments that you have made in the operation of your businesses in the Cincinnati area. The men that your con- cern selected to operate your businesses `in the greater Cincinnati area have enviable reputa'tionu and are excellent members of our overall community. Your associates in Cincinnati are men of the highest caliber and this speaks well for your reputation. PAGENO="0351" 1361 I am also aware that your concern was awarded the concession francl~ise at the Kennedy Stadium in Washington. A close personal friend of mine served on the Armory Board at the time of the award of the contract and he shares my opinion of you and your family. Sincerely yours, DONALD D. CLANCY. CINcINNATI, Oi-iio, June 12, 19~72. To Whom It May Concern: I became acquainted with the Jacobs brothers, Marvin, Charlie and Louis M., all of whoni are now deceased, iii the 1930's; and, since that time, I have had many dealings with all of them. They l1ad excellent reputations for honesty, integrity and fair dealings, and their personal conduct was above reproach. After Marvin and Charlie passed away, Lou, as I called him, conducted the operations of Sportservice and Emprise Corporation, during which time I had close personal contact with him via telephone and in person. Because of the many concession contracts with Major League Baseball Clubs, Lou was very knowl- edgable about the various baseball operations anti baseball generally, which I dis- cussed with him quite frequently. He would never betray a confidence, but was always available for advice. I considered him a trusted personal friend and miss him very much since his death. His business was his only hobby. My dealings with Lou Jacobs and his organization over a period of years has been excellent and they have been very cooperative in every respect. They have done many things beyond their contractual obligations. NoRTIIvILr~E Downs, ~Yortiiville, illicIt., March 17, 1970. Mr. JEREMY M. JAcoBs, President, Sportservice, Inc., Buffalo, N.Y. DEAR JERRY: Your company has been our caterer and concessionaire for ap- proximately twenty-six years and would like you to know that I have always found you personally to be reliable and trustworthy and your company hats always been fair in its dealings with me for many years and look forward to a long term continuing relationship. It is therefore, my pleasure to have renewed our concession agreement with you for eighteen more years, as I consider you and your comnany to be the top concessionaire in the business. Kindest Personal regards. Sincerely yours, JOHN J. CARLO, Ewecutive Manager. RIDEAIJ CARLETON RACEWAY, Gloncester, Ontario, January 10, 1969. Mr. JERRY JACOBS, Sporiservice Corp., Buffalo, N.Y. DEAR MR. JAcoBs: Just a short note to say thank you for the 1968 staff of Rideau Concessions at Rideau Carleton Raceway. Under Mrs. Russell and Mr. Bechervaise there was nothing butt complete cooperation and the adequate representation that a firm such as yours deserves. Wishing you the very best in the New Year, Sincerely, WREATH ROBERTSON, Secretary to the General Manager. EVERLOCK DETROIT, INC., Sterling Heights, Mich., October 7, 1969. HAZEL PARK HARNESS RACING ASSOCIATION, INC., Hazel Park, Mich. (Attention: Mrs. Frances Yost, Sportservice.) GENTLEMEN: This is in appreciation of services rendered at our annual outing last Friday, October 3, 1969. We, at Everlock Detroit, Inc., wish to extend our sincere thanks for the spe- PAGENO="0352" 1362 cial con~ideration extended at our outing. As in the past, your employees have gone beyond the normal call to make our gathering a smashing success. Again we thank you and your staff for a memorable evening. Yours truly, JIM EN5LIN, Quality Control Manager. During the lean years for minor leage baseball in the 1930's and 40's, the Jacobs brothers financed many minor league operations. In fact, without the financial assistance from Sportservice, many minor league clubs would have closed up, as they were not in position to secure bank loans. In return, the op- erators would contract with Sportservice for their concession operations. Lou Jacobs said many times that he made bad loans to good people; also, that one could not sell food and drinks in baseball parks that were closed. This indicated the confidence Lou had in baseball, as these loans were made without collateral. I might add that I did not at any time ever borrow any money from Emprise, Sportservice or from any member of the Jacobs family. Sportservice is, and has been, to my knowledge, the largest baseball conces- sion operator for more than thirty years. The fact that they now operate in nine major league baseball parks indicates they are doing a good job. They have experienced persoimel and have a fine organization, which is now headed by Jeremy Jacobs and Max Jacobs, who spend all of their time directing the organization and its operations. I have known Jeremy Jacobs and Max Jacobs for many years, but I have not had any contractual relationship with them. People who have bad dealings with them tell me they operate and conduct themmives in the same fine manner established by their father. As a consultant for the Cincinnati Reds, I sat in on all meetings listening to presentations by various concessionaires. Following these meetings, I made a written report to the officials of the Cincinnati Reds recom- mending that the concession contract at the Riverfront Stadium be negotiated with and awarded to Sportservice, which was done a short time later. If any further information is desired, please advise. Very truly yours, W~r. 0. DEWITT. NEW YoRK, N.Y., June 7, 1.972. To TV/tom It May Concern: I know the Jacobs family and Emprise Corporation for some 17 years. I am proud to number the Jacobs family amongst my closest personal friends. Their honesty, integrity and reputation for both personal and business dealings is certainly of the highest. I am also very well acquainted with Emprise Corporation and I know this business is without question highly ethical and honest to a fault. I unhesitatingly vouch for both the Jacobs family and the Emprise Corporation. Very truly yours, Iuvrxo GOLDMAN. Mr. MuRPHY. I-low about the affidavit from Mr. Lockwood? Is there any objection to that being admitted into the record? It will he admitted. (The affidavit referred to follows:) AFFIDAVIT STATE OF NEW YORK, County of Erie, ss: I, Miilington Lockwood. being first duly sworn state as follows: 1. I am employed by Emprise Corporation as its Chief Accountant and my duties include the internal auditing of Emprise Corporation and its subsidiary companies. PAGENO="0353" 1363 2. I have searched the vault record books of Emprise Corporation, Sport- service Corporation, and its subsidiaries which include the records of all docu- ments pertaining to notes, contracts, mortgages, lines of credit, bank guarantees, investments and other legal documents. These records go back to the late 1930's and are all inclusive to date. 3. I have also searched our notes, loans and investment files. This would in- clude a list of collateral held, records of payments, records of re-payments, interest charges. These records are maintained from the later 1950's to the pres- ent and include all records of Emprise Corporation, Sportservice Corporation and its subsidiaries. I have also searched the detail account list of the assets and liability records maintained by the financial statement department. 4. I have searched our bank files and bank resolution files, our minute books going back to the original date of incorporation of Einprise Corporation, Sport- service Corporation and its subsidiaries. 5. I have interviewed certain key employees who have had a close working knowledge of the books, records, and transactions, of Emprise Corporation, Sport- service Corporation and its subsidiaries for the past 25 years. I have also searched all other miscellaneous records pertaining to corporate transactions, including the very detailed records kept by the financial statement department, accounting department and legal department. These records include: (a) A detailed schedule maintained by the financial statement department showing the details of all assets, liabilities, etc. (b) A vault record book which lists all documents, notes, contracts, legal instruments and investments, which are sent to the Emprise vaults. 6. In my search of all of the records mentioned above and my interview of key personnel, I have not discovered nor have I found any reference to any of the following: (a) James (Doyle) Plumeri, (b) Frank Carbo, (c) Johnny Dio, (d) Russell Biifalino, (e) Gerardo Catena, (f) Joseph Cataldo, (g) Anthony Corallo, (h) Moe Dalitz, (i) Las Vegas Stardust, (j) Roman Patriarcha. 7. I have no knowledge whatsoever of any transaction or dealings by Emprise Corporation, Sportservice Corporation or its subsidiaries with any of the above mentioned nor did my search of the books and records reveal any transaction between Emprise Corporation, Sportservice Corporation and its subsidiaries with the above mentioned individuals. 8. I have particularly searched for the name Stardust Las Vegas and cannot find a record of any transaction with Stardust Las Vegas in the books and records or files of Emprise Corporation, Sportservice Corporation and its sub- sidiarie.s. Further afflant sayeth not. MILLINGTON LOCKWOOD. Subscribed and sworn to before me this 31st day of May, 1972. NELSON H. KRATJS, Notary Public. My Commission expires Mar. 30, 1974. Mr. Munpii~. How about the letter of Burke Security, Inc.? Is there any objection from any member of the committee to admitting it into the record? It will be so admitted.~ (The letter referred to follows:) BURKE SECURITY, INC., Buffalo, N.Y., May 23, 1972. SPoRTsm~vIcE CORP., Buffalo, N.Y. Attn: Mr. J. Jacobs. DEAR JERRY: My firm was retained on several occasions since 1965 by your late father to investigate the background of both individuals and businesses which made propositions to your Dad in relation to Sportservice or Emprise possibly acquiring their business. My firm i.s composed of former federal, state, and muni- cipal investigators with diverse and extensive backgrounds. It is with this in mind that I found interesting the allegation of a willing business relationship between your father and one reputed underworld character named Gerado Catena. 81-068 0 - 73 - pt. 3 - 23 PAGENO="0354" 164 On one specific occasion I can recall that after your father had expended a considerable amount of money. he decided on my recommendation not to enter a business relationship and not to purchase a `business which had absolute ties with one Gerado Catena who I described to your father as a man of questionable reputation and purported organized crime relationships. It is quite inconsistent with the allegation made that your father bad such ties. I think the allegations are inconsistent because if your father had ties with Catena, lie certainly would not have retained me to investigate Catena or this company to which Catena was connected. I know you were not aware of this information, so I thought I had best call it to your attention. Very truly yours, EDWARD J. BURKE, 1R., President. Mr. MURPHY. And here is the letter from the State of Michigan, office of `the racing commissioner. I can't read the name. It is Mr. Beaman's letter. Mr. STEIGER. I object to that, Mr. Chairman. Mr. MURPHY. How about the files? Mr. STEIGER. No objection to it going into the files. Mr. MURPHY. Explain your objection. Mr. STEIGER. There is diametrically controverting written opinion from other law enforcement people who express concern over Zerilh, et cetera, at the same time Mr. Beaman gave him a clearance. If we are going to do that, in equity we will have to uncover the controvert- ing information from equally competent law-enforcement officials. I think in equity it would burden the record. Mr. WALDIE. The witness is justified in reading that into the record. Mr. MURPHY. Counsel, do you wish to have your client read this statement into the record? Mr. BITTMAN. I don't believe it is necessary at this time. The pur- pose for asking that this document be admitted as part of the record is because one of the witnesses testified here concerning the `allega- tions made in 1963 which I don't believe was ever adequately ex- plained. I thought that it would be appropriate for this committee's consideration in view of the fact that those charges were m'ade in 1963 that full report of the investigation which arose out of those charges be made part of this record. Governor Romney asked that a full investigation be made of those charges in 1963. This is Com- missioner Beaman's report of those charges. Mr. MURPHY. Do you want to take a vote on this? Mr. WIGGINS. I understand that because it is controverted it doesn't mean that it should be not made a part of the record. Mr. STEIGER. I will have to go to the difficulty now of getting the controverting document. I will withdraw my objection upon the ground that I be permitted to insert the controverting document of which I am aware. (Seep. 14.) Mr. MURPHY. Any objection to that? Mr. WALDIE. I want to see the document Mr. MURPHY. This document from the State of Michigan, the office of the racing commissioner, Mr. Beaman, will be admitted into the record. (The document referred to follows:) PAGENO="0355" 1365 1~xn :~n.rr ~ ~ 0. ~ :,i~~:a;.'~, - .-~ .:~,- --~ ....~ -~ ~ I, -~ /1.. PAGENO="0356" 1366 -- . ~ ~ rnc-.ii.;~ . ) I C~ ~ ~ :~`c:- p~o::p~cI :~ ~c (ç~o~) -.3 ~.:3:::~.1 .,~.,Cu3.CC) 3.3 ~3..3.32 .33.3 t 331' 3333 S-.33~: cf ::fc:~L::3 of cl1'3.333.3..3.3 11i' 33 1'333c331'oc~ .3003333031 3.331' 130.. 00333303- 30-03293-330 3.'. * `. .1'. 33.33333.311 1. - :~.. 3:: - ~- .33.0:.- -- `1 .333, PAGENO="0357" 1367 8. op-o...:ci~o. ti 553ccntnf b:.o:sccsbte0l slcc. :.choc of cli offtCOSO ~ dt:cccoo.co. ITo cclcittT.occ, Oo:~ctnccts.c.; :..:ctc, oiccslso0cl to so -c'tocs osnos orso: of ccc .sc.:ccct s.cccct.:, otc. 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PAGENO="0359" 1369 Mr. MURPHY. Mr. Steiger? Mr. STEIGER. Thank you, Mr. Chairman. Mr. Jacobs, the point of my concern about your involvement in pari- mutuel licensed operations in Arizona and then in the country and in your other involvements is that you do business with organized crime, that your firm has done business with organized crime, and continues to do so. It was my contention that when one does business with organized crime in the manner in which you have, this is not in the same manner in which you inadvertently buy from an organized crime supplier or inadvertently make available to him `a product that you produce. I am going to ask at this time, Mr. Jacobs, if you recognize the existence of organized crime in this country, the Mafia, the Cosa Nostra, or by whatever other popular name it is known `as. Mr. JAcoBs. First of all, Congressman, I want to address myself to the prolog that we are doing business with organized crime. I dis- agree with that. Insofar as organized crime, yes, I do believe that there is crime in this country and that there is apparently some organization between them, whether or not they are identified, per se, as Mafia, which is apparently Sicilian or whatever they are I don't know. I can't address myself. Mr. STEIGER. I think I would like a little more responsive answer. I don't mean just the fact that some criminals might communicate or plan in concert. I am talking about the highly structured, often discussed, now the subject of the popular movie, The Godfather, that particular kind of organized crime, with the 22 identified families throughout this country. Mr. JACOBS. I don't dispute it. Mr. STEIGER. You don't dispute it? Mr. JACOBS. No. Mr. STEIGER. I take it you have a reservation about it. Does it exist or doesn't it exist? Mr. JACOBS. I don't know, sir. I am not qualified to make that. Mr. STEIGER. I think it is important, Mr. Jacobs, because I have maintained that this is the basis of my concern, that you do business with these people. Now you tell me that you really don't know if they exist at all. I would also remind you that you made the same statement to the Na- tional Association of State Racing Commissioners on March 20, 1970. Also, in response to a question of mine, when I asked you why you don't divorce yourself .from Mr. Zerilli and Mr. Tocco, in light of your concern about your own reputation, you said, in effect, "I won't divorce myself simply because Steiger or McClellan or anybody else says that they are bad men. I have found my association with these people to be very good so I don't care to disassociate myself on the basis of what someone else tells me." Apparently you still have that attitude. Do you still believe that there is no such structure; and if your own dealings with Gerardo Catena are satisfactory then it doesn't matter that he has been identi- fied with organized crime? Mr. JACOBS. I will not dispute your comment with regard to orga- nized crime, does it exist and are there "families" with regard to organized crime. PAGENO="0360" 1370 I really am not certain as to how they are defined, but I really do believe there is such a thing as organized crime. I will agree with that framework. With regard to Gerardo Catena, that is a new name. As it applies to Mr. Zerilli and Mr. Tocco, in 1970 you acquainted me with their uames being entered into the McClellan report. It was the