Las Vegas & Organized Crime Part II

Punters and Gangsters Flock to Las Vegas

A massive change came to Las Vegas during the final years of James “Jim” Ferguson’s reign over the underworld. While he was fighting various charges in 1931, gaming was made legal in Nevada again. As a result, new casino and showgirl venues opened along Fremont Street—the only paved road in the growing city—in the hopes of attracting workers to spend their hard-earned cash.

Prohibition fell by the wayside next, in 1933, but unfortunately for Ferguson, he was locked away in prison and in no position to take advantage of the changes in the law. By 1938, authorities in other states had begun to crack down on all the vices so freely available in Vegas, opening the door for a massive influx of tourists.

Gangsters and other nefarious elements of the criminal fraternity continued bootlegging and offering illegal gaming in other states around America, but crackdowns by law enforcement eventually forced many of them to seek opportunities to make money elsewhere. A flood of gangsters and displaced gamers sought refuge in Nevada, but it would be many years before the gangster who helped make the foundations of modern Las Vegas came to the city.

The outbreak of World War II (WWII) in September 1939 temporarily stunted the growth of Las Vegas, and for a time, it appeared the fledgling city would simply fade away into the annals of history. Nevada Senator Pat McCarran inadvertently came to the rescue. In 1941, he successfully lobbied for a magnesium-processing plant southeast of the city, and a military airfield. Dam workers were replaced by defense personnel, eager to forget their woes and indulge in everything Vegas offered. The first hotels, El Rancho Vegas and the El Cortez opened the same year.

Near the end of the war, the first advertising contracts to promote tourism were awarded. Encouraged by the large influx of newcomers, hotel owners began to offer entertainment featuring top-name performers such as Frank Sinatra and Tommy Dorsey. When World War II finally came to an end in 1945, many of the soldiers chose to settle in the city permanently, nearly tripling the population. The stage was set for a new wave of organized crime figures to take over the city, and it all started with one man, Benjamin "Bugsy" Siegel.

The Man Who Helped Create Sin City

Let’s get one thing straight—Las Vegas was built by organized crime figures; it wasn't CEOs, governments, eccentric millionaires or any of the people currently profiting from the billions of dollars running through Las Vegas. Those people are certainly enjoying the fruits of the mobsters’ labors, but men like Benjamin "Bugsy" Siegel truly built Sin City.

There were many businessmen who had the ability and knowledge to create profitable casinos, but most of them didn’t have the money to fund the venues. On the other hand, there were many gangsters who wanted to invest in the casino industry, but had no idea how to run a business. It was only a matter of time before these two groups combined their efforts, and in the process, Las Vegas was born.

In the time between the fall of first Vegas Vice King, James "Jim" Ferguson, and Benjamin "Bugsy" Siegel's revolutionary—but brief—time at the top of Las Vegas' underworld, there were more than a few other gangsters in the city, but none came close to the impact these two had. Ferguson may have brought the first true organized crime group to the city, but Siegel helped usher in a new era that saw gangsters infiltrate and control pretty much every important industry, from drugs and gaming to hotels and real estate.

Siegel already had a fierce reputation when he first moved out to Las Vegas around 1945. His nickname Bugsy was supposedly a reference to the Idiom, "crazy as a bedbug", and was earned due to his erratic and often violent behavior. During the 1930s, Siegel made a name for himself as a notorious bootlegger, but after Prohibition was repealed in 1933, he supposedly turned his skills to murder and muscle for hire. His new job saw him tried for murder in 1941, and again in 1944, but he was eventually acquitted due to insufficient evidence after several witnesses were killed.

Bugsy was a boyhood friend to Chicago outfit boss, Al Capone, and organized crime heavyweight and money man, Meyer Lansky. When they got older, Siegel allegedly helped Capone hide from the law a few times, but it would be Lansky with whom he spent most of his adult life working. The two men founded The Bugs and Meyer mob, and were heavily involved with the National Crime Syndicate, a loosely connected confederation of criminal organizations. It’s good to have friends.

