Questions Persist About Casino : Laxalt’s Hopes May Hinge on His ‘Nevada Problem’

A trace of annoyance flickered across Sen. Paul Laxalt’s face.

He had been talking about his possible bid to succeed his close friend Ronald Reagan in the White House, candidly answering questions about the timing, issues and financing of a potential presidential campaign. Then the questions turned to his “Nevada problem,” and Laxalt leaned back from the restaurant table.

“I don’t want to spend a lot of time going through all that crap,” he said. “I’ve been through it. I went through it with Roger Mudd (of CBS). I went through it with Nancy Collins (of NBC). I went through it with Ed Pound (of the Wall Street Journal). I damn near sued his ass off, so I don’t want to get in that kind of problem with you.”

Laxalt may find it annoying that questioning persists, but there is a broad consensus among politicians that his presidential hopes may hinge on how he handles some of the political baggage he accumulated during more than two decades in Nevada politics and a brief fling as a casino owner.

Laxalt headed Reagan’s White House campaigns in 1976, 1980 and 1984 and became known as the “First Friend,” the President’s closest adviser on Capitol Hill and general chairman of the Republican Party. He said his decision next year on whether to seek the GOP presidential nomination himself will hinge not on how the public views his “Nevada problem” but on whether he can be assured of raising $8 million to $10 million in campaign funds.

“That’s my poll, my very real poll,” Laxalt said of the fund-raising goal.

Laxalt’s close identification with Reagan and his role in national Republican affairs have given him the beginnings of a national political base, particularly among conservatives, some analysts say. He already has the active support of several well-known political pros and fund-raisers who, like him, worked in all of Reagan’s presidential campaigns.

A Favorable Reaction

Starting with a spate of news accounts last summer, the Laxalt-for-President trial balloons have brought a favorable reaction, his aides say. And Laxalt is well known in the Western states that are so important to the GOP, though nationally his name recognition is fairly low (28% in a Gallup Poll last summer).

But part of the answer to how well Laxalt can build a positive image in the minds of national voters lies in those questions he is already tired of answering.

Laxalt’s “Nevada problem” stems, in part, from a fact of political life in his state: To succeed, a politician must come in contact with gambling interests--gambling, after all, is the state’s biggest industry and its largest source of tax revenue.

But Nevada gambling and the cash it generates also has attracted organized crime in the past. Thus, Nevada politicians almost inevitably come in contact with individuals alleged to have ties to organized crime.

Interest in Casino

In Laxalt’s case, he went into the hotel and casino business himself after ending a term as governor in 1971, joining his brother and others in opening the Ormsby House in Carson City. The business foundered, and he sold out after his election to the Senate in 1974. Then, in 1983, the Sacramento Bee published an article that began:

“Substantial sums of money were illegally skimmed from the proceeds of Carson City’s Ormsby House Hotel Casino during the time it was owned by Paul Laxalt, now the powerful U.S. senator from Nevada and head of President Reagan’s reelection campaign, according to federal tax agents who gathered the evidence 10 years ago.”

The newspaper said its sources “did not know whether Laxalt himself knew of the scheme” and the story did not accuse him of breaking any law. But the lengthy article said Laxalt had been associated with men it described as linked to organized crime.

Nearly a year after the article was published--in the midst of the 1984 presidential campaign--Laxalt filed a $250-million libel suit against the article’s author, Denny Walsh, and California’s McClatchey Newspapers chain, which owns the Bee.

Closely Watched Case

The suit, pending in federal court here and still months away from trial, is being closely watched in political, legal and media circles as a case that could have significant impact not only on libel law but on American politics.

Politicians also were closely watching the outcome of last week’s contest for the Senate seat from which Laxalt is retiring after two terms. And his presidential prospects suffered a setback when his hand-picked candidate, Rep. Jim Santini, lost to Democrat Harry Reid--and in the process helped the Democrats seize control of the Senate.

Laxalt had campaigned extensively for Santini and prevailed upon Reagan to make two appearances in Nevada the week before the election.

A week before the election, Laxalt said he had “no second thoughts” about his decision to retire from the Senate. Between campaign appearances for Santini, he arrived for an interview at a hotel near the Reno airport wearing boots, a silver belt buckle and a Western-style leather sport coat. At age 64, with silver hair and a tanned face, he could easily pass--as some writers have suggested--as a model for the Marlboro Man cigarette advertisements.

Enjoys Outdoors

Indeed, Laxalt does spend as much time as possible outdoors. That morning, for instance, he said he had hiked for an hour in the hills near Lake Tahoe. And, when his schedule permits, he retreats to Marlette Lake and the collection of tents and weathered buildings that once served as a base camp for his father, a Basque immigrant who herded sheep in the mountains and deserts of northern Nevada.