first time I ever heard of their names being in the McClellan report. I did respond to that. Mr. STEIGER. Of course, you did know as far hack as 1963 that there was concern about it. You did make some statements in your opening remarks which I just want to refer to very briefly. You said for one thing that you made an attempt to buy their interests in Hazel Park fairly recently. We had testimony here from Commissioner Leo Shirley of Michigan that Van Patrick, a radio sportscaster, approached him, allegedly on your behalf, and asked him if he could accept Emprise as the replacement for Zerilli, Tocco, and so forth. Mr. Shirley advised Mr. Van Patrick not at this time, that he could not tell him that he would approve you. Isn't that the reason that you didn't acquire the Zerilli-Tocco interests? Mr. JACOBS. First, Congressman, do you have a copy of what Mr. Shirley said here? Mr. SITIGER. I just told you what he said. Mr. JACOBS. Could I see it? That doesn't confirm- Mr. STEIGER. What is your recollection of what Mr. Shirley said? Mr. JACOBS. My recollection, as it applies to what Commissioner Shirley said here, Congressman, is that when Van Patrick went for- ward and requested that his approval may be sought with regard to the transfer of the ownership to Emprise or the Jacobs family, that he would, of course, have to conduct a complete investigation before he could make such a ruling. He wouldn't do it "off the top of his head" at that time. To go one step further, Congressman, I would like to finish that answer, because Commissioner Shirley did not, insofar as Mr. Van Patrick is concerned, accurately report his conversation with Com- missioner Shirley. Van Patrick advised first to me directly but also in a news confer- ence that he was representing a group of people who were interested in purchasing stock in Hazel Park, one of which was myself or our company, Emprise Corp., and would he approve of the new group which would also encompass the Jacobs family. Mr. STEIGER. Mr. Shirley informed us that he informed Mr. Van Patrick that he could not tell him that he would accept the Jacc~bs at this time. But the point is that you mentioned that you attempted to acquire the interests of Zerilli and Tocco in some sort of cleansing operation. My only point is that Mr. Shirley was apparently at least concerned about you as a replacement, as a c'eaner replacement, than Zerilli, Tocco, and company. I am also going to call your attention to line 12, in which you recite the fact that Mr. Will, when he testified, did not contradict or dispute Mr. Troy's testimony. Of course, that was in the California matter. That is absolutely true. The only one who was in conflict with Mr. PAGENO="0361" 1371 Will or Mr. Troy's testimony was your brother Max. That was the point in contention. It was not whether Mr. Will and Mr. Troy were in conflict, but that Max's testimony was in conflict with Mr. Will's. I would call your attention to page 17, and I think this is important, Mr. Jacobs. You refer to the George Johnson matter, and you then say: Let me state that while we own stock with the Funks in these various tracks, there is a management contract giving to the Funks, the exclusive right to run the tracks, to hire and fire all employees, and to handle the day-to-day operations of the business. I will ask that you recall a telephone conversation about the spring of 1970 with Albert Funk in which you discussed the purchase of $1,200 worth of chairs. I suspect you can reconstruct that. Mr. JACOBS. Where is that conversation? Was I party to it? Mr. STEIGER. Don't you have that, counselor? Yes, it was a conver- sation which you were party to. Do you recall discussing with the Funks-and if you don't recall I will simply pass over it-the purchase of $1,200 worth of used chairs in which they asked your permission to purchase these chairs? Does that mean anything to you, Mr. Jacobs? Mr. JACOBS. One second, Mr. Steiger, please. Mr. STEIGER. Counselor, really, I can understand his not recalling it, if he honestly does not. Mr. JACOBS. I have no recollection of that. Mr. STEIGER. You have no recollection of discussing that kind of situation with the Funks. In the interest of time, Mr. Chairman, I will not belabor the matter. You state on page 18 that you have never seen any confidential bank records of Mr. Steiger or anyone else. Did you ever see the file that Max mailed out to some of his friends and some of your lawyers-Mr. Garner? Mr. JACOBS. No, sir; I haven't seen that file. Mr. STErnER. You didn't see that file? Your brother did that on his own? He never discussed the fact that he had mailed the file out, the file that we talked about here yesterday? Mr. JACOBS. I know the file you are referring to, the one of yester- day. I knew that we had a file which contained development investi- gative material with regard to your background, Congressman, but I can't recall ever looking at it specifically. It was compiled over a pe- riod of time. I never reviewed it. Mr. STEIGER. You never reviewed it? Mr. JACOBS. No. Mr. STEIGER. Did you know where it came from? Mr. JACOBS. Yes. Mr. STEIGER. Where did it come from? Mr. JACOBS. It came from information that was developed in a se- ries of investigations that were conducted by the Funks and other material that was picked up along the way regarding Congressman Steiger. There are various and sundry sources that may have con- tributed to it. Mr. STEIGER. What kind of sources? Mr. JACOBS. Attorneys. Mr. STEIGER. Only from attorneys? PAGENO="0362" 1372 Mr. JACOBS. No. I said the investigator that was in Arizona that was used by the Funks. Mr. STEIGER. The investigator that was in Arizona, the one that you fired in 1970 or asked them to fire in 1970? Mr. JACOBS. Whomever the Funks used to develop their material. They, themselves, sometimes developed it directly. Mr. STEIGER. We were told by Mr. Mooers that he put the material together. Do you know who Mr. Mooers is? Mr. JACOBS. Yes, sir. Mr. STEIGER. Did you know that he put this material together? Mr. JACOBS. How do you mean by put it together? Assembled it? Mr. STEIGER. Yes, and produced the memorandums that were in this ifie. Did you know that? Mr. JACOBS. I knew he participated, yes. Mr. STEIGER. In this file is my financial statement that was in appro- priately, or dishonestly, or whatever you want to say, taken from the bank. I will ask the counsel to find it. You may see it as soon as coun- sel finds it. Mr. Jacobs, now to get to the nitty-gritty. You have said that you don't do business with organized crime and then you detail a rather specific deal which has long ago surfaced of the money `that the com- pany loaned Zerrilli and the manner in which it was paid back, and so forth. In that instance, by my definition, that is doing business with organized crime. I am going to recall for you a quote from the trial; the same quote exists under direct testimony and cross-examination. The witness is Mr. Zerilli. I don't know who the examiner is in this since we only have the "Q." and "A." The question is: "What type of relationship, was there between you and Mr. Lou Jacobs?" and Mr. Zerilli answered: "A business but something more than that. I would credit. part of whatever ability I do have to the re1atiom;hip that I had with Mr. Jacobs." He w~; ref erring to your father. That is what I mean when I talk about a close as';ociation, other than any kind of a casual or normal association. I would also re~all your attention to the Colonel Enfante letter from the New York St~te Police Department, in which he starts off by saying, "Sportservice Corp. and the Emprise Corp. have many admitted contacts and d'~alings with individuals who r~re hoodlums or alleged Mafia leaders." I am well aware of the letter which you have from the Strte police which in turn said that I had no right to use that letter. Mr. JACOBS. I think it goes beyond that. If you are going to use that report, Congressman, and do it at the level you plan to do it from, the 18 pages or 20 pages, I would like to see that the whole first part of this letter from Mr. Kerwin, superintendent of State police, goes in. This dates back to March 30, 1970, `Congressman, and I think it better develops the relationship you are trying to develop here. Mr. STEIGER. I would be happy to admit whatever documents' in connection with the letter. I would have no objection to it. Mr. JACOBS. Congressman, would.you- Mr. STEIGER. Is the Enf ante letter wrong? Mr. JACOBS. Yes. Mr. STEIGER. It is wrong. Fine. PAGENO="0363" 1373 Chairman PEPPER. Do you offer this instrument? Mr. STEIGER. Mr. Chairman, if you please, there is a letter dated March 30, 1970, from William Kerwan, superintendent of police. It comes subsequent to the dissemination, public dissemination, by Con- gressman Steiger before the New Mexico Racing Commission and then, in the Congressional Record. I will read the letter to you, sir. I think it is germane and I think it lays out the whole relationship very clearly. It is to Alger A. Williams, Esq., a retired State judge. I believe he was a supreme court justice in the State of New York. The letter reads as follows: `NEW YORK STATE POLICE, Albany, N.Y., March 30, 1972. ALGER A. WILLIAMS, Raichie, Banning, Weiss & Halpern, Buffalo, N.Y. DEAR JTJSTICE WILLIA~1s: Your letter of March 16, 1070 addressed to the Gover- nor has been referred to me for reply. As you know from your own law enforcement experience, law enforcement agencies frequently exchange information, much of which may be unevaluated, on a confidential basis for background assistance. The three paragraphs in Congressman Steiger's remarks (reported in the Congressional Record of March 4, 1970) attributed to an officer from this Division came from just such a background memorandum furnished by this Division, upon request, to the Arizona State Highway Patrol, the Phoenix Police Department and the Arizona State Racing Commission for their confidential use. At no time has this Division authorized the public dissemination of the memorandum or any part of it. An examination of the full memorandum, a copy of which you have in your files, reveals that the only portion of Congressman Steiger's remarks derived from it are the three paragraphs directly attributed to it. The remainder of Congress- man Steiger's remarks, and by far the greater portion of his full statement, was plainly not based on anything in the memorandum furnished by this Division and must have been derived from other sources. As to the quoted passage, the statements therein were not based on any direct field investigation by this Division but represented a summary of information, developed by other sources, which has come to our attention in the past. A reading of the full memorandum makes the nature of the quoted passage clear. I regret any inconvenience and embarrassment that the unauthorized and improper use of a confidential memorandum may have caused your client. Sincerely, WILLIAM E. KIRWAN, Superintendent. Mr. Sa1~IG]ral. Mr. Jacobs, on May 31 we heard from Mr. Aaron M. Kohn. Mr. Waldie asked him: "Let me get clear your understanding of Emprise, as I am trying to understand Emprise, too. Thus far we have been given the picture that Emprise deals with organized crime and makes organized crime thereby have more access to this activity."-ref erring to racing. "Do I understand from your last response that you believe Emprise is in fact a part of organized crime? "Mr. KOHN. I do. I think it is a part of the economy of the or- ganized crime in the United States." Do you know who Mr. Aaron M. Kohn is? Mr. JACOBS. I have heard Mr. Aaron Kohn talk. I don't know really who he is. Do you know? Mr. STEIGER. Do you have any comment as to that response to Mr. Waldie's question? How would you characterize that response? Did you understand the response? Did you understand Mr. Waldie's question? Mr. JACOBS. Yes, sir. PAGENO="0364" 1374 Mr. STEIGER. Did you understand Mr. Kohn's response? Mr. JACOBS. Not entirely. Mr. STEIGER. It is very short. The last part of Mr. Waldie's ques- tion was, "Do I understand from your last response that you believe Emprise is in fact a part of organized crime?" "Mr. KOHN. I do. I think it is part of the economy of the organized crime in the United States." Mr. Kohn is the managing director of the Metropolitan Crime Commission of New Orleans. He has been, I guess, for 15 years or more. Prior to that, he was engaged in the same kind of activity in the Chicago area. Prior to that he was with the Federal Bureau of Investigation. I think it would behoove you to comment on that statement at this time. Mr. JACOBS. That is a statement of opinion by Aaron Kohn. It is one man's opinion. I have never met Mr. Kohn. Mr. Kohn has never spoken to me. Mr. Kohn has never been to my office or to any place of business where I conduct my business, to my knowledge. I think it would behoove Mr. Kohn to become familiar with me and with the conduct of my business before he makes a comment like that. Mr. STEIGER. Do you plan to do the kind of investigation on Mr. Kohn that you did on me, for historical interests, or do you plan to refute what he has to say? Are you going to do anything about his statement? Mr. JACOBS. I think I just did. Mr. STEIGER. You have dispelled any validity in his statement by saying that he never spoke to you, or to your knowledge has never been in your office and, therefore, his statement is without fact; is that correct? Mr. JACOBS. I said, Congressman Steiger, that you have just ex- pressed one man's opinion. One man has come before you and answered a question you put before him, of his opinion. Mr. STEIGER. I would say that was accurate. Mr. JACOBS. I disagree with it. Mr. STEIGER. Incidentally, you heard your brother refer to the Osmond report in Arizona as being without merit. Do you concur generally in that? Mr. JACOBS. Congressman, again, you are taking it out of context. Wasn't there a second Osmond report? Mr. STEIGER. Actually, there were three Osmond reports that this committee heard about. One dealt with the Emprise involvement with the two racing commissioners who resigned under a cloud. Mr. JACOBS. Congressman, I have to correct you there. Mr. S~rEIGmi. Fine. Mr. JACOBS. There was no reference to Emprise's involvement with two racing commissioners. Would you like to take that and let's re- develop that? Mr. STEIGER. I really would love to, Mr. Jacobs. Perhaps you can tell me where I am wrong and then we can just accelerate the process. Mr. JACOBS. You name the incident, sir, and we will start from there. PAGENO="0365" 1375 Mr. STEIGER. I just told you that Emprise was involved, under Osmond's testimony, with the funding of Mr. Butler and the im- proper funding or involvement with Mr. Butler and Mr. Waitman. Mr. JACOBs. Mr. Waitman predates any relationship of the Em- prise and the Funks in an ownership position in the Prescott race- track in question. It was, I believe, a 1964, 1965, 1966 relationship referred to, where Mr. Waitman did certain construction work on a competitive basis at the Prescott racetrack. I am not really able to testify- Mr. STEIGER. It seemed to me he did the work at Black Canyon. Mr. JACOBS. Let's take Black Canyon, the Black Canyon racetrack, in the construction of Black Canyon. The simple fact of the matter is that Emprise didn't come into relationship with that racetrack until subsequent to its construction building and operation. Mr. STEIGER. You had no involvement? The only improper fund- ing you did was with Mr. Butler, is that correct? Mr. JACOBS. No, sir. In that instance that was done with the Funks prior to our relationship as well. Mr. S~rEIG1ui. I am sorry I don't recall the facts of the Osmond report with regard to Waitman, but I recall that Mr. Osmond was specific in tracing the Emprise involvement. Do you recall that Osmond said Emprise was a 50-50 investor with Butler? Mr. JACOBS. What I would like to do is take you back on that chapter and verse, point by point, and the dating of the relationships. What I would like you to make clear is that the relationship with regard to Mr. Butler emanated well prior to our relationship with the Yuma racetrack in question. Mr. STEIGER. But the money came out of Jacobs. Mr. JACOBS. The money was spread on a 3-year payment installment and we came into Yuma racetrack after the commitment had been made, but prior to the complete payment of the commitment. Mr. STEIGER. So Osmond misstated the facts? Mr. JACOBS. I didn't say he misstated the facts. I haven't read it. Mr. STEIGER. You have never read the Osmond report? Mr. JACOBS. Why don't you read it, sir? I mean read it now. Mr. STEIGER. Come on, Mr. Jacobs. Mr. JACOBS. Just that portion. Mr. STEIGER. We have much more important things. I don't have the Osmond report in front of me. In the Osmond report, with regard to the differing sets of figures with regard to the same year's income; you do recall that? Mr. JACOBS. Yes, sir. One referred to a fiscal year, Congressman, and one referred to an annual year report. There was a partnership in- volved in that as well, that was a personal filing on the part of David and Arthur Funk. Mr. STEIGER. If you recall, on March `20, 1971, you testified before the National Association of State Racing Commissioners, on page 78 that it-when you and I appeared together: "regarding the fact of corporate records versus