Desimone became delinquent ganized crime. N Tire s 4 1973 on the $525 monthly payments Alessio's wealth was accu- on the 1957 loan. Mr. Lipin mulated in large part from his Banger Friend of 41xon made several of the payments horse and dog tracks on both, and then -arranged, through sides of the Mexican-American, Salyatore Bompensiero, younger border and a bookmaking op- Is Target of U.S. Inquiry brother of Frank Bompensiero, eration in Mexico (where such a Mafia leader in San Diego activity is legal), which accepts at the time, to have- Desimope's bees on races at United States By DENNY WALsH tracks. It has been strongly payments kept up. that, Special to Tile Mew York Tiknes The Southland Amusement felt-among Federal agents- WASHINGTON, Sept. 9 C. bee. Company, Inc., •the vending, Alessio's bookmaking operation Arnholt Smith, the California would not have survived with- Mr. Donnelley has for years. machine 'concern that has had; out the cooperation of the multimillionaire who has been been a subject of much interest a successful business relation- underworld in obtaining the one of PreSident Nixon's clos- to Federal enforcement offi- ship with the United States Na-t "line," or odds on races in est personal and political so- tional Bank, is typical of opera-I ,3 cials, especially those agents tions that attract the 'Mafia' this country. ciates for more than a q ter who are part of the fight A Federal investigative re- 1 because of their large cash flow; port written six years agncar- of a century, is now th ub- against organized crime. He has and potential for "skimming", f ject of intense scrutiny b 3 ed- ries this entry: been,, linked, both as a business profits before taxes. "Mr. John S. Alessio,-true eral investigators, who ave associate and-a legal represen- Southland agrees to arrange name Giovanni Sevano become increasingly inte ed tative, to organized crime fig- for and guarantee loans from is well known to law enforce- in Mr. Smith's dealings ith ures for at least 25 years. United States National to 'bar ment agencies. Over the years organized crime fgures. In addition, a number, of and restaurant owners in need his activities and associations highly reliable GoVernment in- of financial assistance, in - re- have resulted in his being in- Within the last year the San vestigative sources have 'told turn for the owners' allowing cluded with other known' mem- Diego entrepreneur's sprawling The New York Times that Mr. Southland to install its jukebox, bers of organized crime." cigarette machines and pool business. empire has come un- Smith and his enterprises have No Reference to Cranston der fire from the Securities and a long history of dealings with tables. Southland then sees to organized crime. Records sup- it that the loans are repaid out Alessio, once a director as Exchange Commission, the In- of the owners' part of the pro- well as a stockholder of Mr. ternal Revenue Service, the plied to The Times support the statements of these sources. ceeds from the machines. Smith's conglomerate, West- Federal Bureau of Investigation Information from the sources Present Officers gate-California, was released and the Controller of the and the records show that 'a earlier this year from Federal Currency. . "These are good, low-risk prison, where he served two senior vice president of the loans for the bank," said one Most recently, a Federal Smith-controlled United States yeas of a thre-year term for Federal agent who has followed income tax evasion. grand jury has undertaken an National Bank, Lewis Lipton, is well-connected in the Southern the matter for years. "There' is But it is the presence of Mr. inquirY related to Mr. Smith. California underworld. United nothing illegal about it, on the Donnelley at Westgate that now, The banker and industrialist States National has resources surface anyway, but these guys intrigues Government investi- made a 10-minute appearance well in excess of $1-billion and at Southland are able to -'as- gators. sure themselves locatis The Times has learned that under subpoena on Aug. 20 be- operates 63 branches in Cali- through the lending power: of fore the grand jury in San fornia and one in the Bahamas. in addition to his history of as- the bank." sociation with organized crime Diego and, according 'to a Mr. Lipton, a former New Almost from its inception in Yorker who once used the 1,940's, Southland has figures, evidence indicating'that source Avith knowledge of that name Felix Aguirre, was a the late. Mr. Donnelley