After the National Crime Syndicate formed around 1929, Siegel became a founding member of a group the media dubbed “Murder Incorporated,” a crew of enforcers that carried out murders and other violent acts for the Syndicate. By the time Murder Inc was disbanded in 1941, some sources say they were responsible for at least 400 murders, although, others say it was well over 1000. Either way, the gangsters in Murder Inc were not to be trifled with. “I’m funny? Funny how?” kind of scary.

At various times throughout his life, Siegel controlled several offshore casinos and maintained working relationships with well-connected businessmen, attorneys, accountants and politicians. He also befriended some of the biggest movie stars in the country like Clark Gable, Gary Cooper, along with studio executives such as Louis B. Mayer and Jack L. Warner. He was a well-connected and very dangerous man.

The Start of a Billion-Dollar Industry

By 1945, Siegel was trying to shed his image as a quick-tempered rogue with an itchy trigger finger, but he’d inadvertently become one of the first front-page celebrity gangsters, and shedding that image was proving to be easier said than done. His playboy lifestyle and murder trials made him a household name. He started looking for new and more legitimate opportunities in the business world; a struggling casino hotel would eventually provide that chance, although it would prove to be a double-edged sword in the end, costing him everything, including his life.

The Flamingo Hotel & Casino was built on land originally owned by one of the first settlers to the area, Charles Squires. In 1944, Squires sold it to Margaret Folsom, who then sold it to Billy Wilkerson. At the time, there were hotels and casinos in Las Vegas, but Wilkerson had plans to create a grand blending of the two, complete with luxurious rooms, spas, a showroom, restaurants, and a nightclub. He was already very successful in the business world, with a few popular nightclubs and the Hollywood Reporter Magazine already under his banner, but the Flamingo was going to be his crowning achievement. Unfortunately for Wilkerson though, he wouldn't get a chance to finish his project.

It didn't take long for the construction project to run into trouble. So soon after the end of WWII, material and labor costs were stupidly high. So, Wilkerson found himself in need of new financing. At the same time, newcomer Bugsy Siegel had his own troubles. The gangster and his partners had purchased a relatively small hotel and casino called the El Cortez, but city officials blocked all his expansion attempts due to his extensive criminal background. After hearing about Wilkerson's financial issues, Siegel saw a chance to pursue his plans, using the legitimate entrepreneur as a front man.

Siegel and his partner's managed to convince Wilkerson to give them a stake in his hotel casino in exchange for their vast sums of cash. Using their criminal contacts, the mobsters also helped obtain black market building supplies and more labor. Siegel stayed in the background for a time, learning how the business worked from Wilkerson, who was far more experienced. However, the gangster slowly began to take control. It started with a few business decisions without Wilkerson's knowledge or consent, then Siegel outright demanded a more significant role in the construction; Wilkerson relented, but Siegel wasn't done yet.

What happened next isn't entirely clear; there are two conflicting versions of how Siegel took control of The Flamingo Hotel & Casino from Wilkerson. In one version, Wilkerson ran out of money again, and Siegel bought him out to take full control. In the other version, Siegel forced him out, threatening the businessman with death if he didn't sign over complete ownership. Either way, by 1946, and with the financial backing of some crime bosses and his boyhood friend and long-time associate Meyer Lansky, Siegel managed the final stages of construction while Wilkerson left Vegas and went overseas.

Wilkerson wasn't the first entrepreneur to try and create a premium hotel-casino in the desert, but his fresh ideas would be the spark that Siegel would use to revolutionize the entertainment industry in Las Vegas, creating the first major casino-hotel complex with everything under one roof. The Flamingo Hotel & Casino's eventual success would inspire a whole generation of hotels and set the foundations for the modern city. It also ushered in a new era of organized crime that saw gangsters dominate the city for several decades.

Siegel Wracks up Record Debt 

Using his contacts in the film business and other high-profile industries, Siegel had plans to bring gaming, movie stars, the best food, liquor and entertainment under one roof. Combined with state-of-the-art facilities that were far beyond anything the competition was offering, Siegel was convinced The Flamingo Hotel & Casino was going to be a smash hit that would appeal to both high rollers and casual gamers.

