After the Sydney syndicates consolidated their hold over organized crime in New South Wales during the battles of 1967-8, the revolver gave way to the briefcase as the symbolic weapon of the underworld and leading Sydney personalities began to cultivate contacts among the American Mafia. From the late 1960s, regular trans-Pacific contact between leading Sydney personalities and alleged U.S. Mafia figures was established and eventually culminated in a number of American investments in Australia.
While the Sydney milieu had much to learn from more experienced American Mafia and its enthusiasm for these contacts is easy to understand, the reason for American syndicate interest in Australia has often eluded State and Commonwealth police. American organized crime, it has been argued, could hardly be bothered with a small and distant land like Australia. But, as Mr Justice Moffitt discovered to his dismay, Australia does present a tempting target for American organized crime. New South Wales’ gambling industries, both legal and illegal, have a turnover and profit margin without equal in the world. Of the $7,125 million invested in all forms of gambling in 1976-7, only the $675 million put through the TAB, less than 10 per cent of the total, was largely immune to organized crime penetration. Even the $4,600 million put through poker machines could be tapped through a variety of means: gangs of poker machine cheats, skimming and inflated sales and service contracts.
Unlike Nevada or France where all forms of gambling are tolerated but strictly regulated, the enormous New South Wales gambling business remains largely beyond state controls. Illegal gambling is unregulated, and there is almost no government supervision of poker machine operations once the licence fees have been paid. In Sydney licensed clubs are within a short drive from any suburban neighbourhood and large crowds of working-class members can be found pumping away on the rows of poker machines any night of the week. Sydney’s illegal casinos are at the city centre or in major suburban areas, and as crowded during the week as on the weekend. In short, the affluence of Sydney’s gambling clubs has made Australia a prime target of opportunity for American organized crime.
According to the later findings of the Moffitt Royal Commission into Organized Crime, Australian-American contacts began with an Asian ‘holiday’. Travelling through Hong Kong in 1965, a Chicago businessman named Joseph Dan Testa was given a letter of introduction from an anonymous contact to a Sydney figure named Ronnie Lee, later known as a partner with Percival Galea in the Forbes Club casino. During his seven or eight day stay in Sydney, Testa was introduced by Lee to Reg Andrews, proprietor of the Kellett Club baccarat school. After returning to Chicago, Testa maintained a regular correspondence with Lee.
Although Lee had introduced Testa to Sydney, most of his later dealings with Australia were conducted through that durable triumvirate: Leonard McPherson, Stanley Smith and George Freeman. Preceded by a letter of introduction from Ronnie Lee, Smith and Freeman travelled to Chicago under false passports in 1968 and stayed as Testa’s guest in his 400-unit apartment complex inhabited by 900 air hostesses. After six weeks of what Testa later called ‘giggles’ and ‘one hell of a time’, he took Smith and Freeman to Las Vegas.
Testa returned to Sydney in February 1969 and was greeted with a round of parties hosted by Lee and McPherson. Police later obtained a photograph of one gathering at Sydney’s Chequers Night Club and were able to identify some of Sydney’s leading personalities: Leonard Arthur McPherson; Milan ‘Iron Bar Miller’ Petricevic, and George Freeman. During his four week stay Testa gave a flamboyant interview to People magazine, went kangaroo hunting with McPherson at Bourke, and was feted with a champagne farewell party at Mascot airport. In 1970 it was McPherson’s turn and he travelled to America at Testa’s invitation, staying with him at his home in Chicago and at the Sands Hotel in Las Vegas, a licensed casino ‘connected in the early days with leading gangsters in America’. Pan-Pacific amity continued with the arrival of Testa at Mascot airport on 13 January 1971 where he was met by Ronnie Lee and George Freeman. During his six week stay Testa formed Grants Construction Pty Ltd with his ‘close friend’ George Freeman to invest $235,000 in a property in Cooper Street, Double Bay.