had conspired to session, invoked his Fifth restaurateur in San Diego until 'beenIcontrolled by the Mafia. violate the law governing the Amendment right against self- Mr. Smith brought him into ;the Its present officers are: conduct of campaigns for Fed- incrinnnr ati on. bank for the loans and ac- Josephine Dia, the president of eral office was uncovered by the I.R.S. in 1970. A special It is not clear what is the counts Mr. Lipton would hope- the company, wife of a mid- fully be able to create through• agent's report, approved by the focus of the grand jury's in- his connections. le-echelon Mafia figure, ,Leo acting chief of the I.R.S. intel- Dia, and niece of the late quiry, but sources familiar with Owned by the Mafia - ligence division in Los Angeles, the whole range of the inves- Tony Mirabile, Mafia head in recommened "future grand jury tigations of Mr. Smith's affairs With the help of Mr. Lipton, San Diego until' his murder action or additional investiga- according to the sources and tive effort," but no action was said it was separate from those records, a coin-operated-ma- in 1958: previously initiated. taken. chine company owned by the Charles Gelardi, the vice presi- The report shows that the In the midst of his mounting Mafia established a line of dent of the company and Government has the following difficulties, Mr. Smith made a credit some years ago at the a San Diego produce dealer. evidence: bank and has been a beneficiary move that Is generating even Steven Niotta, the secretary- In 1.968 a Donnelley client, of hundreds of thousands of Charles A. Pratt, then president more heat on him and the dollars in loans from United treasurer, and related by ,Westgate-California Corpora- of the San Diego Yellow Cab, States National. marriage to the Dragna fam- Inc. (not then part of West- ' tion, the conglomerate he con- In the mid-nineteen-fifties ily, leaders in the Mafia in gate), committed $2,000 to,the trols", whose interests include Mr. Lipton's brother, William Southern California for,years. ultimately successful campaign R. Lipin, an accountant and Leo and Josephine Dia are the third largest packer of tuna the controlling stockholders in of Alan Cranston, a Democrat, in the nation and taxi com- United States National stock- for the United States Senate holder, co-signed on three Southland, arid slightly more from California. Mr. Cranston panies with, monopoly or near- loans, totaling • $10,300, made than 15 per cent of the stock 'monopoly situations in every later got in touch personally by the bank to the late Frank is held by Joseph C. Dippolito, with Mr. Pratt, who reaffirmed major California city and Desimone, a Los Angeles currently the underboss of the the pledge. Phoenix. lawyer, who was the Mafia Mafia in Southern California. Shortly thereafter, Mr. Pratt Ord July 25 it was announced boss in Southern California at 'Minimal' Account told Mr. Donnelley that he that time. th Through a spokesman, Mr. wished to take the contribu- at a San Diego lawyer, John The third loan was for $6,300 tion from the corporate funds Andrew Donnelley, had been Smith told The Times he had and was made on May 8, 1957, never heard of Southland. of the- cab company. Even after six months before Desimone James F. Mulvaney, president Mr. Dmmelley read his client Continued on. Page 28, Column 1 attended the now-famous Meet- of United States National Bank, the Federal law prohibiting a ing of Mafia hierarchy at said in a telephone interview coporation from contributing to .Continued From Page 1, CoL 71 Apalachin, N.Y. Immediately that'he had only a vague knowl- a Federal candidate and warned. named to the Westgate board! follOwing the so-called "crime edge of the Southland account, him that what he proposed) conference," Desimone dropped which he described as "mini- was "very dangerous," Mr. of directors. Mr. Donnelley is from sight dodging a subpoena Pratt was adamant. representing Westgate in a law- mal," and said he was unaware from a New York Federal of the background of the con- ' Finally, the lawyer agreed •to suit filed against the conglom- grand jury. In April, 1958 he cern's principals. help. On Oct. 31, 1968, Mr. erate by the S.E.C. He is acting was located and was served Mr. 'Smith's long business Donnelley sent a personal check for $2,000 to a Cranston as co-counsel with. Mudge Rose the subpoena by Federal nar- and personal relationship with Guthrie & Alexander, the New cotes agents. John S. Alessio has long been campaign committee. On Nov. 7, Mr.