those records that were given to the Arizona Racing Commission. I would like to just point out that you gentlemen who are sophisticated in the business areas, you will find that your tax report and your financial report often differ. PAGENO="0366" 1376 I never got a chance to ask you what you meant by a sophistication in having you~r tax report differ from your financial report. This might be as good a time as any to explain that. Did you say that? Mr. JACOBS. That is correct. Mr. STEIGER. Would you care to explain how your tax report differs from your financial report, particularly when we are dealing with the same period of time and dealing with the same income? How do you explain two sets of books-in a sophisticated manner, Mr. Jacobs? Mr. JACOBS. That is the way I plan to keep this, sir; on that basis. Certain people account on what is known as an accrual basis and others account on a cash basis. Often the tax returns are done strictly from a cash basis as opposed to an accrual basis. Or it may be done in reverse, sometimes on an accrual. Mr. STEIGER. And that is what `is meant by a tax set of a books and a financial set of books? One is cash one is accrual? Mr. JAOOBS. One may reflect a business relationship on one basis and then looking at it in still a different light or different basis. As an exam- ple, there is an accrual of fees due us from the Funks for some time. They have used that accrual of fees for some time on their reporting. Mr. STEIGER. With regard to Mr~ Leacy's testimony, Mr. Jacobs, you do recall Mr. Leacy? ` Do you know Mr. Leacy of Buffalo? Mr. JACOBS. `Yes, sir. Mr. STEIGER. Mr. Leacy told this committee that Emprise funded and authorized him to give cash campaign contributions of $10,000 and $25,000 to elected officials in New Orleans. This was verified by Mr. Masoni. He told about a $300,000 fund in California and he dis- cussed a dog racing proposition in Honolulu, as I recall. Are you familiar with those stories or would you like to refresh your memory? Mr. JACOBS. What is your question, sir? Mr. STEIGER. My question is: Was Mr. Leacy telling this committee k falsehood? Was he distorting the truth? Was part of what he had to say accurate? Was it all before your involvement with the company so you don't want to comment on it at all? Mr. JACOBS. Why don't you ask me about a specific instance and I will comment on a specific answer. Mr. STEIGER. Mr. Phillips, our chief counsel, was examining Mr. Leacy and he said- Will you tell us what happened then? Mr. LEACY. Well, I had a conference with an official of the State, and officer of Jefferson Downs and myself. I believe I was on the executive committee at that time. There was a request for campaign contributions because, as I recall, most of things were primaries down there, but I think this was an actual gubernatorial campaign with Republican opposition or something. I believe that was the reason they gave for needing the support at that time. Mr. PHILLIPS. How much did they request at that time? Mr. LEACY. $25,000. I will give you another conversation that will place the thing in con- text. Did you have a comment? Speak. Mr. JACOBS. No, sir. I just didn't understand the question. Go ahead. Mr. STEIGER. Again Mr. Phillips and Mr. Leacy: PAGENO="0367" 1177 Mr. PHILLIPS. Did you have a conversation with Lou Jacobs in relation to this $10,000? Mr. LEAcY. He had to approve it. Mr. PHILLIPS. He approved the $10,000 payment; is that correct? Mr. LEACY. That is correct. Mr. PHILLIPS. Could you tell me after he approved the payment of the $10,000 in cash to the then Governor of Louisiana~ what you then did? Did you then go to a bank? Mr. Leacy then recited how he got the money and gave it to the Governor. Mr. JACoBS. If my recollection serves me, that happened about 12 or 13 years ago. I have no comment on it at all. I just don't know any- thing about it. Mr. PHILLIPS. Could I interrupt? That is one of the major trouble- some facts about the situation, in my opinion. It seems to me that is an out and out payoff to a governmental official. It is a long time ago. I want to know whether it would be the present disposition of Sport- service, or Emprise, or yourself to repeat a transaction like that. Mr. JACOBS. Mr. Phillips, your conclusion that it is a payoff doesn't agree with Mr. Leacy's illustration of it. As I recall, Mr. Leacy indi- cated it was a political contribution. Mr. PHILLIPS. Yes; and he said the man took it in cash and put it in his pocket. Mr. JACOBS. He paraphrased it by saying it was legal. Mr. PHILLIPS. You can call it whatever you want, that man can call it whatever he wants. Whether or not you agree that it is legal or I agree it is legal, it occurs to me it is totally illegal. Do you think it is legal? Mr. JACOBS. I am making no comment on it at all. I don't know any- thing about- Mr. PHILLIPS. What I would like to know is whether you would en- gage in that type of conduct at this time, in Emprise's newer role. Mr. JACOBS. No, sir. Mr. STEIGER. I think Mr. Phillips has raised a most interesting point. Mr. Masoni, your partner in Jefferson Downs, and in a previous venture in Idaho and in Arkansas, on May 30 before this committee, answered in response to the following question: Mr. STEIGER. Have you ever made contributions to Governors' races in either Ohio, West virginia, Florida, Louisiana, North Carolina, when you were operat- ing as a parimutuel licensee? Mr. MAS0NI. I have. Mr. STEIGER. So it is fair to say that it is a normal cost of doing business? Mr. MASONI. In the type of business we are in, it is a normal procedure. Do you share Mr. Masoni's view that it is a normal procedure to con- tribute to political races so as to insure your continued operation in the State? Mr. JACOBS. I believe it is the responsibility of every citizen to con- tribute to a candidate who he believes represents his thinking and the welfare of the country; yes, sir. In the same way, I feel he should vote that way, he should support him, and he should conduct hiniself that way. I think it is the American way, so far as getting people elected to office. Mr. STEIGER. So you make no distinction between the anonymous cash contributions of the kind authorized by Emprise that we know PAGENO="0368" 1378 of through* Mr. Leacy, and the kind of dedication to better govern- ment that you have just talked about; or do you? Mr. JACOBS. What Mr. Leacy did, how he did it, when he did it, and the circumstances in which he did it, I have no knowledge of at all. I can't even begin to reconstruct what occurred, what prompted him, what was in his mind or my father's mind or anybody's mind at that time. I really can't even determine whether it is true or not. Mr. STErnER. Do you think Mr. Leacy was telling us the truth? Mr. JACOBS. I just don't know. Mr. STEIGER. Do you think he was? Mr. JACOBS. I said I just don't know. *Mr. STEIGER. Are you aware that Mr. Masoni confirmed Mr. Leacy's story independently and separately in the matter of the $25,000 to Governor McKeithen? Are you aware of that? Mr. JACOBS. I am aware of that; yes, sir. Mr. STEIGER. Do you think Mr. Masoni and Mr. Leacy, in that in- stance, were telling us the truth? Mr. JACOBS. I know they were telling you the truth. Mr. STEIGER. That was the $25,000 cash- Mr. JACOBS. It was not. Mr. STEIGER. It was not cash? Mr. JACOBS. That is right. Mr. STErnER. You are aware of that contribution? Mr. JACOBS. Yes, sir. Mr. STEIGER. What was the date of that contribution? Mr. JACOBS. 1964. Mr. STEIGER. Did you authorize a portion of the payment of that contribution? Mr. JACOBS. No, sir. Mr. STEIGER. How did you happen to be aware of it? Mr. JACOBS. I am aware of it because I made a $5,000 contribution and my mother made a $5,000 contribution in 1964. I became aware of it after Mr. Masoni's testimony here. I had completely forgotten the fact that I had done that at my father's request. But, indeed, it was substantiated and my mother pointed it out to me and I am now here to tell you that. Mr. STErnER. So that Mr. Masoni, at least in this instance, con- formed with your operational idea that that was a good idea to do that. Was that in line with your concept of contributing for better govern- ment or Mr. Masoni's concept of staying in business? Mr. JACOBS. No, sir; that was my father's direction and recommen-. dation to me and I did that just at my father's recommendation. I gave no thought at that time nor did I evaluate it. Mr. STEIGER. Confronted with the same situation today, what would you do? Mr. JACOBS. Confronted with the same situation? I would apply my standards to it, sir, the support of either the correct type of govern- ment or else I wouldn't make the contribution. Mr. STEIGER. So even if you were licensed in that State and you felt it might hurt you to contribute if you were asked, you would contribute if you felt the candidate was worthy of support? Mr. JACOBS. That is correct. PAGENO="0369" 1379 Mr. SrEIGER. Do you know Mr. Ralph Meyers of the State of Arkansas? Mr. JACOBS. Yes. Mr. STEIGER. Who is he? Mr. JACOBS. An ex-racing commissioner of the State of Arkansas. I think he was appointed by Governor Rockefeller during the Rocke- feller administration. He was appointed to a short-term office and he replaced another racing commissioner. Mr. STEIGER. Did you ever give Mr. Meyers $4,000 to contribute to Mr. Rockefeller? Mr. JACOBS. No, I did not. Mr. S~ri~IGER. Did you ever authorize $4,000 to be given to Mr. Meyers to contribute to Mr. Rockefeller? Mr. JACOBS. I did not. Richard Upton gave the $4,000 to him. Mr. STEIGER. So there was $4,000 that went from Southland Racing and not Emprise? Mr. JACOBS. That is correct. Mr. STEIGER. And did Mr. Rockefeller turn that down? Mr. JACOBS. I believe he did. Mr. STEIGER. Did you have a private meeting with Mr. Meyers sub- sequent to that and prior to his removal from the Arkansas Racing Commission, where just you and he were present? Mr. JACOBS. I have absolutely no recollection of such private meeting. Mr. STEIGER. The conversation, according to Mr. Meyers, was such that you wanted to know what it would take for him to change his vote on a matter that affected Southland Racing, meaning money. Mr. JACOBS. I can tell you, Mr. Steiger, unequivocally Mr. Meyers is telling you a complete falsehood. He is lying. Mr. STEIGER. Mr. Meyers is lying? Mr. JACOBS. Yes, sir. Mr. STEIGER. Then are you aware that on the evening that Mr. Meyers contends that you asked him what it would take to change his vote-I don't know if it was the evening or not-sometime im- mediately following that, two men called upon him and threatened him and his family with physical harm if he didn't conform to what- ever it was that you asked him to do? Mr. JACOBS. I am not aware of that. Mr. SrEmEli. You have never heard of that? Mr. JACOBS. No. Mr. STEIGER. I will tell you that that is exactly what Mr. Meyers told me and he told me that he would not come up here and testify because he was very concerned. He just didn't want to put his family through that again. As a matter of fact, that is what his actual state- ment was. I will also tell you that to the best of my knowledge this matter has now been turned over to the Arkansas authorities as well as the Federal authorities in the area. I am sure that if Mr. Meyers is not telling the truth you will have ample opportunity to establish that. I ask if you know a Mr. May, of Kentucky. Mr. JACOBS. Bill May? Mr. STEIGER. Bill May. Mr. JAOOBS. Yes, sir. Bl_0680-73-Pt. 3-24 PAGENO="0370" 1380 Mr. STEIGER. Are you aware that Mr. May, in a recent speech to the Thoroughbred Breeders Club of America made the statement in Lexington with reference to sports-and Mr. May is chairman of the Kentucky Racing Commission- Mr. JACOBS. Yes, sir. Mr. STEIGER. He made the speech with reference to Emprise. Em- prise is either majority stockholder or the largest stockholder in Latonia and Milos Park; is that correct? Mr. JACOBS. That is correct. Mr. STEIGER. Do they own any other parimutuel licenses in Ken- tucky? Mr. JACOBS. No, sir. Mr. S~rEIGER. Of course, as racing commission chairman, Mr. May would be concerned with the operation of those two tracks; is that correct? Mr. JACOBS. Yes, sir. Mr. STEI~ER. Mr. May said in Lexington, referring to Emprise and Mr. May's ownership of a racetrack in Florida-the racetrack is Florida Downs, in Tampa-he said, "They are there"-meaning Emprise-"as caterers and have no interest, topside nor bottom, in the equity, holding, or management of Florida Downs. They are hotdog- and-beer people. The highest authority I have seen there on behalf of Sportservice is the headwaiter in the clubhouse." There was a subseqeunt revelation after that speech that Emprise loaned $1.5 million to Mr. May to facilitate the purchase of Florida Downs. Are you aware of that loan? Mr. JACOBS. I am aware of the loan, it is not a revelation. It has been on file and in fact was testified to in Florida in 1970, Congress- man. You were there. Mr. STEIGER. What is the present condition of that loan, if you know? What is the balance of the loan? Mr. JACOBS. It is on a scheduled repayment and it has been paid up to date. Mr. STEIGER. I am sorry. Is it current? Mr. JACOBS. Yes. Mr. STEIGER. It is current as far as the original agreement? Mr. JACOBS. As far as I know right now. I just don't know when a payment will be due. It may be September or November. I don't know. So far as I know, it is paid upto date. Mr. STEIGER. Incidentally, I am quoting from the Courier-Journal of Kentucky, from an article by Mr. John Finley. In your opinion, the statement by Mr. May, as I read it to you, is an honest statement as to Mr. May's relationship with Emprise in Florida Downs? *Mr. JACOBS. I take exception. I have been to Florida Downs with Bill May on One occasion. So he saw me there as well as the headwaiter. Mr. STEIGER. Aside from the fact of your presence there, I was more concerned with thefact that he told the Thoroughbred- Mr. JACOBS. The Thoroughbred Racing Club. Yes, sir; that is a true and accurate interpretation. We are strictly concessionaires at Florida Downs. Mr. STEIGER. And the fact that you are a lender, the largest single lender, you don't feel represents a different situation than if you were just a concessionaire? PAGENO="0371" 1381 Mr. JACOBS. We are a creditor as well as a concessionaire. Mr. STEIGER. I would say that the creditor and concessionaire is in a different position than just the concessionaire; wouldn't you? Mr. JACOBS. It would be a dual capacity, wouldn't it? Mr. STEIGER. Mr. Jacobs, I just can't believe that you are as in- genuous as you are trying to have us believe you are. I understand the problem you must be having. But the basic issue here I think is worth exploring a little bit; for example, Sportservice. The loan was made in 1968. Sportservice has been paid relatively small amounts of money. For example, $1,232 in 1 fiscal year for advertising, publicity, and public relations. If that represents the amortization of the loan, and if Sportservice is being excessively generous with Mr. May in terms of the payoff and being relaxed about it, it is clear that Mr. May is going to be co- operative with Sportservice when it comes to giving dates or whatever else the commission is required to do in the supervision of Sportservice at Latonia and Milos Park. I will tell you that Mr. May further went on and said, "If you can show me where Sportservice has a conflict of interest anywhere in the country, I will see to it that they are thrown out of the State of Kentucky." I will ask you: Do you think that the fact that you have a loan of $1.5 million to Mr. May, in a track in a different political subdivision, in a different jurisdiction, represents a conflict of interest as far as Mr. May is concerned? Mr. JACOBS. Well, let's start this way, Congressman: Was Mr. May chairman of the racing commission in 1968 in Kentucky? Mr. STEIGER. I am asking about the present fact that he is a chairman now and the loan exists now, and he did not reveal the loan publicly until some newspaperman found it, apparently. Mr. JACOBS. Congressman, first of all, you and I were in Florida and I testified to the fact I had a loan at that racetrack and it is of record in Florida. Second, the conflict of interest may exist with regard to Mr. May, and I think you should address yourself to Mr May. Mr. STErnER. Excuse me, Mr. Jacobs. I think it is important that we have your opinion as to whether you feel this represents a conflict of interest or not. I think it will give us some insight into what you believe honesty is and what you believe a conflict of interest is. Do you think that represents a conflict of interest? Mr. JACOBS. I just have no opinion on that, sir. Mr. STEIGER. You really have no opinion on something that so vitally affects your industry? You have no opinion? Mr. JACOBS. I have no opinion as far as Mr. May's conflicting interest might go. I don't believe that I can make that judgment for Mr. May. I think it is up to Mr. May to make. Mr. STEIGER. I am asking you to make it for yourself. You have made a great many representations as to being anxious to be as upright as you possibly can be. You `want to be decent. You know that image is important. Do you think it is good or do you think it represents a conflict of interest to have as a creditor a man over whom you have literally economic