By 1971 Police had become aware of the growing Australian-American contacts and were concerned by their implications. During his third visit Testa was picked up by Detective Sergeant Knight of the N.S.W. police and asked a series of rather blunt questions: ‘Do you know that George Freeman is a reputed criminal?’; ‘Do you know that you can be booked for consorting?’; and, ‘Are you one of the leaders of the Mafia?’ Testa did not answer the latter question in the affirmative, but police gathered intelligence which indicated otherwise:
Subject is thirty-five to thirty-eight years of age, is the owner of a caravan park at Justice, Illinois. . . Testa travelled to Australia to renew his acquaintance with Leonard Arthur McPherson. Whilst in Sydney he associated with the criminal element, including McPherson, Freeman and Lee. He has access to considerable funds and entertains a good deal. . . The alleged intention then is to establish a centre for organized crime which will initially integrate activities in New South Wales, Queensland and Victoria. He intends then to maintain a formal link with organized crime in Chicago, Illinois.
A Commonwealth Police inquiry into Testa’s activities began in June 1971 and by September the investigating officer, Sergeant Gyles, had contacted an informant who mentioned for the first time the name of the company that was to become the prime target of the Royal Commission into Organized Crime: Bally Poker Machines. The anonymous informant alleged that a Sydney poker machine company was using ‘threats of violence’ against clubs, American ‘organized crime money was being used in the poker machine business in New South Wales’, and Leonard McPherson was involved. This informant further charged that Testa was conspiring with McPherson and a poker machine company to corner the New South Wales market and ‘to attempt penetration of clubs with a view to gaining control of their entertainment, food and liquor services’.
Commonwealth police investigations in North America uncovered official reports alleging that Testa ‘was a financial adviser employed by an organized crime syndicate in Chicago’. Of the twenty-two companies owned or controlled by Testa, sixteen had ‘some connection, or suspected connection, with the Chicago “Syndicate” ‘. Testa’s partner in several companies, Frank Pantaleo, had well-documented associations with syndicate figures in the Chicago area. Commonwealth Police concluded: ‘Testa is a member of the syndicate and is therefore unlikely to bring anything to this country other than a totally undesirable connection between organized criminal groups in this country and the United States of America’.
Commonwealth Police investigations into New South Wales organized crime culminated in the compilation of one of the most controversial police reports in recent Australian history — a nineteen-page document dated 19 May 1972 and titled The Bally Manufacturing Company’. A complex and enormously detailed document, the report covered the company’s involvement with American Mafia figures in the United States and its alleged penetration of the New South Wales club market through ‘classic’ American organized crime methods. Commonwealth police learned that Bally had been established in the late 1930s by an ordinary Chicago businessman named Raymond Maloney. In 1963 Maloney’s heirs sold Bally to a seven-man consortium apparently dominated by New York Mafia Don Gerardo Catena, who exercised his influence anonymously through ‘dummy’ investors.
Commonwealth police went on to detail disturbing linkages developing between Bally America and poker machine operations in New South Wales. The police alleged that there was a concerted campaign by an alliance between Bally and Sydney syndicate figures to drive Australian manufactured machines off the market, secure a monopoly of the $400 million industry for Bally and then use this ‘corner’ as leverage to take over a wide range of club supply services, particularly entertainment bookings. An ‘American crime organizer’, either Testa or one of the Bally American executives who visited Sydney in 1971, had allegedly initiated a ‘campaign against club managers who have refused to purchase Bally products’ and ‘an attempt to destroy the image of locally manufactured gaming machines’.