= Donnelley billed the cab York law firm- or which Mr., Payments by Brothel thought by Federal agents to be the most obvious example of company far $2,000, which was Nixon was once a senior mem- While he was a ftigitive, Mr. Smith's connections to or- paid on- Nov. 12. At Mr. Don- nelley's suggestion, Mr. Cran- Evidence gathered by the Dis- trict Attorney's office show ed why Mr. Donnelley was placed on the Westgate board at this 'and scheduled to go to trial that much of the money car tie next month, charged Mr. Smith, from a Donnelley trust accourA. time, lawyers for the Securities The normal procedure was fa, and Exchange Commission pri- Westgate, two other individuals Mr. Pratt to draw company vately interrogated Mr. Donnel- and five other companies with the fraudulent use of, millions! checks payable to Mr. Donnel- ley under oath last Friday in ley. The lawyer would then of dollars in assets of Westgate, San Diego. None of th other of gie United Statestlational' draw checks of like amounts seven directors of West are Bank. do his trust account, payable scheduled to give a d 'tion to persons designated by Mr. in connection with th E.C. Controlling Stockholder Pratt, and would give> these lawsuit, in spite of t fact Mr. Smith is chairman and ghecks to the cab company that Mr. Donnelley was not on esident, who would deliver the board during the period of controlling stockholder of West- them. the allegations in the suit. gate, which has $220-million in Four Acquitted Government sources, who assets. Although he no longer The prosecutions were tin• are not with the S.E.C. but who holds any office at the bank, successful however. Four of are knowledgeable about its in- Mr. Smith remains its control- the defendants were acquited. vestigation •of Westgate, said ling stockholder. Both the bank an Appellate Court dismissed that the Donnelley deposition and the corporation are traded the charges against another de- was also designed to spread as publicly. fendant and the District At- much of his background as pos- One condition 'of an order is- torney's office the moved for sible on the official record. The sued against United States-Na- dismissal against twcr more. Government would then use tional by the Controller of the One defendant pleaded guilty this information as leverage Currency last spring was Mr. to conspiring to violate Cali- with the court in a move to Smith's resignation as chair- fornia election laws. The judge force the lawyer off the board. man and a director of the bank. reduced the charge from a `Man on the Inside' C. Arnholt Smith felony to a misdemeanor, lined It is known that Mr. Smith him $1,000 and placed hirn on The sources said that Com- feels strongly that most if not probation. mission lawyers were concerned all is troubles stem from a ston's name did not appear on By far the most fascinating not just about Mr. Donnelley's dei on the part of , certain the bill in order to minimize part of Mr. Donnelley's history, placement on the board, but stafi4members in vari Fed- the possibility of a discovery as far as Federal investigators about his selection as chairman eral agencies to dernonst e, of the true nature of the trans- are concerned, is the role he of the corporation's audit com- the atmosphere of Wate e, a action. has played in the fortunes of mittee, a body composed of capability to move agar ven In a telephone interview, a group of entrepreneurs head- three directors and two oom-I friends of the President Mr. Donnelley told The. Times ed by a former Cleveland pany officers. The audit com-I Funds for mittee is Aarged with main- that Mr. Pratt had promised racketeer, Morris Barney Dalitz. Indeed, Mr. S him that he would carry the Mr. Donnelley-has been both taining liaison. between West- as en- transaction on his personal ac- gate and an independent audit- joyeci a warm rela- n attorney for and a sometime tionship with Richard count ledger at the cab com- partner in this group since it . Nixon. pany, and would reimburse the bought controlling interest in ing concern hired by the com-i The Pre, lent has si company when he could. Later, the the Desert Inn Hotel and mittee to prepare financial! older man's confsel at the time of the Internal Casino in Las Vegas, Nev., statements for the company. ,ugh Revenue Service inquiry, Mr. more than 20 years ago. covering the years called into the years. Donnelley said he had learned He held stock in the Desert question by the securities agen- And, as an active