His own career as a sheepherder was cut short, he often jokes, when he lost 100 of his father’s sheep. He became a lawyer instead and, after a term as district attorney in Ormsby County (which voters later consolidated with Carson City), was elected lieutenant governor in 1962. He ran for the Senate in 1964 and lost by 48 votes. But he won election as governor in 1966, the same year Reagan was elected governor of California. The two had met in the 1964 presidential campaign of Sen. Barry Goldwater (R-Ariz.) and their friendship flourished as governors of neighboring states.

After one term as Nevada’s governor, Laxalt announced that he was retiring from politics, telling reporters that the odds against his ever again seeking public office were 1,000 to 1. But four years later he ran for the Senate once more, this time winning by 624 votes. He was reelected in 1980 and, although he held no formal leadership position in Congress, he played an important unofficial role as a principal liaison between Capitol Hill and the White House.

A Potential Rival

“Paul Laxalt is the only U.S. senator for whom you have to call the White House operator to talk to,” Rep. Jack Kemp (R-N.Y.), a potential rival for the GOP presidential nomination, said in toasting Laxalt at a Republican fund-raising dinner this year.

Because of Laxalt’s friendship and easy rapport with Reagan, White House aides say they sometimes have turned to him to deliver “bad news to the boss.” And Reagan himself turned to Laxalt to deliver unpleasant news to Ferdinand E. Marcos earlier this year. Marcos, after a White House-initiated telephone conversation with Laxalt, stepped down as president of the Philippines.

Several of Reagan’s past political advisers--Lyn Nofziger, Edward J. Rollins and Richard B. Wirthlin among them--have been identified as early and enthusiastic supporters of a Laxalt presidential bid. Laxalt said he will not decide until next spring whether to authorize a formal exploratory committee.

With his retirement from the Senate, and his planned departure later this year as general chairman of the Republican Party, he is expected to disclose soon that he is joining an as-yet-unidentified Washington law firm.

Coldly Realistic

In the interview, he said his presidential campaign decision will be based “on cold realism.” The key factor, he added, is money. “If I don’t have enough people in this country who have enough faith in me to invest a thousand dollars a pop to accumulate $8 million to $10 million,” he said, “I’m not going to take the trip. . . .

“I’m not going to go out starry-eyed and run a presidential campaign insufficiently funded and end up with a campaign that isn’t well-conducted, and if I lose, be in debt for the rest of my life. That unfortunately has been the legacy of many, many presidential candidates in recent years. The landscape is littered with them, and I’m just not going to let that happen.”

A review of Laxalt’s legislative record, speeches and public comments reveals the political philosophy of a pragmatic conservative--virtually a carbon copy of his friend in the White House. If he runs, he has told reporters, it would be “so that Ronald Reagan’s policies and purposes can be perpetuated.”

Domestically, he says, more needs to be done to cut federal domestic spending and trim unnecessary regulations. In foreign policy, he advocates arms control negotiations with the Soviets--he says Reagan is approaching arms talks in just the right way--and a firmness in combatting communist inroads in Central America. He has been largely silent on such divisive social issues as abortion and school prayer.

According to Laxalt’s financial disclosure statements, his 1985 income was about $150,000--including his $75,100 Senate salary, $50,200 from the Republican National Committee, $22,530 in honorariums for speeches, and between $3,000 and $8,000 in interest from savings and retirement accounts.

Diverse Supporters

To underwrite the expenses of his libel suit against McClatchey, a trust fund established on Laxalt’s behalf has raised more than half a million dollars from donors as diverse as Democratic Sen. Edward M. Kennedy of Massachusetts ($500), House Democratic leader Jim Wright of Texas ($100), CIA Director William J. Casey ($5,000), beer magnate Joseph Coors and his wife ($5,000) and Los Angeles Raiders owner Al Davis and his wife ($10,000).

In filing the suit, Laxalt contended that the article was “wholly false, misleading and libelous.” And in a 977-page deposition conducted as part of the pretrial proceedings, Laxalt testified that he was especially upset because, in his view, the article blackened his family’s name by suggesting that it was involved with organized crime.

He said his mother always dreamed of reopening the Orsmby House, a hotel the family once owned, and that when his term as governor ended he decided to pursue that dream. As for Walsh’s article, he testified: “I wasn’t about to let that pass because that presented a cloud that historically is going to be on the books in the minds of many people, and we’re going to remove that cloud.”

Responding to questions in The Times’ interview, Laxalt said organized crime “is one of our very real problems” in America and that he has been “very strongly supportive” of FBI efforts to combat it.

‘I Want a Conviction’

But, he said, “I don’t accept that someone is a member of organized crime or is an organized crime figure unless the legal process has demonstrated that. . . . I want a conviction.”

“We’ve had in Nevada . . . a lot of old-timers who came from other states (where) they sold booze and they had small gambling operations, and in the context of those times I guess were disreputable people,” Laxalt said.

“After the Second World War they came out here and they became licensed (for gambling), and I think you can talk to any public official, including myself, in terms of our dealings with them, they were straight with us. They were so glad to be operating under the cloak of legality. . . .”