life-and-death regulation? Is that a conflict of interest or not? PAGENO="0372" 1382 Mr. JACOBS. As long as it is fully disclosed, sir, I don't believe it is. And I also don't believe that you are fully representing the differences that exist. Mr. May has paid in full to date. The note is not in default. Also, within the State of Kentucky, I believe I pointed this out to you before, it is encouraged within the statute for members of that racing commission to become board members and affiliated from a board level with various racetracks in that State. Mr. STEIGER. Wait. Excuse me, Mr. Jacobs. You feel that it is the same thing to be affiliated with a racetrack as a board member as it is to be personally obligated for $1,5 million to a single entity over which you have an operational control? Mr. JACOBS. No, sir. I didn't say that. Mr. SmIGER. You made that equation. Mr. JACOBS. I am just saying that there is a distinction made in one State versus another. Mr. STEIGER. I am going to press on, if I may. I am going to tell you that in my view you employ intimidation. I g~uess the best evidence I have of that is the lawsuits that you have instigated against at least four newspapers that I know of; the fact that you have told members of the Arizona Racing Commission-not you, but people who rep- resent you. have told them-that there is a likelihood of being sued if they take a certain action; your own actions against myself; your naming of Mr. Bolles in a lawsuit. As I say, there are the four newspaper lawsuits and I suppose the Sports Illustrated la'wsuit. As far as I am concerned, that is an at- tempt at intimidation rather than an attempt to simply set the record straight. You keep talking about people who are out to destroy you or people who are maliciously attacking you. I will tell you, Mr. Jacobs, that attacking you is not only not profitable but it can cause some pain, a great deal of discomfort, and rather long days. You or your organization have accused me over the last 2 years of being: The first time I wanted to be the czar of rac- ing; then I was linked with Las Vegas gamblers, whom you never named; then I was with this Intertel thing; then Mr. Weiss had me when the ITT thing broke, I was with ITT; then I think the most horrendous one of all, Mr. Jacobs, and the one that I would like to hear from you on, is there was a gentleman: in Cincinnati who works with one of your racetracks who said I was a disgruntled former em- ployee of Emprise. I have been called a lot of things, but I want to tell you that to be called a former employee of Emprise is probably the unkindest cut of all. Would you tell the committee whether to your knowledge I have ever worked for Emprise? Mr. JACoBs. Congressman, we have 40,000 employees and you would be the most disgruntled. I would have to agree with that. Mr. STEInER. I will ask again. Have I ever, to your knowledge- Mr. JACOBS. No, sir. Mr. STEIGr~n. Do you have knowledge of this Intertel front for the Mafia or whatever that thing was? Do you have any doubts in your own mind that I am fronting for the Mafia or any of these other people are? Mr. JACOBS. I don't believe there is any validity to that. Intertel has suffered because of dissemination like that in some publications around the country. There have `been those accusations and they have PAGENO="0373" 1383 been unkind, I must say, unfounded, unevaluated, similar to the police report from New York. Mr. STEIGER. Why do you think I do these things, Mr. Jacobs? I am interested. What is the current assessment of what my motive is in this matter? Mr. JACOBS. Your motives I can't address, sir. But I can state this, that you have stated your intentions. Your intentions are to drive us out of business. We have a family-owned organization, a corpora- tion employing over 40,000 employees. In this direction, sir, I think that our 60 years of history and success bespeaks of our conduct. I think your illustrations or allegations are unfounded and your ob- jectives are very un-American. You have indicated your intentions are guilt by association. In my belief you absolutely have misused your public office to promulgate these types of attitudes or this type of attitude which I hope you are not addressing the whole committee to, which I know you are not, or, at least, it won't happen. Mr. STEIGER. Mr. Jacobs, I will ask you one more time: I will tell you that it is not my intention to drive you out of business. Mr. JACOBS. Congressman, then that conflicts with your statement. Mr. STEIGER. Where did I make the statement? Mr. JACOBS. Where would you want to start? Do you want to start with the Congressional Record? We will start back in New Mexico. You never met me. You never talked to me. Mr. STEIGER. Did I make the statement in New Mexico? Mr. JACOBS. Yes, sir. You said they are bad for racing and should be driven out of racing. Mr. STEIGER. And that meant I wanted to put you out of business? Mr. JACOBS. Then you went before Senator Ervin's committee and said they are bad for sports and should be driven out of sports, sir. What do you think our business is? We are in the business of con- cessionaires and sport is our life. It has been for 60 years. Mr. STEIGER. As a matter of fact, I don't think you can substantiate either of the statements. I said you should not be licensed and I will say it again and again. Mr. JACOBS. I will do it right now for your benefit. I will quote it verbatim. Mr. STInGER. I am not interest in getting into a semantic argu- ment with you. I have assured the chairman I will not put this on a personal level. Mr. JACOBS. You brought it to that, sir. You put it on that. Mr. STErnER. I would like to point out that in addition to conflict of interest, business with the Mafia, bribery, intimidation, and the hidden interests that you have engaged in, the concealment in New Mexico, the thing that led to New Mexico calling you unfit to operate a racetrack there- Mr. JACOBS. That was you, sir, that led to that, and you never met me or never talked to me. It was your testimony before that commission that came to that result. Congressman, you have failed to enter the reversal of that finding. I think you are misleading this committee by not giving them the facts. The facts are that finding was reversed. Mr. STErnER. As a matter of fact, that finding was not reversed. They permitted you to operate as a concessionaire. PAGENO="0374" 1384 Mr. JAooBs. No, sir. The findings were that Mr. Jacobs and Emprise were fit and qualified to do business. Mr. STEIGER. As a concessionaire. Mr. JACOBS. And as a financer, sir, and also as a stockholder. Mr. STEIGER. You are raising your voice, Mr. Jacobs. Chairman PEPPER. Let's have order. Mr. WALDIE. Would you yield? Mr. STEIGER. Yes. Mr. WALDIE. In the preface of your last question you stated that Emprise had committed bribery. I don't recall an establishment of that fact. I would like to know what you base that upon. Mr. STEIGER. In bribery, I refer to the Leacy matter, the Masoni testimony, the Meyers situation, which Mr. Jacobs has just denied and, of course, my view of Mr. Jacobs' gift to Mr. Jencke, or Mr. Jencke's view of it was that it could be interepreted as a bribe. Mr. WALDIE. Is it your belief that Emprise has committed bribery? Mr. STEIGER. Based on Mr. Leacy's testimony, yes. Mr. WALDIE. As one member of the committee, for the record, I do not accept that any of the evidence that has been introduced in this committee has made any case of bribery against Emprise. Mr. STEIGER. The gentleman is entitled to his own opinion. Mr. Jacobs, two questions: Why, since you have obviously gone to a tremendous amount of expense and aggravation in attempting to discredit me, why didn't you make the same effort in correcting what you contend are erroneous statements? It would seem to me it would be a relatively simple matter, if in- deed I am wrong, if indeed you don't do business with members of organized crime-which, of course, your stipulated to yourself-if you haven't engaged in the intimidation of people who oppose you. Why is your reaction to criticism, and not just my own-lay my- self aside-why is your reaction to criticism-and here we have heard today between you and your brother, the critics of record: The Ar- kansas people were mistaken. The SEC was improper or wrong. New Mexico was false. Osmond has no merit. Sports Illustrated was dis- torted. Aaron Kohn was one man's opinion, which I disagree with. There was no comment on the Leacy bribe charge because you had no knowledge of it. Mr. Meyers is lying and you have no opinion of Mr. May's behavior. It would seem to me that if all of these people and all of these situations are so patently wrong it would be a relatively simple thing to correct them at the source rather than just try to throw up some kind of a smokescreen by maintaining that you are being somehow destroyed or campaigned against. Wouldn't it seem that the best defense against a wrongful attack would be a legal defense instead of this nonsense that you do? Mr. JACOBS. Congressman, I have appeared before~ five racing corn- missions. I have defended myself before five racing commissions against your allegations. We have been successful in our defense of ourselves before those five racing commissions. Mr. STEIGER. Is that right? Mr. JACOBS. Congressman, you and I have appeared there in each instance and in each instance the racing commissions have responded PAGENO="0375" 1385 based on fact. You have been told to put up or shut up with regard to your various accusations with regard to us. That is a crude way to say it, but that is what it comes down to. Like you mentioned Arkansas, the Arkansas Racing Commission. There was a report that came out in Arkansas and there was a minority and majority report regarding Emprise Corp. and the licensing of them in that State. The racing commission found against us, sir. Then we went to court and the court chastised the racing commission for their conduct and told them to award the dates. You choose to keep on reiterating the conduct of that racing com- mission refusing us dates, but you seem to want to end the story there, Congressman. Mr. STEIGER. Hasn't that order been reentered, Mr. Jacobs? Mr. JACOBS. It has been appealed, do you mean? Mr. STEIGER. Yes. Mr. JACOBS. Yes. Mr. STEIGER. So it really isn't over, is it? Mr. JACOBS. Do you mean that court of last resort? Mr. STEIGER. What is the state of the situation in Louisiana? Are you operating under a supervised trust situation there? Mr. JACOBS. I appointed a trustee over our shares of stock in Jeffer- son Downs. Mr. STEIGER. Did you appoint one or accept the one the State appointed? Mr. JACOBS. I appointed. They accepted my appointee. Mr. STEIGER. Why did you have to appoint a trustee in the State of Louisiana? Mr. JACOBS. The racing commission felt as long as there was any pending action in Los Angeles, they would like to see it. It was an offer on my part, sir. It was entirely my idea. Mr. STEIGER. And in Arkansas, the situation in which you are going to be required to divest yourself of your holdings has been appealed, the reversal of the commission order has been appealed by the court; is that correct? Mr. JACOBS. It has been taken back to the court, yes. Mr. STEIGER. Are those situations the result of my activities? Mr. JACOBS. Yes, sir. Mr. STEIGER. They are the result of my activities? Mr. JACOBS. Yes, sir. Mr. STEIGER. Was the conviction in Los Angeles a result of my activities? Mr. JACOBS. No, sir. Mr. STEIGER. The Justice Department thanks you for that. I think if you really believe that about Arkansas and Louisiana, that you would surely have taken some kind of action against me, if that really is your belief. Why didn't you take some action against me, or why haven't you? Mr. JACOBS. Because in each instance you have been reversed in the respective forums that we have appeared before. Chairman PEPPER. We have just had notice that there is a recorded teller vote on the Dennis amendment on the floor, and we only have 12 minutes if we are going to vote. What is the pleasure of the committee? PAGENO="0376" 1386 We will have a recess so we can go over and vote. (A brief recess was taken.) Chairman PEPPER. The committee will come to order, please. Mr. Steiger wishes to pursue his inquiry. Mr. STEIGER. Mr. Jacobs, your stock is in trust in Arkansas also at the present time. Did you in that instance also appoint and the State accept your trustee or did the State appoint and you accept their trustee? Mr. JAcOBS. The State recommended a trustee and we accepted. Mr. STEIGER. So the facts are that in Arkansas and Louisiana at thistime your interests are held in trusts supervised by the respective States, is that correct? Mr. JACOBS. No. Supervised by the trustee. Mr. STEIGER. Who is representing the State, is that correct? Mr. JACOBS. Representing my interests. Mr. STEIGER. And not the States' interests? Mr. JACOBS. I think they are identical. Mr. Sa1~IoI~R. Identical interests, all right. Do you have any other bank accounts except the Canadian accounts at Fort Erie for the company? Mr. JACoBs. Yes, sir. Mr. S~rEIGER. Where are they? Mr. JACOBS. Our major banks are the Marine Trust Co. in Buffalo, the Canadian Imperial Bank of Commerce, the National Bank of Detroit, the Central Trust Co. of Cincinnati, the Irving Trust, the Central Trust in Denver, the Barnett Group in Florida. I am trying to think. The Central Trust in Rochester, N.Y., the Bank of Montreal. Those are our primary banks. And National City, also in New York. Mr. STEIGER. Are the bulk of your business accounts in one or two banks? Mr. JACOBS. Yes, sir. Mr. STEIGER. Which would they be in? Mr. JACOBS. The Marine Trust, the National Bank of Detroit, and the Canadian Imperial. Mr. STEIGER. The Marine Trust is in Buffalo? Mr. JACOBS. Yes, sir. Mr. STErnER. And the Bank of Detroit and the Canadian Imperial? Mr. JACOBS. In Fort Erie~. Mr. STEIGER. In which one would you have the largest amount or are they about equal? Mr. JACOBS. The preponderance would be in the Marine Trust. Mr. STErnER. How long has that been the case? Mr. JACOBS. The last few years. Mr. STEIGER. Prior to that time you used to bank in Canada? Mr. JACOBS. No, sir. Well, let me just describe it for you. The Cana- dian bank has a clearing through New York City and the Canadian Imperial Bank in Fort Erie handled a great deal of our disbursement accounts for us and also our deposit accounts were funneled to them to cover the disbursements, in that fashion. Mr. STEIGER. And that is no longer the case? Mr. JACOBS. No, sir. Mr. STErnER. Do you have any Swiss bank accounts? Mr. JACOBS. No, sir. PAGENO="0377" 1387 Mr. STEIGER. Does the company have any Swiss bank accounts? Mr. JACoBs. No, sir. Mr. STEIGER. Did you mention Chase Manhattan? You didn't men- tion that. Mr. JACOBS. No, sir. Mr. STEIGER. Do you have an interest in the Eggers Trust? Mr. JACOBS. What is it? Mr. STEIGER. It is a trust held by the Chase Manhattan National Bank. Mr. JACOBS. No, I have no interest in it. *Mr. STEIGER. Mr. Jacobs, I will tell you that in fairness to the com- mittee-and I have a great many more questions I would like to ask you-at this time I am going to yield. I am going to reserve the right, Mr. Chairman, to ask that in the event the committee doesn't get through with Mr. Jacobs, that we do recall him later at the committee's pleasure. At this point I will yield the balance of my time. Chairman PEPPER. Mr. Wiggins. Mr. WIGGINS. Mr. Jacobs, the following questions require the sub- mission of information and I would ask your counsel to make notes as I ask these questions. You will not be in a position, I am sure, to respond to them at this time. But I request that the information I am asking for be submitted for our record. Would you please submit the following information as of January 1, 1968-parenthetically that was at a time when your father was alive, was it not? Mr. JACOBS. Father died in August 1968. Mr. WIGGINS. As of January 1, 1968, and as of January 1, 1972, the names and addresses of each officer and director of Emprise Corp. The name and address of each stockholder of Emprise Corp. and the percent of ownership with respect to each; the name of each busi- ness entity in which Emprise Corp. owns any interest as a stockholder, partner, joint venturer, or otherwise, and the percent of interest in each case, the nature of the interest in each case; the name of each business entity in which any wholly owned subsidiary of Emprise Corp. owns an interest of the same type described in the previous ques- tion; the name and address of e.ach business entity involving sporting activities in which members of the Jacobs family personally own an interest, and the nature of that interest and; finally, would you please list and describe all loans in force as to sporting activities or to individ- uals connected therewith from any wholly owned subsidiary of Em- prise or from the Jacobs family individually, members of the Jacobs family individually, as of the dates mentioned. There is one final piece of information, counsel, I would like to get to make our record complete. Would you please describe and list, as of the dates mentioned, the organizations with whom you have concession contracts. Mr. Chairman, that is all I had. Chairman PEPPER. Mr. Murphy. Mr. BITTMAN. Mr. Chairman, I would like to ask