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March 26, 2019

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Gamblers pull off the ‘perfect’ casino scam

By the time Tom Kuhn discovered some of the addresses on the credit cards were a cemetery, bar and health food stand on Wall Street, the gamblers had pulled off the perfect crime.

Every address was a fake, except for the one belonging to Anthony Caputo, the purported mastermind of a bold credit scam at the Desert Inn and Sahara hotels in 1979. And Caputo’s address was a rented apartment in a Milford, N.J. slum. But nobody had seen him there for more than on year and Kuhn concluded the address was simply a mail drop.

The Sahara Hotel sent Kuhn in December 1979 to check the addresses. The previous February, Caputo, whose real name is Rosario Bongiorno, and 14 gamblers took off owing $530,000 at the Sahara Reno. Less than three weeks earlier, the same group, with three different members, left owing the Desert Inn $684,500.

``It was a well-orchestrated credit scam put together by Caputo that played upon greed of the casino,’’ said Kuhn, who supervised casino surveillance for the Sahara. ``It was the perfect crime because it’s a gaming debt, even thought it was fraudulently obtained.’’

Both Sahara hotels are facing fines of $37,500 each proposed by the State Gaming Control Board for alleged violations of casino procedures in the matter. A public hearing has not been set. The Nevada Gaming Commission last week fined the Desert Inn $75,000 as the result of a similar control board complaint.

Details of what has become known as the ``Caputo scam’’ portray a vivid look at the credit issuing process of a major casino.

The Sahara scam actually began in 1977 when Caputo established himself as a cash player. Caputo met Sahara credit manger Richard Strother in June 1978, through Strother’s secretary, Mariam Anka Ramirez, the sister of entertainer Paul Anka. She knew Caputo for about 10 years.

Caputo told Strother he was a bookmaker from New Jersey, did not have any bank accounts and would deposit front money to play. Besides a Central Credit check on August 28, 1978, no other background checks were conducted. Strother waived bank checks, according to the control board complaint.

Caputo deposited $20,000 in cash at the Sahara cage on June 13, 1978. He paid off a debt in extended credit of $21,000 on June 19. The next visit, August 3, Caputo received $20,000 in credit. He left five days later owing the full amount. He returned the next month, paid his debt and got his credit raised to $50,000l line of his son, Russ. Both lost the full amounts.

In November, Caputo returned and paid off both debts. On this visit, his credit line was increased again, to $60,000. He also received a $10,000 line for his stepson, Gerald Caputo. The two gambled, left owing the full amounts.

By January 1979, the setup was in full swing. Caputo told casino manager Thurman ``Bud’’ Spach he wanted to bring a group of friends from New York and New Jersey to the hotel for following month. Spach arranged for Gary Eilenberg, the New York junket

representative, to accompany the group.

Caputo called Strother Jan. 31 and asked for credit limits of $50,000 each for the group, except for two who would get $30,000 and his son, $10,000. Caputo said he wanted $80,000 for himself and told Spach he would guarantee all the credit.

The credit cards were filled out by Stother’s secretary. She listed only the names and requested credit limits. Some cards contained addresses. Strother took the cards to Spach and then vice president Ed Zike. Both signed them.

This crucial step – the approval of credit – is a key dispute in the case.

Strother, who was fired from the Sahara one year after the scam, works as a bartender in Los Angeles. In a telephone interview, he said he was authorized to approve credit only up to $25,000 He left for vacation for Feb. 9 for 10 days and said the banks and Central Credit should have been checked in his absence, but whose responsibility was it?

Strother left no instructions for his assistant to make the bank checks.

"How can I make the bank checks if the banks are not on the cards?'" asked Strother.

Spach broke his silence on the case in an interview at the Tropicana, where he is a casino host. He said he trusted Strother, who worked for the parent Del E. Webb Corp. since 1964, and assumed he would check the Caputo group.

"When he said something, I normally took it for the truth," Spach said. "Strother was supposed to follow up (on the credit checks). He was going on vacation and he didn't do it.''

Nevertheless, Caputo and 11 associates arrived Feb. 13, ready to play. Each signed the credit cards and filled in their home addresses and phone numbers. No bank accounts were obtained. Caputo immediately paid off his previous debt of $60,000.

On the second night, Tom Kuhn noticed a known cheater in the casino cashing out black ($100) chips. Kuhn, a former State Gaming Control Board agent, is the casino surveillance director of the Imperial Palace. He recalled the Sahara scam: "Anytime you have a massive credit scam, the key is to convert the checks into money. There was a known crossroader (cheater) hanging around the casino. I saw him at the casino cage cashing out about $2,000 in black checks. It kind of piqued my curiosity because I knew the guy’s background so I started watching him. Throughout the day, he was cashing out black checks, but wasn’t playing in the casino and nobody remembered him playing.

"He would go up to the '21' table, bet $100, maybe twice and then cash out. There was a tremendous amount of black (chip) action in the casino and it was hard to follow. We set up a surveillance. After two day, I was able to determine the guy was going to a suite in the hotel and he was passing off black checks to other locals, $500 and $1,000 at a time.’’

Kuhn followed the cheater to Caputo’s suite. He estimated it took six or seven people five days to "walk" with about $400,000. He said the amount was determined by "action reports" used to keep track of credit players and whether they left the table with chips.