One of these “old-timers,” as Laxalt termed them, is Morris (Moe) Dalitz, now in his 80s, a Las Vegas developer and casino landlord who the Sacramento Bee story said has been “named by law enforcement officials as a founding father of the national crime syndicate.”

Careful of ‘Signals’

According to records, Dalitz contributed $2,000 to Laxalt’s 1980 Senate campaign. Laxalt said in his deposition for the libel suit that Dalitz is “enormously popular and respected” and that to turn down the contribution “would send out the worst kind of negative signals . . . that you’re turning your back on Nevada gambling.”

And that, he said, would be like a politician in Michigan “taking a position against the car industry in Michigan.”

“If the word got out in Las Vegas that I wasn’t going to take (a) contribution from Moe Dalitz, that probably would be a huge political minus,” Laxalt said in the deposition.

In The Times’ interview, after Laxalt described Dalitz as “a very respected citizen in this state,” this sequence of questions and answers followed:

Question: If you were elected President, would you have any qualms about inviting him to the White House for a dinner?

Answer: That’s too hypothetical to address. I don’t know what the situation would be then.

Q: . . . that is one of the questions that will come up in the campaign.

A: That could well be. I’m not thinking in terms of any social list.

Q: So you wouldn’t exclude him?

A: I don’t know. Based upon what I presently know, I probably would not.

Questions About Dorfman

In the pretrial deposition, Laxalt was questioned about his relationship with Allen M. Dorfman of Chicago, who was twice convicted of federal charges stemming from dealings with the Teamsters’ pension funds. Dorfman was killed in a gangland-style murder in 1983 while awaiting sentencing for his conviction for conspiring to bribe then-Sen. Howard W. Cannon (D-Nev.). Cannon was never accused of accepting a bribe.

Laxalt said he met Dorfman “at most a dozen times,” including once when he flew to Chicago to attend a birthday party for Dorfman. “We just touched base from time to time,” he said of his contacts with Dorfman. “The Teamsters were a substantial economic force in Nevada, a principal lending institution, and . . . around Las Vegas he was deemed to be one of the principal Teamsters people.”

According to the deposition, soon after leaving the governor’s office in 1971, Laxalt invoked Dorfman’s name when he wrote a “personal and confidential” letter to then-President Richard M. Nixon urging that Teamsters leader James R. Hoffa be granted an early release from prison.

“Dear President Dick,” the letter began. “The other day I had an extended conversation with Al Dorfman of the Teamsters with whom I’ve worked closely the past few years. He described for me in detail . . . the personal vendetta that Bobby Kennedy had against Hoffa.

‘Kennedy’s Revenge’

” . . . Jim is a victim of Kennedy’s revenge . . . through vindictive action he has been and continues to be a political prisoner,” Laxalt wrote. He added that he did not know Hoffa personally, but “several months ago I had the members of the (Teamsters) board at the governor’s mansion for a briefing of our state gambling heads.

“The candidness, the spirit of cooperation which they extended, impressed all of us greatly. I cannot believe that the man who organized this group is the criminal type so often depicted in the national press.

“The more I move along in life the more impressed (I am) by the inaccurate and tragically false images that are created by our national press.”

Later that year, Nixon commuted Hoffa’s prison sentence. Hoffa later disappeared and is presumed to have been murdered.

Laxalt has said that although the Teamsters were active in financing Nevada casinos, they provided none of the funds for Ormsby House. Rather, he testified in the deposition, financing for the Carson City hotel and casino came from bank loans, including more than $7 million ultimately advanced by the First National Bank of Chicago.

He said that he and his brother put less than $1,000 apiece into the venture and that it was his “fond hope” they could persuade Delbert W. Coleman, a wealthy businessman and one-time Las Vegas casino owner, to join as a partner.

Connections to Banker

Coleman lost his gambling license when the Securities and Exchange Commission forced him to resign as chairman of Parvin-Dohrmann Co., which owned three casinos, in a consent agreement settling 1969 charges of stock price manipulation. Coleman never did invest in Ormsby House, Laxalt testified, but introduced him to the Chicago banker who made the major loans.

Soon after it opened, Ormsby House encountered financial difficulties and the Laxalt group sold out in early 1976 to a casino operator who paid no cash but agreed to assume the debt.

During the Watergate investigations that led to Nixon’s resignation, Laxalt was questioned about his dealings with billionaire recluse Howard Hughes. Laxalt’s family law firm, according to a book entitled “Citizen Hughes” by Michael Drosnin, “received at least $180,000 from the billionaire while Laxalt was in office,” and Laxalt later collected legal fees from Hughes of “at least $72,000.” In particular, Laxalt was asked about a trip he made to Palm Springs in 1968 with a Hughes aide who was seeking to deliver a cash contribution of $50,000 to the Nixon campaign.

Explains Episode

Asked during the interview about the episode, Laxalt said: “They had pledged a contribution. After the election they wanted to deliver it. I was going down to a governor’s conference . . . and so we flew down together. The meeting never took place.”