Congressman Wiggins a question, if I may, please. Chairman PEPPER. Yes. PAGENO="0378" l~88 Mr. BITTMAN. Obviously, some of this information, Congressman, is of a confidential business nature. We have absolutely no objection in furnishing this information to you but we would ask that it be held in confidence and not be made public for business reasons. Of course, all of this information doesn't fail in that category. Mr. WIGGINS. Precisely, counsel. I am aware of the sensitivity of portions of it. With the committee's concurrence, I would like that it all be submitted and .that you designate that portion which you feel to be sensitive for business reasons, or other reasons. As to those items 1 will defer to the committee's judgnient on it. I am sure we will treat you fairly, but I don't wish to make the blanket statement now that all of it will be treated in a confidential manner; only those items which you regardas sensitive. (The information requested above was retained in the committee files.) Mr. BITTMAN. Thank you very much. Chairman PEPPER. Mr. Murphy? Mr. MURPHY. Mr. Chairman, 1 think that is the second bell. Chairman PEPPER. Let me make this statement to the committee. We have just started into reading the bill for amendments. There may be one amendment right after another. We only have. 30 minutes left to occupy the room. Personally, I will stay on. I would like to conclude this inquiry. Other Members can go and return. Since we only have 30 minutes, if we go over and come back we won't have much time left. If anybody wishes to stay with me, I will go ahead. Mr. WIGGINS. Mr. Chairman, may I ask counsel-and, of course, consult with your client-as to how long it will take for him to ac- cumulate the information I have requested? Mr. BITTMAN. I believe this information can be accumulated within a week. . Chairman PEPPER. Do you agree, Mr. Jacobs? Mr. JACOBS. Congressman, most of this information I think has been compiled and is ready. It probably could be submitted. I want to point out that, because of the characteristic of our business and all, I would like the privacy maintained, especially with regard to where customers have a relationship with us, either a concession relationship or as a borrower. It has just been our policy not to disseminate this, I think because of that many of our customers appreciate it. Mr. WIGGINS. I understand the problem. I am confident the commit- tee will treat you fairly in that regard. I am most interested right now in some statement from you, counsel, as to when this information might be available to the committee. Mr. JACOBS. It will be within a week, sir. Mr. WIGGINS. That will be fine. I will accept that assurance. Mr. BITTMAN. I will ask the court reporter if he will type up im- mediately the transcript relating to Congressman Wiggins' request because I just took some rough notes. I want to make sure that we completely comply with that request. Chairman PEPPER. Mr. Waldie. Mr. WALDIE. I yield to Mr. Steiger. Chairman PEPPER. Mr. Steiger, have you any further questions? PAGENO="0379" 1389 Mr. STEIGER. Are we winding this up at this point? Chairman PEPPER. We will have to by 4 o'clock. Mr. STEIGER. On one point, then. Do you recall Mr. Latourette of Arkansas, Mr. Jacobs? Mr. JACOBS. Very well, sir. Mr. STEIGER. Do you know that Mr. Latourette delivered to Mr. Crank, a candidate for Governor in Arkansas- Mr. JACOBS. I don't even know the name Crank. Mr. STEIGER. Crank, I believe, is the name. He was a candidate for Governor. It involved a check. My question would not involve the check. That would obviously be unfair. But do you recall, in general, if the situation described by Mr. Hanny to us yesterday, in which Stanley Phillips disbursed political contributions, was a normal procedure for you, personally? Mr. JACOBS. I have checked with Stanley Phillips. Stanley Phillips made a disbursement to Mr. Hanny in my behalf of $500. In this regard No. 1, Jack Hanny and I had gone to school together and had been boyhood friends, so to speak. I called Mr. Hanny before the election and told him that I would contribute to his campaign. The day of the election I suggested that he stop at Stanley Phillips' house-I may be wrong in this regard. In any event, I arranged that he and Stanley Phillips would get together and that he could pick up a check for an unstated amount. I then called Stanley Phillips and said, "Stan, would you give him one of your checks for $500 and I will give you the $500." Now Mr. Hanny tells me he reported that, or at least I heard he reported that, under the name of Stanley Phillips. This was a contri- bution from me and why he saw fit to report; it that way I don't know. Mr. STEIGER. If he had a check from Stanley Phillips, I suppose he could have done it from you through him. I don't think that is important. I don't see anything insidious in that. Mr. JAooBs. I asked Phillips if he had ever done that before and he said no, he hadn't. Mr. STEIGER. That was my question. Mr. JACOBS. Stanley Phillips was here to testify to that. Mr. STEIGER. Now I will tell you that we have a check that was delivered to Mr. Crank in 1968 in the gubernatorial campaign in Arkansas for $1,000 that was signed by Stanley Phillips and endorsed to Mr. Crank by Mr. Latourette. If that was the only other instance, I suspect that it wasn't a normal practice. If it was a normal practice, I think then it would concern the committee because, obviously, it would then appear as if you were attempting to conceal a campaign contribution. Mr. JACOBS. I have never heard of Mr. Crank. I don't believe he ever ran for Governor there. I never heard that name. Mr. STEIGER. It was Governor. You might consult Mr. Jennings. He would remember. Mr. JACOBS. I don't recall. No, no recollection of it at all. Mr. STEIGER. But it was not a practice to have Stanley Phillips or any of your other accountants disburse. Do you have any loans to any other baseball team besides the Montreal Expos and Milwaukee Brewers? Mr. JACOBS. Yes, sir. PAGENO="0380" 1~9O Mr. STEIGER. What other baseball teams? Mr. JAC0I3s. Chicago, Detroit. Mr. STEIGER. Which Chicago team? Mr. JACOBS. The White Sox. Mr. STEIGER. What is the amount of that loan, sir, approximately? Mr. JACOBS. I think it is less than $200,000. Mr. STEIGER. And the Detroit team? Mr. JACOBS. $500,000. Mr. STEIGER. Are there any other teams? Mr. JACOBS. No, sir. Mr. STEIGER. Football teams? Hr. JACOBS. I have no loans with any football teams. Mr. STEIGER. How about hockey teams? Mr. JACOBS. Yes, sir. St. Louis. Mr. STEIGER. Only St. Louis? Mr. JACOBS. Yes, sir. Mr. STEIGER. I have no further questions, Mr. Chairman. I will be happy to yield. Mr. Chairman, I want to yield to Mr. Wiggins, if I may. Mr. WnxuNs. Mr. Jacobs, the purpose of my question was to find out the nature and extent of the Emprise business interest as it relates to sports. My question perhaps may not have been perfectly drafted to reach all avenues of the involvements in which your company may find itself in sports. But the intent of it is to ascertain that information. There- fore, if it should develop that there are any controls or rights or voting interests exercised by your company short of ownership over business entities that also is the type of information I would like developed. Do you understand that, Mr. Jacobs? Mr. JACOBS. I understand what you are seeking, sir, and I think all that you are asking us will describe our relationship completely. Mr. WIGGINS. I want a full and complete disclosure. Chairman PEPPER. Counsel has another question or two. Do other members have any questions? Mr. Phillips. Mr. PHILLIPS. Mr. Jacobs, it occurs to me that as we heard the testi- mony and read your statement that Emprise, through your father, had a long, good business relationship with the Zerilli's in Detroit. Is that correct? Mr. JACOBS. No, sir; and I don't think it was suggested that way. The suggestion was made that Anthony Zerilli had a very high regard for my father's business acumen and advice and sought that advice. Mr. PHILLIPS. Was it true that the Zerilli's would not own the Hazel Park racetrack if your father hadn't cooperated with them in extending loans? Mr. JACOBS. I am going. to state again: You use Zerilli in the plural. It is Anthony J. Zerilli, who more than likely would not have been able to purchase the full extent of his interest in Hazel Park race- track without the financial assistance of my father. This only applies to Anthony J. Zerilli, nothing to do with his father, if that is what you are implying. Mr. PHILLIPS. I didn't say that. PAGENO="0381" 13~1 Mr. JACOBS. Or his daughter, whoever it may be. Mr. PHILLIPS. In addition, that was also true of Mr. Tocco,. is that correct? Mr. JACOBS. Jake Tocco, yes. Mr. PHILLIPS. So both of these men, who you now know as rack- eteers, obtained their ownership position at Hazel Park through loans that your father made them, is that correct? Mr. JACOBS. Yes, some 15 years before they were listed as such racketeers. Mr. PHILLIPS. You say that is when they became listed. When the first loans were made, Mr. Zerilli's father was already a well-known racketeer in Detroit. I don't know whether you knew that or not. Do you know that? Mr. JACOBS. That I just don't know. I know that- Mr. PHILLIPS. Do you know whether or not your father knew that the Zerilli's father was a known racketeer? Mr. JACOBS. No. My father, to my knowledge, has never indicated it to me. Mr. PHILLIPS. Excuse me? Mr. JACOBS. My father never indicated that to me. Mr. PHILLIPS. Did he ever indicate to you why he would loan sub- stantial sums of money to Mr. Zerilli and Mr. Tocco who at that time were very young men; as I understand it? Mr. JACOBS. Why he did it? Mr. PHILLIPS. Yes. Mr. JACOBS. I think I answered that. He obtained half of those shares that they had under option at the option price. Mr. PHILLIPS. I know that he obtained some financial benefit. Mr. JACOBS. That is the reason why. Mr. PHILLIPS. You think that is the only reason why? Was your father in the lending business at that time? Mr. JACOBS. As just lending? Mr. PHILLIPS. Normally people go to banks to obtain money, to bor- row, isn't that correct, banks, insurance companies, people of that nature? Mr. JACOBS. Banks have been lending money right along, but they don't normally loan money-I don't know if they would lend you money to buy stock in a racetrack. I just don't know. Mr. PHILLIPS. What I am trying to get at is why Mr. Zerilli would go to your father for a loan rather than go to a bank? Mr. JACOBS. Because my father was known to loan money to race- tracks or on racetrack properties. Mr. PHILLIPs. You say he was known to do that? Mr. JACOBS. Yes. Mr. PHILLIPS. When did he first start doing that? Mr. JACOBS. I think he started to do that as soon as he found that this was a requirement in order to do business with racetracks. Mr. PHILLIPS. Can you give me a year when that started to occur? Mr. JACOBS. It would certainly predate maybe 1950. Maybe 1945. Mr. PHILLIPS. What experience did Mr. Zerilli have with racetracks prior to his involvement with your father? Mr. JACOBS. He was on the board of directors of Hazel Park before that and a shareholder before that. PAGENO="0382" 1302 Mr. PHILLIPS. You say before your father lent him the money to buy the stock he was on the board of directors? Mr. JACoBS. Yes. Mr. PHILLIPS. Tell me how he got to be on the board of directors. Mr. JACOBS. I imagine he got voted on by the shareholders. Mr. PHILLIPS. Do you know where Mr. Zerilli got the money to repay your father's loans? Mr. JACOBS. To repay it? No, I don't. Mr. PHILLIPS. These questions may be difficult for you to answer because they more properly should have been addressed to your father. Do you know where he was going to get the collateral to secure these loans? Mr. JACOBS. I really don't. I believe the shares were serving as col- lateral but that would be supposition. I am really not certain, sir. Mr. PHILLIPS. Did there come a time when you were advised that your father was concerned about some of the people he was doing business with, that they may be racketeers? Mr. JACOBS. When my father was concerned about somebody he would do business with he wouldn't do business with them. My father died prior to the listing of Zerilli in the McClellan committee. I be- came aware of it in 1970. Mr. PHILLIPS. Zerilli, Sr., had been identified, I think, in 1961, by the authorities. Mr. JACOBS. Yes. Mr. PHILLIPS. The manner in which Mr. Anthony Zerilli obta.ined this money should have been of some concern to anybody doing busi- ness with him, wouldn't you think? Mr. JACOBS. How Anthony Zerilli obtained money? Mr. PHILLIPS. Yes. Mr. JACOBS. I imagine so. It probably would have been of concern. Mr. PHILLIPS. Apparently your father was concerned with where Mr. Catena got his money. Mr. JACOBS. Yes. Mr. PHILLIPS. Can you tell us more about that? Mr. JACOBS. Do we have a copy of that letter? Mr. PHILLIPS. I have read the letter. Mr. JACOBS. That is all I know, what is in the letter. Mr. PHILLIPS. This letter that you supplied the committee with, which has been made a part of the record, reflects that your father was concerned about doing business with Jerry Catena. Mr. JACOBS. Right. Mr. PHILLIPS. And as a result of that he retained an investigator to look into Mr. Catena's background to find out, whether Mr. Catena was a racketeer. Mr. JACOBS. The letter says- My firm was retained on several occasions since 1965 by your late father to investigate the backgrounds of both individuals and businesses which made propositions to your dad in relation to Sportservice or Emprise possibly acquiring their business. My firm is composed of former Federal, State, and municipal investigators with diverse and extensive backgrounds. It is with this in mind that I found interesting the allegation of willing business relationships between your father and one reputed underworld character named Gerardo Catena. On one specific PAGENO="0383" 1393 occasion I can recall after your father expended a considerable amount of money he decided on my recommendation not to enter a business relationship and not to purchase a business which had absolute ties with one Gerardo Catena, who I described to your father as a man of questionable relationship with purported crime relationships. I think the allegations are inconsistent because if your father had ties with Catena he certainly would not have retained me to investigate Catena or the companies with which Catena was connected. I know you are not aware of this information so I thought it best that I call it to your attention. I can't tell you any more than what is in that letter because I never heard of Jerry Catena. Mr. PHILLIPs. Would you go any further than that? You just re- ceived this letter and you didn't ask anything further about it? Mr. JACOBS. As I indicated in my statement to you earlier- Mr. PHILLIPS. I am asking you simply about the letter. Mr. JACOBS (continuing). I can't find anything with regard to Jerry Catena. Mr. PHILLIPS. You told me that. When yOu got this letter, it was an unsolicited letter? Mr. JACOBS. It was prompted by the Sports Illustrated article. Mr. PHILLIPS. Did Mr. Burke write to you that he read the article and gratuitously wrote this letter to you? Mr. JACOBS. Mr. Burke is doing security work for me now. Mr. PHILLIPS. And does he work for your father-in-law? Mr. JACOBS. He did some work for my father. Mr. PHILLIPS. For your father-in-law? Mr. JACOBS. No, my father. Mr. PHILLIPS. Is there a man by the name of Ryan connected with this organization? Mr. JACOBS. Yes. Mr. PHILLIPS. WhO is that? Mr. JACOBS. That is my brother's father-in-law. Mr. PHILLIPS. Is he one of the owners? Mr. JACOBS. He used to be the sheriff of Erie County and also, I think, the Republican majority leader or something in Erie County. Mr. PHILLIPS. Did he have something to do with Burke Security? Mr. JACOBS. I think he is a director of it, but I don't know in what connection. I have never talked to him in regard to it at all. Mr. PHILLIPS. It seems to me this letter says your father expended a considerable amount of money. As I read it, and I may be reading it incorrectly, this has been some venture in which Catena was involved in, if you read that paragraph. It would seem to me that you would go back and ask Mr. Burke where his reports were and what his investiga- tion was if you really were interested in determining what this was all about. Mr. JACOBS. Do you mean on Catena? Mr. PHILLIPS. Yes. Mr. JACOBS. He told me he had a tremendous file on Catena. He said he did a lot of the development work. You had a fellow here from New Jersey who he had originally supplied the original investigation *on Catena. He knew this man. Burke would like to come up and testify because I think you would find it very interesting. He did a certain amount of work for the National Football League. PAGENO="0384" 1394 He has extensive background on this. In other words, he gave me a short letter. He could probably fill 14 files as to how it developed. Mr. PHILLIPS. Was your father doing business with Mr. Catena and that is why he decided to investigate him? Mr. JACOBS. No. The letter speaks for itself. It says he was consider- ing entering into a business proposition. Mr. PHILLIPS. What is the reference, "after your father expended a considerable