Las Vegas has become a favorite destination for American tourists, many of whom are attracted by the city’s connection to organized crime figures. Indeed much of the narrative surrounding the funding of resort hotels in Las Vegas in the two decades after World War II focuses upon the mob financing of them. While it is true that money from mobsters played a role in the construction of several hotels, including the Sands, Tropicana, and Caesars Palace, there were also investors and developers not associated with the criminal underworld. Notably, the funding of the first of the post-war hotels, the Flamingo, which enjoyed a spectacular opening on December 26, 1946 with Jimmy Durante performing before a packed house, showed how mob bosses worked together with more traditional investors to promote growth in the city. Most who have written about the development of this property contend that the mob funded the Flamingo’s construction because, while it was the brainchild of Billy Wilkerson, gangster Benjamin “Bugsy” Siegel completed the casino and hotel. Yet examining the evidence suggests that mob bosses had a specific role in funding construction. They provided seed money to fund projects that bankers thought were too risky.
Wilkerson, a successful developer of popular southern California restaurants and editor of the Hollywood Reporter, conceived of the Flamingo and began the construction in late 1945, but quickly ran out of money largely because of his heavy gambling losses. Siegel took over in summer 1946 and completed both the casino in December of that year and the hotel the following March. Siegel, who had made a fortune in New York as a bootlegger during Prohibition, had moved to Beverly Hills in the mid-1930s and gained control of illegal gambling in southern California and the race wire service throughout the Southwest. In 1941, he began to consider Las Vegas as a possibly lucrative gambling center.
As Wilkerson had before him, Siegel envisioned a resort hotel that would offer tourists something dramatically different than the western-themed El Rancho Vegas and Hotel Last Frontier, the first two hotels on what soon would be called the Las Vegas Strip. Beyond its lush landscaping, huge swimming pool, casino with plush carpeting and elegant drapes, and beautiful hotel rooms, the Flamingo would also offer gourmet meals and some the biggest stars of the era in its showroom, including, eventually, singers Lena Horne and the Andrews Sisters, and comedians Joe E. Lewis and Abbott and Costello.
The $6 million required to pay for the extravagant property contrasted sharply with the $350,000 needed to build the El Rancho Vegas in 1941. To secure the funds, Wilkerson turned first to banks. He obtained a loan of $600,000 from Bank of America to start the project and, along with Siegel, secured another $2.3 million from Valley National Bank in Phoenix. Then Siegel sought, without success, to get additional loans from Bank of America as well as two insurance companies. When they turned him down, Siegel complained that bankers did not understand that the rooms would be a loss leader and that the profits from the casino would subsidize the operation of the hotel.
Siegel had to draw upon other sources. He was part owner of the downtown El Cortez Hotel-Casino, which provided him with a profit of $160,000 when he sold it in July 1946. He also created the Nevada Projects Corporation so that he could sell shares of stock, a move that brought in over $500,000. Howard Hughes, a personal friend of Wilkerson’s, lent $200,000. Siegel, who had gained control of the race wire service that provided bookies in Las Vegas with horse racing results in 1941, poured his profits of about $25,000 a month into the project.
These sources failed to cover the escalating costs. Siegel had to rely upon $1 million provided by G. Harry Rothberg who was the co-owner, with his brother Samuel, of the American Distilling Company. Still short of the investment dollars needed to complete the Flamingo, Siegel turned to organized crime figures for help. Through his associate Gus Greenbaum, a Phoenix bookmaker who ran Siegel’s race wire service in Arizona, Siegel sought a $500,000 loan from the Chicago mob, but had no luck. He then traveled to New York in October 1946 and visited with Frank Costello, the kingpin of the New York mob, at his stylish Copacabana nightclub. According to George Wolf, Costello’s attorney, Costello invested his own money and persuaded others like Phil Kastel to give Siegel money, a total of over $1 million.
In the end, most of the money Siegel used to build the first of the successful mob-influenced casinos in Las Vegas appeared to come from seemingly legitimate sources like sales of shares of stock and bank loans. But that money was likely a cover to legitimize the enterprise. In fact, even those exchanges were suspect. Three of the biggest stockholders in the Nevada Projects Corporation were Siegel, his long-time gangster friend Meyer Lansky, and Lansky associate Louis Pokross. Also, some claim that mobsters influenced the lending practices of Valley National Bank.
The experience of the Flamingo explains the development of many of the subsequent hotels in Las Vegas over the next two decades. Banks often were reluctant to fund casinos and mobsters were eager to invest in enterprises in the only state where gambling was legal. So, mob money poured in, but so did funds from investors with no connection to organized crime. Indeed, publicly traded-corporations, like the Del E. Webb Corporation, as early as the 1950s, were involved in casino operations. It appears that visionaries seeded the funding of the remarkably successful casinos of Las Vegas, beginning with Bugsy Siegel’s Flamingo in 1946. It just happened that the visionaries who could take the biggest risks often made their investment money in crime.