political from his client that Mr. Pratt Inn until Dalitz and his follow- cy's suit. supporter of Mr. Nixon, Mr. had carried the transaction on ers sold out in 1967 to Howard S.E.C. officials specula ac- Smith goes all the way back the company's books and had Hughes, the billionaire recluse. cording to the sources, tliaT'Mr. to the President's first cam- made no reimbursement. During part of the time the Smith placed Mr. Donnelley on paign for a seat in the Cali- The I.R.S. special agent wrote Dalitz group controlled the the Westgate board at the dic- fornia Congressianal delegation. in his ieport: Stardust and the Desert Inn, tates of certain investors or He as contributed hundreds of "As 1, a result of interviews Mr. Donnelley was the execu- potential investors in the corpo- tnusands of dollars to Mr. Nix- with11111r. Pratt, a review of the tive vice president and man- ration. Under this theory, Mr. on's poltical efforts, and has records of San Diego Yellow aging director of both, and Donnelley is "the man on the been instrumental ino raising Cab and John Donnelley, at- secretary-treasurer of the Star- inside” for these investors in millions more. torney, it appears Mr. Pratt and dust. To carry out thee duties the event the S.E.C. is Nuccess- Following the filing of a Mr. Donnelley conspired to- he lived at the Desert Inn from ful in one of the avowed pur- $22.8-million tax lien against gether to-violate three [sections the latter part of 10621- until poses of its suit, that is to re- him last month by the I.R.S., of the U.S. Code] anti, in the and of March, 1967. move Mr. Smith from Westgate. which is believed to be the furtherance of that conspiracy, If Mr. Donnelley represents largest ever against an indiVid- caused an overt act to be com- Profits Skimmed potential investors to whom ual for a single tax year (1969), mitted, specifically the prepara- Mr. Donnelley held these Mr. Smith has turned for finan- Mr. Smith characterized it as a tion and sending of a bill by posts at the Desert - Inn, and cial aid,, be is now in a position bureaucratic effort to develop Mr. Donnelley to the , corportyes active in the casino's man- to assess both the promise and a "little Watergate," and ac- in a manner designed t A'a'a gement, during the nineteen- the risk of such an investment. cused the agency of attacking 'hide the real purpose --of the sixties when Federal Bureau of That is how the S.E.C. views him as "a friend of President expenditure." vestigation listening devices Mr. Donnelley's role, according Nixon." Investigations by the revenue planted there disclosed that the to the sources. The 74-year-old financier ob- !agency and the San Diego gambling profits were being "There has to be an over- served. in an interview with a (County District Attorney's of- "skinfmed," and the money de- riding reason why Donnelley is San Diego newspaper that "it's fice ultimately established that livered to hidden crime syndi- on that board," one Federal strange „that the people around Mr. Donnelley had often been cate interests. In connection investigator said. "Smith's got the Pntident who have been used as a conduit through with the extortion trial of a enough trouble, without 4nvit- actively supporting him and which Yellow Cab money passed part owner of the Desert Inn, ing more by hooking up with raising money for him have to candidates for public office. a guy like that. been targets." On Oct. 8,1970„a San Diego the F.B.I. said that a micro- phone had been planted in the "Whoever it is that: wants "I can't help but feel that I County grand jury indicted Donnelley inside Vitstgate had am on some' bureaucrat's list Mayor Frank Curran, seven executive suite at the Desert Inn, that meetings concerning to do it while Smith was still of enemies, and must be the other "public officeholaers ,and in a position to railroad it." No. 1 plus, or something," he a former campaign treasure" "skimming" took place there, The S.E.C. suit, filed in May for one of -them. The I-indict- and that two of the persons. in- added.' ments charged that the Mayor volved were Dalitz and Mr. and all but one member of Donnelley. the 'city council had accepted Mr. Donnelley has also as- bribes totaling $27,850 from sisted Dalitz and his colleagues Mr. Pratt, with the understand- in establishing a plush resort ing that they would act favor- community in northern San ably on the cab company's ap- Diego County known as La plicatio .a. 22.8 per cent Costa. rate in - In an effort to determine