amount of money?" Mr. JACOBS. He spent a lot of money on developing a statistical data and evaluation of the property. Mr. PHILLIPS. What was the business of. absolute ties with Gerardo Catena? Mr. JACOBS. I don't know. Mr. Burke can tell you. Chairman PEPPER. Gentlemen, I am very sorry. Mr. Winn wanted to ask a question. Mr. WINN. Thank you, Mr. Chairman. Mr. Jacobs, were you here in the room when your brother, Mr. Max Jacobs, testified this morning? Mr. JACOBS. Yes, sir. Mr. WINN. You heard most of his testimony then? Mr. JACOBS. Yes, sir. Mr. WINN. There were several questions about the ownership of the Kansas City Kings, the old Cincinnati Royals, that I felt might have been unanswered. One was the tie between Sportservice and the concessionaire that will probably get the concession from the Kansas City Kings new basket- ball team, B. & L. Can you clarify that for me? I am not exactly sure who owns what. Mr. JACOBS. I would be happy to. Mr. WINN. Let's start with the Kings. How much of the Kings' stock does Emprise own? Mr. JACOBS. None. Mr. WINN. Emprise owns none? Mr. JACOBS. None. Mr. WINN. Jerry Jacobs owns how much? Mr. JACOBS. Fifty-six percent. Mr. WINN. And how many additional stockholders would there be in the remainder? Mr. JACOBS. I thought there were several hundred but my brother just told you there are 90, or 100, or 80. Mr. WINN. You thought there were several hundred? Mr. JACOBS. Yes. Mr. WINN. And he thinks there are only about 80 or 90? Mr. JACOBS. He would know better than I because he is the chair- man of the board. I have never seen a stockholders' list. Mr. WINN. You have never seen the stockholders' list, but you are the owner of 56 percent? Mr. JACOBS. That is correct. Mr. WINN. But you have never seen the list of the remaining stock- holders? You don't know who the rest of your partners are? Mr. JACOBS. They are not my partners. They own shares of stock in the company. PAGENO="0385" 1395 Mr. WINN. They are not your partners, I guess, because they don't have the controlling interest. They are not that important? Mr. JACOBS. They are very important as shareholders but I am just a shareholder like they are. Mr. WINN. But you own 56 percent of the stock, right? Mr. JACOBS. That is correct, sir. Mr. WINN. So you own by far the controlling interest of the stock. Mr. JACOBS. I own more than half; yes. Mr. WINN. Would you give the the background on Sportservice or Emprise's holdings as far as the basketball franchise is concerned? Mr. JACOBS. Sportservice has no relationship to the basketball. Mr. WINN. Itis B. & L. Mr. JACOBS. B. & L. has no relationship to the basketball team. I think I know what you are trying to say. B. & L. has the concession at the Kansas City Auditorium. At the Kansas City Auditorium con- cessions are controlled by the city council, or some authority within Kansas City. Those concessions have been let to B. & L. Concessions a number of years ago. When I say a number, maybe 2 or 3 years ago. It has been an ongoing concession relationship with B. & L. Mr. WINN. Who owns B. & L.? Mr. JACOBS. B. & L. is half-owned by Sportservice and half-owned by George Bush. Mr. WINN. Which George Bush? Mr. JACOBS. The only George Bush I know. Mr. WINN. He is not the Ambassador to the United Nations? Mr. JACOBS. No, sir. Mr. WINN. I just wanted to clarify that. Who handles the contract agreements for B. & L., or Emprise, or Sportservice? Mr. JACOBS. In the instance of Kansas City? Mr. WINN. Yes. Mr. JACOBS. George Bush. Mr. WINN. George Bush handles that? Mr. JACOBS. Yes. It is publicly bid, I believe. Mr. WINN. I asked your brother had he ever heard of the name Morris. Have you ever heard of the name Morris? Mr. JACOBS. Yes, sir. Mr. WINN. In what capacity do you recall the name Morris? Mr. JACOBS. When my brother was considering going to Kansas City with the Royals, or was looking into that as being a possible location, I spoke to Mike Coen. Mr. WINN. You spoke to whom? Mr. JACOBS. Mike Coen. He is first of California. Anyway, he is in the security business. Mr. WINN. Would that be M. J. Coen? Mr. JACOBS. Right. I told him of our interest but then indicated to him that the dates at the auditorium were completely filled and could he help me to get dates in the auditorium if it were decided that we would try and move the franchise to Kansas City. Mr. WINN. Is this Mr. Coen you are talking about? Mr. JACOBS. Yes. He said, "I don't know, but I have a friend that, maybe, could help." 81-068-73-pt. 3-25 PAGENO="0386" 1396 In that direction he went to,I think, Mr. Morris, who is an acquaint- ance of his, and Mr. Morris helped to introduce my brother or at least advise the people who are in~ charge of the auditorium assignment of dates and so on to give favorable consideration to the moving of the team into Kansas City. Mr WINN Do you know what Mr Morris does ~ Mr. JACOBS. I think he is the Assistant Governor Or Lieutenant Governor. Mr. WINN. Lieutenant GovernOr of the State of Missouri. Mr. JACOBS. Yes. Mr. WINN. Are you awar&that he is also a candidate for the Gover- nor of the State of Missouri on the Democratic ticket? Mr. JACOBS. I think I am; yes. Mr. WINN. Do you know if you or Max contributed to his campaign? Mr. JACOBS. I don't believe either one of usdid. Mr. WINN. You don't believe either one of youdid? Mr. JACOBS. I would have to ask him. I didn't. Mr. WINN. I am just trying to hurry it up. Do you know if Mr. M. J. Coen might have contributed to Mr. Morris' campaign? Mr. JACOBS. I think he probablydid. Mr. WINN. Have you heard of Mr. Morris in any other capacity* other then trying to help you get located there? Mr. JACOBS. I understand Mr. Morris at one time was interested in getting a hockey franchise. . Mr. WIN'N. Hewas interested in a hockey franchise? Mr. JACOBS. Interested in participating ma hockey franchise. Mr WINN I don't know all of the stockholders in the organization that ~as as~arded the hockey franchise, but I don't recall his name as being one of them; but it couidbe. Mr. JACOBS. Mr. Coen and Mr. Morris, I believe, own the minor league franchise now in Kansas City. That is the affiliation. Mr. WINN. Do you know of any other case where. you have heard of the name William S. Morris?. Mr JACOBS I think I have told you about all that I know about him Mr WINN Did you hear `your brother s'my that he was not aware of the name of William Morris ~ Mr. JACOBS. I-don't,think he was.; no. Mr WINN Let me possibly refresh your memory from the morning St Louis Globe Democrat, the front page story, banner story, clear across the page "Morris Held Stock in Track With Emprise Loan." You are not aware of that? Mr. JACOBS. What racetrack is that? Mr. WINN. What racetrack? I will again quote from this article. Lt. Gov. William S. Morris among several Missouri public officials who hold or have held stock in two New Mexico parimutuel horserace tracks, the racing com- mission records show The corporation that owns the tracks under pressure from the New Mexico Racing Commission, recently paid off a $600,000 loan from Emprise Corp. The answer to your question to me was the two New Mexico tracks. Does that refreshyour memory? PAGENO="0387" 1397 Mr. JACOBS. Well, no, I did not know that Mr. Coen had an in- terest- Mr. WINN. I didn't say Mr. Coen. I said Mr. Morris. Mr. JACOBS. I know Mr. Coen had an interest in the racetracks. Mr. WINN. But you didn't know Mr. Morris, the Lieutenant Gov- ernor, did? Mr. JACOBS. The only thing I do know is that Mr. Morris has an in- vestment in a hockey club with Mr. Coen. Apparently, by that article, he must have had an interest in the racetrack as well. Mr. WINN. The article also says that Morris, who is seeking the Democrat nomination for Governor, said he disposed of his track inter- est in January of 1971, which is after the date that the racing commis- sioner of New Mexico put the pressure on them to pay off their loan. At that time he held, through stock in other corporations, the equiva- lent of about $68,000 in stock in the two tracks, which, according to this article, says that he paid off a $600,000 loan for the corporations. You are .right, Mr. M. J. Coen does own stock in those two racetracks. So your memory there is pretty good. Mr. JACOBS. Mr. Winn, excuse me. Mr. WINN. I don't mean to confuse you. Mr. JACOBS. You are not, but I think it is confusing as to the article. The Ruidoso Racetrack was loaned $600,000 to Eric Culver and a group, incidentally, a fellow from Wichita, as well, that owned a com- pany called NuCo, to loan them $600,000. Subsequently tothat the racetrack went through certain dIfficulties in getting racing dates and so on and subsequently got the racing dates. After they got the racing dates the racetrack operated for 1 year and then Mike Coen and a group through some investment company bought the racetrack. My loan that was originally made to Ruidoso with the original owners continued on with the new owners of the stock. It could very well have followed again, but it had been paid off prior to this sale you are talking about. Mr. WINN. There wouldn't be any possibility of these gentlemen- particularly as I look at the list I see some names that I know very well, who enjoy very fine reputations, and about half of them are politicians. This wouldn't be any hidden representation on the partof Emprise, would it? Mr. JACOBS. No Mr. WINN. Have you ever heard of the name Jack Hackley? Mr. JACOBS. -No. Mr. WINN. The name Jack Hackley doesn't ring a bell with you? Mr. JACOBS. No, sir. Chairman PEPPER. I am advised that we simply have to vacate the room because another function is to occur here and the room has to be set up. I regret very much to have to ask my colleagues to terminate their inquiry but it looks like that is what we will have to do. Mr. WINN. Mr. Chairman, I am really just getting into this line of questioning. Not only the committee but the people of the Midwest, would be very interested in this. Can we have Mr. Jacobs come back before the committee sometime? PAGENO="0388" 139~8 Chairman PEPPER. I can say the intention of the committee now is that we will resume these hearings on July 18, this series of hearings. Do you wish these gentlemen to return at that time to conclude your inquiry? Mr. WINN. I would be glad to do that. I have some other questions. I would like to make one short statement of about 30 seconds. Chairman PEPPER. Very well. Mr. WINN. If you don't know the name of Mr. Jack Hackley, I would like to point out that he is a colonel on the Governor's staff who headed a petition drive to place the question of legalizing horseracing before the Missouri voters, and he is one of the stockholders in the cor- porations in which Emprise just paid off a $600,000 loan. Mr. JAcoBs. Excuse me, sir. Emprise was paid off a $600,000 loan. Emprise didn't pay off a loan. They paid me off. I also know that Mr. Coen was very interested in the passage of legislation in Missouri. Mr. WINN. I accept that correction. But the point was that Mr. Jack Hackley, who now serves as a colon~l on the Governor's staff, has headed a petition drive to place the question of legalizing horseracing before the Missouri voters. I would like to end my questions right there, Mr. Chairman. Chairman PEPPER. Very good. Gentlemen, we will have to ask you if you will be good enough to re- turn on July 18, at 10 o'clock in the morning. There may be further questions. Mr. BWrMAN. Mr. Chairman, both Max and Jerry Jacobs have testified here voluntarily without subpena. We will again reappear on July 18 without subpena. Chairman PEPPER. We appreciate that very much. It might be well for Mr. Max Jacobs to return, also. There might be something that would come up. `~\Te will recess until July 18. (The following letter was received from Mr. Jeremy Jacobs.) TULY 24, 1972. Hon. CLAUDE PEPPER, C1~airman, Select Committee on Crime, U.S. House of Representatives, Washington, D.C. MY DEAR Mn. CITATRMAN: As you will recall, after my last appearance before your Committee, you asked me to submit for your consideration any recommendations which I might have regarding corrective measures to be taken by the Federal Government in the field of pari-mutuel wagering. Pursuant to your request, myself and my staff have devoted a considerable amount of time and effort focusing on this problem, and I am pleased to enclose herewith a detailed report for you. I had expected to deliver this as a prepared statement before your Committee, tomorrow, Tues- day, July 25, 1972, which is when I was scheduled to reappear. I have just learned that my appearance has been cancelled and it is not expected that I will testify again until sometime during the month of September. However, I wanted you, at this time, to have the benefit of my thoughts and recommendations on problems related to pari-mutuel wagering. it is my earnest hope that this report will be of some help to you and your Committee in formulating appropriate recommendations to the Congress. Let me say that I would be only too happy to meet with you or any member of your staff after you have had an opportunity to review the enclosed, should you wish to discuss any of my recommendations in further detail. Should you desire that I further develop or clarify any of these recommendations at the time of my next PAGENO="0389" 1399 appearance before your Committee, please let me know beforehand and I shall be so prepared when I am called to testify again. The problems which confront the racing industry today are, in my judgment, extensive, as I have tried to demonstrate in the enclosed report. I do not profess to have all of the answers. This report does represent the preliminary thoughts and recommendations which I have developed in the time frame available. I would like to have the opportunity of further developing and refining my recoin- niendations if you feel that would be helpful. I am convinced that there are no easy answers here and the proper solution to the problems which beset racing will require intensive thought and study on the part of many people including your Committee. To the extent that I can assist in this most difficult task, I would be happy to do so. I would appreciate your making this report a part of the official record of these hearings and distributing the enclosed copies to the other members of your Committee. Respectfully, JEREMY M. JACOBs., PREPARED STATEMENT OF JEREMY JACOBS, PRESIDENT, EMPRI5E CORP. Mr. Chairman, Members of the Committee: My name is Jeremy Jacobs. Today I appear before your Committee for the second time. After my previous appear- ance here in June, you may recall, Mr. Chairman, you asked me to prepare for the Committee my recommendations of means by which the problems of crime in pari-mutuel racing might be combatted. This I am most happy to do. Crime presents a major threat to all legitimate businessmen and honest sportsmen who are interested in racing. Perhaps some of the testimony that has been presented at these Hearings may have been exag- gerated, or sensationalized. Nevertheless, all of us who are involved in racing are aware that the problem of crime is real, and that vigorous action and con- stant vigilance are required to protect racing against the criminal elements. Emprise Corporation, and the Jacobs family, are committed to this battle. We are substantially involved in racing, and any threat to racing is a threat to us. Through my involvement in the operations of Emnprise Corporation, I have become familiar with various aspects of racing during the past few years. Since last month, when you asked me, Mr. Chairman, to prepare recommendations for this Committee, I have been giving a great deal of thought to means by which Congress could contribute to the solution of problems which I have observed in racing, and other problems which have been presented in testimony before this Committee. In addition, I have discussed these matters with numerous people in all phases of the racing industry, to get their ideas for solutions. Based upon both my own experiences in racing, and those of a great many other interested and committed people, I have developed some recommendations which I believe merit consideration by this Committee. In presenting these recommendations to you, I am mindful that it is the man- date of this Committee, in the words of House Resolution 115: ". . . to conduct a full and complete investigation and study of all aspects of crime affecting the United States . . ." and to report Congress on appropriate measures to combat the crime problems discovered by your investigations. However, I do not believe that the problem of crime in racing can effectively be considered in isolation from the other serious, noncrime problems of the industry; if crime in racing is to be effectively attacked, it must be as part of a broad front attack on a wide range of problems. This is true because crime in racing is only a symptom of the disease. It will do no good to attack the symptoms unless we also attack the disease. Let me give you an example. One of the most serious charges which this Com- mittee has heard about racing is how easy it is for the criminal element to get in behind the scenes at the track, into what we call the "back stretch," to the stables where the horses are kept, so that they can administer the drugs to fix a race. We have security to prevent that; we have laws to punish those who