Nevada Rolls the Dice, Part II

Harold’s Club blackjack dealer Katherine Hector, known as the “Georgia Peach,” circa 1942. | Mark McLaughlin

When Congress repealed Prohibition in 1933, it was yesterday’s news in Reno, Nev. Because of Nevada’s prior legalization of wide-open gambling in 1931, along with its popular six-week divorce policy, the Biggest Little City in the World had already earned a reputation as a party town.

Read Part I.

During the Roaring Twenties, both gambling and drinking — though technically illegal — had been tolerated by Nevada law enforcement. The only restriction in downtown Reno was that roulette wheels and card tables could not be operated at street level. Bribes to police officers helped ensure that deputies would look the other way and not interfere with discrete basement or second-floor operations.

Pappy Smith hired attractive women and had them schooled “to handle dice, cards, wheels, and chips” … women made better dealers than men and they “added an air of refinement to the place.”

After the stock market crash of 1929, Nevada became a retreat for the wealthy — a sanctuary for those still financially solvent. Business tycoons such as George Whittell, who built the Thunderbird Lodge at Lake Tahoe, were naturally drawn to a state that levied no income tax, no inheritance tax, no sales tax and no gift tax. Although it was Reno’s divorce trade that carried the state economically during the 1930s, the legalization of gambling during the Great Depression laid the foundation for the future casino industry, which ultimately became the major underpinning of modern Nevada’s economic base.

The Reno-Tahoe gaming industry got its first casino in 1936 when Raymond “Pappy” Smith and his two sons Harold and Raymond Jr. opened Harold’s Club in downtown Reno. Harold and Raymond Jr. had rolled into town the year before lugging a penny roulette wheel, some borrowed slot machines and $500 in cash. With their father’s help, Harold and Ray Jr. parleyed their meager beginning into a successful casino operation. By the time World War II broke out, the Smiths were millionaires and Harold’s Club employed 150 full-time workers, half of them women. Pappy Smith hired attractive women and then had them schooled “to handle dice, cards, wheels, and chips.” He insisted that women made better dealers than men and that they “added an air of refinement to the place.” That mentality, quite progressive for its time, helped to make Harold’s Club one of Reno’s most famous and enduring casinos.

Harold’s Club was the first of several successful Nevada casinos that got its start in the 1930s and 40s. During the Depression, entrepreneurs John Harrah Sr. and his son William had dabbled in the legal bingo parlors of Venice and Ocean Park. An attorney by profession, John Harrah had been mayor of Venice during the 1920s and was politically well connected, but occasionally local courts would question the legality of betting on games of chance and close the parlors down. The revenue loss convinced young Bill to move to Nevada where wide-open gambling was legal and profits a sure thing.

Bill opened Harrah’s Club Bingo parlor in 1937 with six employees, but it closed in two weeks from lack of business. Harrah continued to try other venues and locations and soon learned the ropes. Emulating the progressive business practices of his main competitor, the trend-setting Harold’s Club, Bill also hired and trained female dealers. After years of persistence, Harrah finally opened his landmark casino on Reno’s North Virginia Street in 1946. It was a first-class operation boasting oak and mahogany roulette wheels, ornate card tables and hot steam pipes under the front sidewalk to melt winter snow.

Customers could play craps, cards and Keno or bet on horse races, as well as baseball and football games. The casino claimed that that their slot machines were the most liberal in the state. To improve service, Harrah’s installed a light on top of each slot machine, which alerted casino personnel to a big payout. Bill was the originator of popular bus programs that continue today, where casinos transport customers to the club and then reimburse them with money and vouchers on their arrival. Over time, Harrah’s modest start grew into an international resort-hotel-casino-entertainment conglomerate.

National crime syndicates ignored Reno’s relatively clean, established gaming industry and instead focused on a little town on the Union Pacific Railroad called Las Vegas. In 1931, work started on the federal government’s massive Boulder Dam project and the sleepy farm community exploded in population. Benjamin “Bugsy” Siegel was a New York mobster and hit man who had been running illegal gambling joints in California.

Bugsy wanted to invest ill-gotten cash proceeds from the Mafia’s national bootlegging racket in legitimate Las Vegas casinos. An opportunity arose when the developer of a new casino ran out of money and Bugsy bailed him out. Unfortunately for Bugsy, the construction of the Flamingo Hotel & Casino had been marred by corruption and inadequate oversight; project costs soared as the club’s opening was repeatedly delayed. Siegel had also been fighting publicly with his beautiful wife, Virginia Hill, whose flaming red hair had inspired the casino’s name.

Then, one of Siegel’s associates, Moe Sedway, decided to enter Nevada politics in order to protect the Mafia’s interests. Instead of offering support, the headstrong Siegel’s response was to permanently bar Sedway from the casino. He yelled, “We don’t run for office. We own the politicians!” When the Flamingo lost more than $300,000 in the first few weeks of operation, Siegel’s partners ran out of patience and killed him.

It was never proven who murdered Siegel on June 20, 1947, but it was apparent that he had become an embarrassment and a financial liability to the families in New York. Siegel was reading a newspaper in his Beverly Hills home when an unknown assailant fired five bullets into him at close range. Twenty minutes after the murder, gangsters Gus Greenbaum and Morris Rosen walked into the Flamingo and alerted the staff that they were now in charge. Business at the club didn’t skip a beat.

Greenbaum was a front man for the mob who knew how to make friends and money. He was generous to politicians, charitable organizations and local law enforcement. He could afford to be. Greenbaum had been elected mayor in nearby Paradise, Nev., and the Flamingo was raking in millions of dollars. Mafia money and a booming post-war economy financed additional casinos along the Strip.

The Thunderbird opened in 1948, the Desert Inn in 1950, the Dunes and the Rivera in 1955. Only a few casinos had financial ties to the syndicate, but the mob had its foot in the door, and it would take the Nevada Gaming Commission decades to root it out. Gaming had blossomed in the Nevada desert, a business that grew into the greatest concentration of casino gambling the world has ever seen.