The alleged agent of this campaign was Leonard McPherson: ‘Information has also been received indicating that professional poker machine players have been instructed by Leonard McPherson to manipulate Australian-made gaming machines to (a) further destroy their image, and (b) put financial pressure on recalcitrant clubs who are resisting Bally’. The infiltration had already begun and the Arcadia Top Artists booking agency was said to be ‘associated with Bally interests and is using unscrupulous methods in an endeavour to monopolize the club entertainment business in New South Wales’. Arcadia’s manager, Geoffrey Gardiner, was supposedly a ‘close associate of Leonard McPherson’, and its country manager was Murray Stewart Riley. Commonwealth police sources had alleged that ‘once Bally moved into a club, Arcadia follows shortly after. Also if a club installs Bally machines it apparently obtains the opportunity to secure an overseas act supplied by Arcadia on a cheaper basis than normal’. The report reached some disturbing conclusions:
- that a direct and deliberate attempt has and is being made to infiltrate an American organized crime-controlled legitimate business concern into Australia;
- in the establishment of this company (i.e. Bally) the ‘classic’ American organized crime methods and corrupt tactics are being adopted.
Senior Commonwealth police met with N.S.W. detectives in Canberra in May 1972 and presented them with the Bally report and a covering letter warning that the investigation clearly showed the control of the Bally Company by United States Mafia-type criminals. Joseph Testa’s 1969 and 1971 visits had alerted Commonwealth police to the threat and inquiries in the U.S. had revealed that Testa was ‘connected with Mafia-style organized crime groups in Chicago’. Commonwealth Inspector Dixon ‘instanced take-overs in the hotel industry of North America by a chain known as Holiday Hotels, and stated that from his information Whale Car Washes and Thomas National Transport were backed by money from American syndicated crime’.
Prior to receiving this report in May, N.S.W. detectives had already begun a limited investigation of organized crime penetration of clubs. Acting on the orders of Sergeant Jim McNeil, N.S.W. police officers interviewed an anonymous source in December 1971 who alleged, according to police interview notes, that:
The American Mafia were in the clubs and a man named Bumper Lambert was teaching cheats to steal on Ainsworth machines.
This man puts cheats in clubs and when the poker machines are taking drops he approaches the clubs to put in Bally machines, guaranteeing that their profits will jump. A man called Wally Dean, a man called Abrahams and a man called Riley have been to the States with the Mafia and met the same people in Las Vegas buying acts — Mafia tie-in.
N.S.W. police ignored these and other leads for six months until they were given a copy of the Commonwealth police report on the Bally Manufacturing Company in May 1972. After only three or four days of superficial inquiries into the report’s contents, N.S.W. police filed their first report about organized crime activity in the State on 1 July 1972, summarizing the Commonwealth police conclusions and arguing that U.S. Mafia penetration of New South Wales was a distinct threat. As N.S.W. police continued their inquiries over the next six months, they failed — whether through incompetence, inability, or indifference — to corroborate the strong statements they had made about Mafia infiltration of the State in their initial July report and progressively weakened their position in their later reports filed in August and October. By the time that Detective Sergeant McNeil had completed his last report in November, he was arguing that organized crime and Mafia penetration were not serious problems.
While the N.S.W. police investigation moved forward slowly and with little success, Commonwealth police scored a major intelligence coup in August 1972 when its officers detected ‘summit’ meetings among alleged Sydney syndicate leaders. Through observation, Commonwealth police learned that over the past two weeks there had been three meetings at 44 William Street, Double Bay ‘called to discuss the current activities re organized crime’ by seven of Sydney’s leading personalities, including Leonard Arthur McPherson, Stanley J. Smith, George Freeman, Frederick ‘Paddles’ Anderson, Karl Bonnette, Milan ‘Iron Bar’ Petricevic, and a Labor Party influential, Mr Albie R. Sloss, MLA. Although advised of these meetings by Commonwealth police, N.S.W. police made a few phone calls and concluded that they were simply social gatherings called to ‘play cards’. The N.S.W. detectives chose to ignore the Double Bay meetings and did not even bother to report them to their superiors, an oversight the Royal Commission later found difficult to comprehend.