To make his vision a reality, he began a legendary spending spree that saw costs explode beyond all initial projections. He wanted to build the finest hotel casino in Vegas, and demanded the best materials, but it proved very expensive and time-consuming to get them with post-war shortages, even with his criminal contacts. Each bathroom in the hotel had its own sewerage system; more toilets were ordered than needed; the boiler room was enlarged because of the plumbing alterations, and a whole host of other expensive alterations were added to the design.

Costs began mounting with no returns. Originally budgeted at $1.2 million, the bill rose to over $4 million, which in 2021, would be tens of millions. As his checks started to bounce, and tempers flared, the pressure was on for the financial backers to see a return soon, or else. Siegel was a well-respected and feared man, but even he couldn't avoid retribution from angry mob bosses forever. Ultimately, his passion project would prove to be his undoing.

Siegel didn't help matters in the slightest; his famous temper had become even more unstable as the pressure mounted. His alpha-male posturing allegedly became the inspiration for many other casino moguls who followed, but it also made him very hard to work with. Head contractor Del Webb apparently became very skittish one day after Siegel bragged about killing people for the mob.

Siegel's financial backers finally snapped and gave him an ultimatum—show them exactly where all the money was going with accounting reports and receipts (pretty much everything the IRS demands every year at tax time), or, they wouldn't send any more money. Siegel refused to provide the mob bosses with any accounting information in defiance of the command, and started his own fundraising campaign to get more money. He sold non-existent stocks in the business to unwary investors and started funneling all the money back into The Flamingo.

Siegel doubled his workforce and started paying overtime, figuring more people working twice as hard would speed up construction and get it finished in half the time. His speculation paid off, but in his haste, he made another mistake. Near the end of 1946, the work was close to being completed, but desperate to finally pay back his disgruntled investors, he decided to change the opening date from March 1, 1947, to December 26, 1946.

In his mind, The Flamingo Hotel & Casino was too big to fail at that point; unfortunately, the reality proved otherwise. Regardless, it was full steam ahead. By this time, the pressure to succeed made Siegel act even more erratically, if that was possible. He changed the opening date at least once, before swapping it back to December 26. The short-notice opening day changes made it extremely difficult for the complete guest list of celebrities to attend, which were one of the main drawcards. Regular punters also struggled to keep up with the changes.

Build it, and They Will Come… Eventually 

When it finally opened to the public on December 26, 1946, The Flamingo Hotel & Casino was the first luxury hotel complex on the Las Vegas Strip, and the Mafia’s first major foothold in the city. There was just one problem; the building had a price tag of over $6 million attached, and it still wasn't finished.

Only the casino, lounge, restaurant, and theatre were operating, and the sounds of construction were constant. With no rooms ready for guests, a broken air conditioner, and only a handful of celebrities, the grand opening was a flop, and that's being kind. It didn't take long for Siegel to realize his big opening night was a complete and utter failure. First, he became very agitated, then aggressive to anyone stupid enough to go near him; he allegedly then started ejecting people from the premises.

The reception to the new venue was poor, but Siegel decided to muscle through and kept the doors open. This would prove to be another costly mistake. Only two weeks later, losses were closing in on $300,000, and with no profits coming in, the mob bosses were still waiting to get their money back. The whole business was shut down less than a month later when profits failed to materialize.

This is when the mob bosses supposedly began discussing ways to remove Siegel and have someone new oversee the operation. In the criminal world, the easiest way to achieve that was through murder. The word apparently came down from the top—Siegel was going to die for his repeated failures. However, long-time friend and business partner, Meyer Lansky, managed to convince everyone to give Siegel another chance, citing his previous earning power and reliability.