fix the races, and those who help to fix them. But apparently a few race fixers still do get into the back stretch; I might add, a very few, in my opinion. We hear demands for stricter penalties, better security, more effective law enforcement. Perhaps we should have them. But I think more thami this is needed. PAGENO="0390" 1400 1 say this because there exists in the back stretch, a basic weakness, an Achilles heel, of racing. I suggest that this weakness lies in the living conditions of the grooms, the exercise boys, the hot walkers-the so-called "back stretch workers." It is ironic that racing, which most people think of as involving tremendous wealth-which is even called the "sport of kings"-should have as one of its real problems the poverty of its workers. But that seem to me to be the case. The simple fact is that racing is not attracting the highest caliber employees possible and something must be done to reverse this trend. I suggest, Mr. Chairman, that no attack on crime alone can be successful unless an overall approach is taken to racing-one which will focus on this problem and many, many others as well. I dO not believe that this Committee is in a position now to tackle the problems of racing with the broad, overall approach I believe is essential. Its focus is on crime throughout the sports world. I do not believe it can devote its resources to the study of racing, to the formulation of regulatory concepts, to the structuring of comprehensive regulations and pro- grams for racing. Therefore, rather than to recommend piecemeal legislation aimed at specific abuses, I believe that it should be the principal recommendation of this Com- mittee that Congress establish a Federal Study Commission to look into racing in all its aspects and problems, to consider what role the Federal Government has to play in solving those problems, and to report to Congress precise and detailed recommendations for federal legislation in the field of racing, if it finds federal legislation necessary. The mandate of the Commission should not be limited to crime, although that should clearly be a major part of its study. Rather, it should consider how to attack all the problems of racing; it should seek answers to the entire range of regulatory questions. In constituting this Commission, Congress should draw upon the knowledge, experience and expertise of the racing industry. It is there that the human re- sources for attacking these problems will be found, there that the ideas already exist and the information needed to formulate new ideas. The Commission should include representatives of every aspect of racing: owners, trainers, jockeys, track owners, track officials, concessionaires, and the public. it should draw on the expertise of the organizations like the TRPB and the HTS which have been involved for years in racing security. Such a Commission could, I believe, make a substantial contribution toward a comprehensive and rational approach to the solution of the problems of racing. One of the major questions to which the Study Commission should address itself is the role of the Federal Government in the regulation of racing. Tradi- tionally, the regulation of racing in the past has been a state government func- tion. Although this Committee has heard criticism of the way that various states have conducted that regulation, I do not believe that it has been all that bad. However, there is no doubt in my mind that racing does involve interstate commerce in many of its aspects, which could be brought within the jurisdiction of federal law. Horses cross state lines as they move from one race track to another, as do the jockeys, trainers, spectators-and the criminal hangers-on of racing. Clearly, racing is within the power of the Federal Government to regulate as interstate commerce. The question is: Should the Federal Government exercise that power and, if so, how? At one extreme, we can imagine the Federal Government taking over the entire regulation of racing, establishing a Federal Racing Commission com- pletely supplanting the state racing commissions. Or the Federal Government may limit itself to a few specific programs aimed at specific problems which are national in character and beyond the capacity of the state governments. But if it does this, it must be careful not to undercut the effectiveness of state regu- lation, nor to impose conflicting and confusing obligations on the racing industry. it is my hope that, as a general rule, the role of the Federal Government will be principally in setting guidelines for the states, and aiding them to carry out their regulations. It is my hope that the states will follow the lead of the Federal Government, voluntarily and enthusiastically. But I do believe that the Study Commission will probably find that there are some fundamental areas in which positive action by the Federal Government is absolutely essen- tial to protect and foster the integrity of the sport. I think it is appropriate to note here the action a week ago of the National Labor Relations Board in announcing a reconsideration of its long-standing policy of not exercising jurisdiction over labor in the horse and dog racing industries. PAGENO="0391" 1401 During the next sixty days, the Board will be considering the views of interested parties as to whether there ought to be federal regulation of workeis in racing It is not my intention to get into that question here. But it does seem appropriate to suggest that, decisions like this one, as to the role of the Federal Govern- ment in regulating racing, should not be made On an ad hoc, case by case basis, without any overall federal policy. The Study Commission which I have sug- gested, would be an appropriate body to consider and develop that overall policy. Mr. Chairman, I would like to spend a few minutes discussing specific pro- posals which I believe the Study Commission which I have recommended, should be directed to consider. These proposals are of two types. The first I would call "preventive". The second I would call "rehabilitative," The preventive measures are aimed directly at specific problems, generally, but not exclusively, related to crime. The first of these is that all horses be re- quired to undergo a pre-race blood test, to combat the fixing of races through the use of drugs. As the Committee undoubtedly knows, the practice today is to give a post-race urine test to the first and second horses in the race, and to a horse chOsen at random from among the rest of the horses in the race. This means that if a horse is drugged to make him lose the race, rather than to win it, the chances are that the drug will usually not be detected. A pre-race blood test of all horses would substantially reduce the possi- bility of drugging horses so that they lose. I understand that such a blood test is not infallible, that there are certain drugs it will not detect. But a recent study conducted at Ohio State University indicates that it is quite effective. Combined with the present post-race test, it should substantially reduce the amount of race fixing through the use of drugs. The pre-race test has the substantial advantage of allowing the drugged horses to be eliminated from the race before it is run-or to cancel the race-rather than to try to undo the damage after the race. However, in order to implement pre-race blood testing, the tracks will be required to expend substantial sums of money-expenditures few of them can afford at the present time. Therefore, the Study Commission, when considering this proposal, will also have to consider means of paying for the attendant costs. Unless the federal or state governments are willing to bear these expenses, I am afraid that pre-race blood testing will become a reality only after we develop and implement measures to generate more money for the racing industry-some- thing which I will speak of in a few moments. Second, I suggest that the Study Commission consider putting some limits on betting by the participants in racing. Let me make it clear; I certainly do not mean that betting by owners and trainers should be prohibited; betting is a part, and a respectable part, of racing. But I do believe that the credibility of racing suffers when owners, trainers, and jockeys bet against their own horses. At the present time, most states do prohibit jockeys from wagering against horses which they ride. I suggest that this prohibition should be expanded to include owners and trainers. It is an unavoidable fact that the owner, trainer or jockey of a favored horse may be able to make more money if his own horse loses, by betting on the winner, than he can make from his share of the purse if his horse wins. This provides a real incentive for dishonesty-throwing a race is as dishonest as fixing it. I would therefore recommend that owners, trainers, and jockeys be pro- hibited from betting against their own horses. Third, I suggest that the Study Commission consider a complete prohibition against state racing officials having ownership interests in horses which race at tracks in their states. These officials-and I am now speaking principally of state racing commissioners-are charged with the responsibility of regulating racing. The credibility of that regulation necessarily suffers when the regulators are also participants in the regulated activity. Now please understand me. I am not saying that racing commissioners abuse their powers to promote their private interests. I don't believe they do, and I certainly know of no instance in which it happened. But we don't generally make a man the umpire of a baseball game if he is the owner of one of the teams, and I don't believe we should allow the state racing commissioners to race horses in their own states. Therefore, specifically, I propose that no horse be allowed to race in a state if a racing commissioner or other racing official of that state has a ten percent or more ownership interest, directly or indirectly, in that horse. PAGENO="0392" 1402 Finally, I believe that security at certain tracks can be improved. Again, let me repeat that I think the incidence of race-fixing is small. At many tracks, an excellent job of security is being done by the Thoroughbred Racing Protective Bureau (TRPB) and Harness Tracks Security (HTS). These agencies are pro- fessional, they are experts in the problems of crime in racing, and they are effec- tive. However, not all tracks are members of the TRPB or HTS. Those which are not members often are faced with the same serious threats to their security by criminal elements. Since TRPB and HTS are private agencies, it would probably not be appropriate for the Federal Government to require that they accept all tracks for membership. But, I believe some procedure should be worked out so that all tracks are afforded the opportunity to make Use of the investigative services of TRPB and HTS whenever they feel there is a threat to their security. I also believe that non-member tracks should be able to receive all bulletins and other information put out by TRPB and HTS pertaining to undesirable persons and practices. Of course, non-member tracks would be expected to pay reasonable fees for these services. Now, as I have said, I do not believe that the Study Commission should neces- sarily recommend that Congress adopt these proposals as federal laws. It would probably be preferable if they were enacted by the individual states in line with the traditional state regulation of racing. This Committee, in fact, while recommending that the Study Commission be established to consider these proposals, might also recommend that the individual states enact such legislation. After all, these Hearings have attracted a great deal of attention across the country, and the recommendations which this Com- mittee makes will be given the most serious consideration by the various states and agencies involved in racing. Perhaps if the states adopt these proposals, that will obviate the need for the federal government to do so. However, if the states fail to act, then I believe that firm and affirmative action by the federal govern- ment will be necessary. But these preventive measures cannot be the whole answer to the problems- including the crime problems-of racing. We also need rehabilitative measures, to strengthen and promote the racing industry, to foster its healthy growth and. the participation in it by businessmen, sportsmen, and the public. It is to these rehabilitative measures that I would like to see the federal government devote its major efforts-not in a punitive way, but in a constructive way. The powers and resources of the federal government should be brought to bear on the problems of racing positively-yet pragmatically. What we need is not the armored fist, but the velvet touch, of the federal government. Among the specific rehabilitative measures which the Study Commission should consider are two which I feel are particularly deserving of attention. They provide examples of the kind of positive and constructive federal action which I-believe is essential if racing is to be preserved as a healthy sport and industry. The first of these relates to the problem of the back stretch workers which I touched on earlier. The federal government could make a positive contribution to racing-in a manner which would have a substantial effect in reducing crime, as well as improving the health of racing more generally-by providing federal assistance for training back stretch workers through the Job Corps and other federal manpower development programs. These back stretch jobs are, in many ways, ideally suited to the abilities of the hard-core unemployed-you don't need a high school diploma to do a good job as a groom, an exercise boy, or a hot walker. These jobs are particularly well-suited for the unemployed in our rural areas-like Appalachia-who are often already familiar with horses, and many of whom live fairly nearby to horse farms and training centers where they can be trained. The federal government could very positively aid the racing industry by pro- viding trained-and uncorrupted-back stretch workers, while racing could aid the government by employing workers who previously were totally unproduc- tive. And I think the availability of such federally trained workers would be a substantial incentive to the industry to make many positive improvements, once it has the means to do so. A second area which I suggest the Study Commission should consider as ap- propriate for federal action lies in attempting to bring some uniformity and consistency into the various state laws and regulations governing racing. Today, these laws and regulations vary so greatly from state to state that the industry PAGENO="0393" 1403 is constantly inconvenienced in trying to conform to all of them, and the public is often prejudiced and confused by the uncertainties created by this lack of uniformity. For example, take the drug Butazolidin, known commonly as "Bute." I realize that the use of Bute on a racehorse is a controversial subject, and I am not focusing on the issue of whether it is good or bad. Some horses will run much better with Bute than without it. In California it is legal to administer Bute. In New York, however, the drug is prohibited. What happens as a result is that a horse will have a very good record in California, running with Bute. It will then be brought East, where it must run without Bute, and so it will just not run very well. What concerns me is that no one knows which horses were getting Bute in California and which were not. This introduces an entirely artificial uncertainty into racing which really shouldn't be there. The victims of this un- certainty, of course, are the members of the public who wager on the basis of the California record of horses using Bute. Likewise, there are inconsistencies in the regulations applicable to pari-mutuel wagering as well as significant differences in the quality of the equipment which * is utilized. For example, at Some tracks, the totalizer board gives pre-race pay-off figures on exotic wagering-like the exacta-as well as the figures in straight betting. This clearly benefits the public and discourages the abuse of exotic * wagering by criminal elements which this Committee has already heard a great deal about. At other tracks, this information is not made available to the public. I recommend that the Study Commission examine the feasibility of formulating uniform regulations governing such matters as the administration of drugs to race horses; the type of pari-mutuel equipment which is utilized at race tracks; the extent to which there should be disclosure to the public of the use of equip- ment-like blinkers and mud caulks-which can affect a horse's performance; the operation of pari-mutuel wagering; along with uniform rules regarding the qualifications of track officials, and any other matters which it finds would be best regulated in a uniform manner. I would particularly like to see the develop- ment of uniform standards for disclosures about horses, so that all relevant in- formation needed to evaluate a horse's past performance and present possibilities would be made generally available to the public. It would be my hope that such uniform regulations could be formulated simply as guidelines, and that the states would voluntarily conform