Alerted to the organized crime problem by informants, several members of the Sydney press corps launched their own inquiries and by July 1972 the daily newspapers began carrying some sensational stories. During the year between the initial press revelations in mid-1972 and the formation of the Royal Commission in August 1973, the four dramatis personae played their roles in perfect character: the press, with banner headlines racing in front of its facts, hurled the issue into the realm of public controversy; the State Opposition, following in the wake of the press, seized upon the issue like an assassin grasping a dagger and used it to probe the soft political underbelly of the Askin regime; Premier Askin, always on the defensive and never in full command of the facts, found himself repeatedly embarrassed; and several investigating officers of the N.S.W. police, continuously revising their reports and eventually whitewashing the matter, went into business with the poker machine companies they were supposed to be investigating. The organized crime debate of 1972-3 became one of the most controversial issues in the State’s postwar political history and produced Australia’s first serious inquiry into the problem.
The first serious journalistic report did not appear until mid-July 1972. Written by a free-lance journalist, Anthony Reeves, the report outlined Mafia penetration of the club industry. After two months of research into corporate records and interviews with contacts in the club industry, Reeves approached the editor of the Sunday Telegraph with the story. Convinced of its accuracy, the editor assigned Reeves to work with Telegraph reporter Bob Bottom and together they produced a major piece of investigative journalism. On 16 July 1972 the story appeared under the title, The Night the Mafia Came to Australia’:
The Mafia, fat with money and confidence, came to Sydney in the winter of 1969. At a small party at a luxurious home overlooking the Watsons Bay waterfront, a slightly-built American was entertained by Sydney’s underworld czars. His main business was with a man about the same age, short and thick-set and lazy about his appearance — Sydney’s ‘Mr Big’.
Also in attendance were the host, the owner of an illegal, inner-city gambling club and a former Sydney detective, suspended and sentenced to one year in gaol for trying to bribe and the policeman who was later to become one of the Mafia chief’s Australian lieutenants.
Pursuing the story, Bob Bottom published an anonymous article the following week headlined ‘Crims Grab Clubs’. The article charged that criminals had taken control of four clubs and implied that Leonard McPherson was the principal. The articles raised a storm of public controversy and several weeks later McPherson rang Bottom at the Telegraph. According to Bottom’s testimony, the conversation went as follows:
When I answered, the caller said: ‘Is that Mr Bob Bottoms?’ When I replied ‘Yes’ he said: ‘I have a few words to say to you . . . you are the man who wrote a story about me in the Sunday Telegraph.’
I asked, ‘What story?’ And he said, ‘That story about me taking over the clubs. This is Lennie McPherson here — you know who I am’.
My immediate reaction was to play it cool, so I promptly interrupted and asked, ‘I know the story you are referring to but how do you know I wrote it?’
He answered, ‘I know. I have been told. I am a man who gets upset, and that story has upset me. I’m upset about it and that’s why I am calling you’. . .
He ended the conversation on that note, but before ringing off, mentioned that he wanted us to know that he was not involved in drug trafficking. He said, ‘I’ve heard some people are saying I’m involved with drugs. That’s one thing I won’t have. When it comes to drugs, I’m 100 per cent against them. . . I wouldn’t have anything to do with it.’
Press reports stirred controversy in State Parliament and debate on the issue dragged on for over a year, becoming increasingly acrimonious as Premier Askin changed his position on Bally poker machines. After reading the first N.S.W. police report on Bally’s alleged links to organized crime in July 1972, Premier Askin expressed grave concerns in an address to Parliament. A wave of sensational headlines followed: ‘Mafia In Clubs — Askin’, ‘Criminals In Some Clubs — Askin’, ‘Mafia Machines In Seventy Clubs’. Four months later Askin reversed himself and told Parliament that police had now found Bally above suspicion.Another round of headlines blazed across the tabloids: ‘Mafia Not In Clubs — Askin’. Evidently in possession of the original Commonwealth police report alleging Bally’s links to the American Mafia, State Opposition leaders levelled charges of a ‘cover-up’ against the Premier. Misled by police and politically embarrassed by the whole affair, Premier Askin appointed Mr Justice Athol R. Moffitt to head a Royal Commission into Organized Crime in August 1973.
from Drug Traffic by Alfred McCoy