It's unclear whether these meetings actually took place, or it was all just a rumor, but nevertheless, Siegel had one final crack at making The Flamingo a success. He spent the next few months throwing everything he had into the construction; he spared no expense. This time though, Lansky was on hand to supervise, along with a few other associates such as American businessman and mobster Moe Sedway. By the time the original opening date of March 1947, came around, the venue, now called The Fabulous Flamingo, was ready for round two and opened to the public again.

The second opening was far more successful, in no small part due to the fact that the building was actually finished. Profits steadily started to accumulate, finally allowing Siegel to pay back some of the money he owed to his very patient financial backers. The good fortune wouldn't last though, he would be dead only a few months later.

The Death of Benjamin "Bugsy" Siegel 

On June 20, 1947, Benjamin "Bugsy" Siegel was killed in a hail of bullets by an unknown assailant while at his girlfriend's house in Beverly Hills, California. Officially, there was no motive, and nobody has been charged with the killing; the crime remains unsolved. Unofficially, there has been plenty of speculation about who killed Siegel and why. Whoever did it made sure to shoot him enough times that he wouldn't survive the encounter.

The most obvious theory speculates that the mob bosses who financed The Flamingo grew tired of waiting to get their money back and took out a contract on Siegel, ordering his murder. There were also allegations that Siegel was quietly stealing cash from the operation, combined with his flippant attitude towards his investors, mob bosses ordering his murder seems like the obvious choice. People have been killed for far less in the unforgiving criminal underworld.

Another theory suggests Meyer Lansky gave the final word to have Siegel killed after their relationship soured in the face of mounting losses from The Flamingo. Lansky had bailed him out once and was unwilling, or unable, to bail him out again. However, it's worth noting before he died in the 1980s, Lansky said in interviews his long-time friend Benjamin "Bugsy" Siegel would still be alive if it were up to him.

The final theory worth mentioning suggests that Siegel was killed for another reason entirely. After the initial debacle with The Flamingo's opening, Lansky and a few other associates, like Moe Sedway, kept a close eye on the venue's finances. Siegel supposedly grew resentful at this extra scrutiny and planned to have Sedway killed.

Sedway's wife Bee allegedly went to her lover Mathew Pandza and convinced him to kill Siegel to protect her husband. Of course, nobody can say for sure where the truth actually lies. By the end of his life, Siegel had made many enemies, and much like the disappearance of Jimmy Hoffa, every few years, somebody new comes out of the woodwork to tell the "real story" of what happened. As of 2021, the murder of Benjamin "Bugsy" Siegel remains unsolved.

Organized Crime Gains a Strong Foothold in Las Vegas

Only 20 minutes after Benjamin "Bugsy" Siegel was shot to death, a small crew of Meyer Lansky’s associates—Moe Sedway and Gus Greenbaum—walked into the Flamingo and announced they were in charge.

The pair managed the venue for the next few years and transformed the struggling business into a rousing success. Under their management, The Flamingo presented everything Siegel had envisioned.

Its high-end accommodation and high-profile celebrity shows became the market standard, ushering in a new generation of hotel-casinos that offered a complete entertainment experience rather than focusing on gaming alone. As a result, The Flamingo began to see significant returns, posting over $4 million in profits by 1948.

Siegel's death, and The Flamingo's subsequent success, saw an influx of more gangsters; plenty of New York and Chicago gangs came flooding into Las Vegas. Now regarded as an "open city" by organized crime figures, many sent their representatives to gain a foothold and take advantage of everything the city had to offer.

Although his role was considerably more restrained than in previous years, Lansky remained a prominent presence in the city and is believed to have advised and aided several other mob bosses, including Chicago boss, Tony Accardo, in setting up their own operations. It was a golden era for organized crime.

However, their success would eventually prove to be their undoing. It didn't escape the notice of the rich and powerful that mobsters were essentially in charge of Las Vegas. The wolves started circling, eager to wrest control from the organized crime families who were building an empire that would one day turn into the entertainment capital of the world.

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This is an article referencing the history of Las Vegas. It is for information and entertainment only. It is not related to, nor a reflection of, Global Poker, its views, products, content, or its games.