to them. Certainly, the federal government should be able to encourage the states to do so. However, as I remarked earlier-racing is interstate commerce, and if only federal legislation is able to provide the necessary uniformity, then I believe that Con- gress should enact the guidelines to be developed by the Study Commission into mandatory law. But measures of this kind, no matter how productive and positive they may be, cannot save the racing industry, because they go only to the symptoms of the disease, not to the disease itself-and its cause. And make no mistake, racing is suffering from a disease, the most serious diseae an indutry can suffer from: unprofitabihity. Continued long enough, this disease is invariably fatal. It may come as a surprise to some that racing is unprofitable, because we have so long associated racing with great wealth. But the facts are well established. For example, last year the New York Division of the HBPA-the Horsemen's Benevolent & Protective Association-submitted to racing officials in the State of New York, a comprehensive report of a study which the HBPA had made comparing purses with maintenance expenses in thoroughbred racing. This report indicated that in 1970 and 1971, the net return to horse owners from purses in New York not only failed to cover maintenance expenses, it fell more than $7 million per year short of covering expenses-and this didn't even include such expenses as breeding fees, taxes, privately operated training centers, and so forth. Perhaps in the past it would not particularly have mattered whether or not the owners were losing substantial amounts of money; it used to be that owners engaged in racing for pleasure, prestige-and for the tax deductions which the law formerly allowed them. This is no longer so. More and more. the owners of today need to make money if they are to continue in racing-and the government is now denying them income tax deductions unless they can, at least in some years, turn a profit. This situation is already critical. It shows every sign of getting worse rather than better, unless something is done, and done quickly. PAGENO="0394" 1404 The tracks, too, are in bad financial condition. For example, in New York, where more people go to the track, and where more money is bet on races, than in any other state in the country, the tracks are losing money. In other states, the situation is nearly as bad; even where the tracks are making money, they are not making a profit commensurate with the amount invested in the tracks. As a result, the natural growth of the racing industry has been stifled. A dis- proportionate number of participants in racing are old-timers, people who became committed to racing at an earlier time when profitability was not as important as it is now. New blood is not being attracted into the industry. Neither is the money for investment to expand the industry to meet the growing popularity of the sport among the public. The economic weakness of the racing industry is, I believe, partially respon- sible for making racing such tempting prey for criminals-who can wring a dishonest dollar out of a situation where it is difficult for a businessman to turn an honest profit. Crime is going to feed on any industry that is economically weak, and racing is no different. I believe that the Federal Government must be the architect of a new economic structure for racing . . . one in which the owners and tracks make fair profits commensurate with their investments and in which employees earn a decent wage, and live and work in decent conditions. I believe that the Federal Study Commission which I have proposed, should look into the economic situation in the racing industry to find out just what is wrong, and just what causes it. When it has done so, I believe it should consider means by which the financial health of racing can be improved, with the help and guidance of the Federal Government. I believe that the Study Commission will find that one major source of racing's economic difficulties is the drain on its resources by the treasuries of the various states. Take, for example, the tracks in New York City, Aqueduct and Belmont. There, seventeen cents out of every dollar bet is retained, or not returned to the bettor, and of that amount, ten cents goes to the State of New York. In other states, the situation is nearly as bad-and getting worse. Not only does this mean that a disproportionate amount of the money in pari-mutuel racing gets drained off, out of the industry, it also tends to discourage betting, since the greater the "take out" from the pari-mutuel handle, the smaller the winnings that are left. Every time the take-out increases, track attendance and handle fall. Yet, despite the huge sums that racing pays to the state, the states in turn do not provide commensurate services to racing. Contrast this situation to that in Canada. The Canadian national government takes one half of one cent out of every dollar bet, in addition to what the provinces take out. In return, the gov- ernment provides, through the Ministry of Agriculture, all testing and analysis for drugs for race horses; it provides the photo finish and film patrol equipment; and supervises all other aspects of racing security. And, it still has a surplus of funds from its share of the take-out. If the states continue to bleed racing, if they continue to think of it as a busi- ness which exists only so that the state can extract large sums of money from it-then they will kill racing as an industry and as a sport. Now, to be frank, I am not certain what the Federal Government can do to induce the states to be more reasonable in their demands upon the racing dollar. Hopefully, the Study Commission can develop a realistic approach toward tax- ation of racing by the states, which the states will follow voluntarily. Perhaps the Federal Government could condition the availablity of certain racing-related programs to the states upon their compliance with federal guidelines in the taxation area. I do not know what the answers are-if we knew the answers, we~ wouldn't need a Study Commission-but I deeply hope that the Study Commis- sion will find the answers, so that racing does not suffer the fate, at the hands of the state tax collectors, of the goose that laid the golden egg. On~ the subject of taxation, there are certain matters of federal taxation which the Study Commission should also look into. For example, the Commission might consider whether some kind of tax relief-mitigating the effect of the Tax Re- form Act in penalizing unprofitable horse owners-might be appropriate. It might also consider tax incentives for investments in tracks, training centers, and the like-perhaps in connection with urban renewal or rural redevelopment projects. But, in my opinion, the major long range project which the Study Commission should consider has to do with off track betting; with the coming advent of OTB, PAGENO="0395" 1405 the Study Commission should examine ways by which OTB can be utilized to channel more money into the racing industry. I believe that the federal govern- ment should ensure that there is a fair and equitable allocation of OTB revenues to the industry as well as to state governments. OTB, of course, is just in its infancy now. But if New York's experience with OTB proves successful, then OTB is likely to be the wave of the future as other states seek new sources of revenue. In my opinion, OTB is both the greatest hope-and the greatest threat to the future of the racing industry. It is a threat because it may have the effect-in New York it certainly is already having the effect-of drastically reducing attendance at the track. Lower attendance injures the racing industry as a whole, and could, ultimately, be fatal to it. But OTB is the great hope of racing if the racing industry can get a fair share of the amount which is bet off the track. Clearly, the potential amount of betting off the track is far, far greater than what will be bet at the track. If a fair portion of this increased volume of betting goes to the racing industry, then there is a substantial likelihood that racing can become profitable. However, it is by no means certain that the industry will get a fair share of the OTB handle. In New York it was only after the most vigorous efforts of the industry that even a small proportion of thet OTB handle was allocated to the racing industry. If, as anticipated, other states adopt OTB as a means of in- creasing revenues, they, too, will be tempted to give racing as small a slice of the pie as possible. I believe that the Study Commission should consider means of preventing the states from draining the industry of revenue by failing to allocate a fair share of OTB revenues to purses and tracks. There is one area of OTB where federal action is particularly imperative- because there seems to be a substantial likelihood that, without federal inter- vention, the states may leave the industry not a small slice of the pie-but no pie at all. This is the area of interstate off track betting. Even though OTB is still a very recent phenomenon, interstate OTB is already appearing, and growing. For example, for the past two years, New York OTB has been taking bets on the Kentucky Derby, and this year it started taking bets on certain Maryland races. Yet, in the present state of the law, the OTB Corporation was not obligated-at least by any express statute-to share a nickel of the handle on those races with the industry which put on the races and, thus, made the betting possible. In the case of the Maryland races, Mary- land and New York officials were able to work out a contractual arrangement for sharing the handle with the local racing industry-but in the case of Ken- tucky, no such arrangement was made, and the industry received nothing from the New York OTB handle. Clearly, fairness demands that the industry which makes betting possible, whether on-track or off-track, should share in the proceeds, whether the bet is taken in the same state as the race is run or not. I believe that it is the respon- sibility of the federal government to see to it that racing gets its fair share of the OTB handle, in all cases, but particularly where interstate betting is concerned. I believe that this is one of the first things that the Study Commission should look into. It may consider, but I hope it does not decide, to prohibit interstate OTB entirely. Rather, I would urge that the Commission strive for ways of using OTB constructively, to strengthen racing. I am hopeful, here again, that if the federal government commits itself to the assurance that the racing in- dustry receives a fair share of the interstate OTB handle, the states will co- operate with the federal government in this effort. But I am convinced, that it will be the duty of the federal government to require, by positive legislative action, that the industry receive its fair share of the interstate OTB handle. Because it appears to me to be clear that the states are not going to allow the industry a fair share of the interstate OTB handle voluntarily, and because it may be some time before the Study Commission is able to recommend com- prehensive federal regulation of interstate OTB which would require such a fair share, I suggest that Congress enact temporary legislation prohibiting interstate off track betting. Such a prohibition would lessen, if not eliminate, the damage to the industry by OTB which is unregulated by the federal government. Mr. Chairman, there are many other positive, rehabilitative measures which the Study Commission should consider, which would tend to promote the rncing industry as a whole, and the interests of the public. Time does not permit de- tailed discussion of them here today. But I hope that what I have said makes PAGENO="0396" 1406 clear the approach which I believe the federal government should follow in meeting the problems of racing, and the attitude which should inform that approach. I have no doubt that there will be a role for specific controls and restrictions by the federal government-particularly of what I have called a "preventive" nature-although I hope that the states will take the initiative in many of these measures. But I envision more than that-and racing needs more than that. I envision the federal government becoming the architect of a revitalized racing industry, through its adoption and promotion of the kind of rehabilita- tive measures I have mentioned. As a result of this kind of positive approach, I believe that solutions to a whole range of problems can be developed-not just problems connected with crime. I can tell this Committee that the racing in- dustry will welcome such positive leadership from the federal government. Finally, Mr. Chairman, I would like to suggest an action which this Com- mittee could appropriately recommend for enactment by the Congress right now. I believe that it is a measure which is so clearly needed, and so directly related to the problem of crime in sports, that it does not require further deliberation by the Study Commission which I have proposed. I recommend that Congress establish a Federal Racing Licensing Authority, which would be empowered to license all those engaged in racing in interstate commerce-specifically, horse owners, trainers, jockeys, and track owners. The individual states presently license some of all of those who participate in racing, and they generally do a commendable job of screening out "unde- sirables." However, their effectiveness is limited by the limitations of their in- formation resources. The individual states simply cannot compile the vast store of information which the federal government accumulates through the FBI, the Justice Department, the Treasury Department, and so forth. Particularly when we are talking about organized crime, this is a mattter uniquely within the com- petence of the federal government. The problem in the past has been that people in racing-not just private indi- viduals and businesses, but state agencies as well-have had no way of making effective use of the wealth of knowledge in the files of the federal government as to who the undesirables are. Federal licensing would provide a mechanism for using that information, because the Federal Licensing Authority would deny licenses to any persons it found, on the basis of its investigation and the files of the va4ous federal agencies, were undesirable. Federal licensing should be in addition to, and not in substitution for, state licensing. Thus, it would be required that an applicant for a federal license have a valid state license already in effect, if the state in which he does business imposes a licensing requirment. By the same token, if the holder of a federal license were to have a state license revoked, his federal license would also be subject to revocation. It would be my suggestion that no one be permitted to engage in racing, training, or riding horses in more than one state unless he had a valid federal license, plus, of course, a valid state license in each state in which he engages in business, and the same requirement of a federal license should be applicable to one who owns a race track. In connection with this licensing, the federal government would require full disclosure of all persons with ownership interests in the horses or tracks to which the license applied. Concealment, or the use of fronts or other deceptive devices, would be made a federal crime with severe penalties. The applications for such licenses would be public records, available for inspection by anyone who wanted to know something about the character-and connections-of the licensee. I have said before that one of the biggest problems many of us in racing have, which is no different than any other business, is knowing who the undesirables are. The newspapers, of course, are full of references to people who are "re- puted" or "alleged" to be involved in organized crime somehow or other. But I am a businessman. I have to deal with facts. A federal license is a fact. I can deal with it. I think most people in racing would be happy to have that kind of licensing. It is a positive contribution which the federal government can make to the improvement of racing. Mr. Chairman, this concludes my prepared remarks. I would be happy to discuss any or all of these recommendations with the Committee here and now, or to meet with the Committee staff at a later date to discuss further. PAGENO="0397" 1407 implementation of these recommendations. Should the Federal Study Commis- sion be appointed as I have suggested, I commit myself to work with it. As I said at the beginning: I think I know something about racing. Over the years, I have owned and raced horses and I have in recent years become in- volved in the ownership of various race tracks. But, in all candor, I would have to say that even my overall knowledge of the problems which beset racing is limited. Make no mistake about it, Mr. Chairman, and Members of the Com- mittee, this is a complex industry and there are no easy answers. I believe that I can make some small contribution to the solution of these problems, and I would welcome any opportunity to do so. Thank you. (Whereupon, at 4 p.m., Thursday, June 15, 1972, the committee adjourned, to reconvene at 10 a.m., Tuesday, July 18, 1972.) 0 PAGENO="0398"