When Kuhn told Spach about the cash outs, Spach checked the credit cards. He found the bank checks had been done. Spach asked junket representative Eilenberg to check on the group. Elilenberg quickly confirmed some of the phone numbers on the cards were phony.

Spach then said they requested a "black chip" count from the cage. The count determined there was not an unusual amount of black chips missing. He said Kuhn told him only one cheater was cashing out chips totaling $2,000. To this day, Spach insists no more than that was taken from the casino and balks that the incident was a scam. The "action reports," he said, indicated the group was losing money.

"There was no money leaving the hotel." Spach said. "Those people were losing the money at the tables. I had to make a decision whether to stop them or continue to let them play. I made the decision they could go through and no more than that."

However, because no Central Credit checks were made, Spach did not know the group gambled at the Desert Inn the month before, leaving $684,500 in unpaid markers.

Strother said he returned from vacation around Feb. 21, when eight members of the group had already left. Spach reprimanded him and allegedly told him to make the credit and bank checks. Strother supposedly did not do that.

On Feb. 21, Caputo and three members of the group traveled to the Sahara Reno. Spach, who directed casino operations for all Del E. Webb’s three Sahara hotels, said he warned Pete Melchiorre, casino manager of the Sahara Reno, not to give the group anymore than what remained of their original credit limit. He told him the situation looked "real hazardous."

The gaming control board complaint alleged Spach told Melchiorre to give the Caputo group "whatever credit limit they wanted."

Whatever Spach told him, Melchiorre gave Caputo and his three friends, plus three others who later came to the Sahara Reno, credit lines of $40,000. Caputo go $60,000.

During their stay, Melchiorre learned the group was cashing out chips. He confronted Caputo. Caputo immediately offered to pay of all outstanding balances and threatened to take his business elsewhere. Melchiorre, who died in 1980, backed down and allowed Caputo to continue playing. Caputo made two trips to the Sahara Reno with his friends. He left March 5.

The Caputo group was supposed to return in April at both the Sahara and Desert Inn.

Meanwhile, Spach was worried about the large amount of outstanding credit. He said he prepared a report that month for Del E. Webb corporate officials about the incident.

Strother called Caputo, and asked him if he could pick up some of the markers. Caputo said he needed to fly to Florida for the money. Strother called again in about one month and Caputo said he needed two more weeks. That was late March and the last time Strother ever heard from Caputo.

In April, Spach was walking to the Sahara coffee shop when Strother. Strother said he had some bad news. Central Credit checks revealed the group had $684,500 outstanding at the Desert Inn. Even so, Spach retained hope the money would be paid since markers have been settled two or three years after being issued.

The group never returned to the Sahara. The money has never been collected. The control board filed complaints against the Sahara hotels and the Desert Inn in February 1981. Del E. Webb, through attorney Robert Faiss, blamed Strother for the scam. Faiss said Strother did not tell Spach the Caputo group consisted of bookmarkers and shirked his responsibility to conduct the credit checks.

Strother said he was being uses as a "scapegoat."

"It was premeditated," said Strother. "They knew what they were doing and they came out for that particular purpose."

"Even when Caputo was there, he handled himself as a true gambler. He played all the little games he should have played. He was a pro. He picked up his markers. He strung us along for six to seven months."

Spach said a lack of communication among hotel officials contributed to the incident. He denied there was a scam.

``Mistakes were made in an effort to build business,’’ Spach said. ``I can name you one player with a $30,000 card at the Sahara when I left that owes $126,000 right now. I could name you another player with a $25,000 card that owes them $65,000. I can name you four other players who own in the proximity of $100,000. Now, you total all that up. Do you want to call that a scam? I think they will get all they can get and maybe not pay knowing they won’t go to jail. This whole town is full of people like that.

"I made a mistake. I put my name on a card that shouldn’t have been put there. I was willing to resign over that. I never denied my responsibility. But I didn’t cheat anybody out of anything. I don’t know whether Caputo did or not."

He speculated Caputo intended to build credit in two or three hotels and bring in highrollers. But he tried too fast and could not pay off his markers.

Webb obtained an $810,000 default judgment last September against Caputo and another member of the group. A process server located Caputo in Bergen County, N.J.

The Saharas were charged with violating their internal control procedures. Those procedures are written by each hotel, compiled into a thick manual and approved by the control board’s audit division. Specifically, the board charged hotel executives violated those procedures by failing to verify the identity or addresses and failing to get financial and required credit information on the cards.

Faiss argued, in a motion filed with the gaming commission, that the Sahara was the "innocent victim of criminal acts through no fault of its own." He said waiving certain credit checks is common throughout the industry and the control board is aware of "occasional non-adherence to internal control procedures governing gaming credit."

Webb conducted its own investigation of the scam in December 1979 after deciding it was more than a collection problem. It submitted its results to the control board.

Investigators for the N.J. Division of Gaming Enforcement also reviewed the incident and concluded that Strother and Spach should share responsibility for giving credit to the Caputo group.

It was in December that Kuhn was sent to New Jersey and New York to check the addresses. Besides a cemetery, bar and health food stand on Wall Street, the addresses he checked did not exist.

On Dec. 31, Peat Marwick and Mitchell and Company, the company’s independent auditors, referred to internal control failures in a letter to corporate management.

"It appears that certain specific failures to follow standard operating procedures contributed significantly to the decisions which permitted the credit to be granted," the letter said. "Of particular significance to the company’s system of internal controls is the fact that several officers with the hotel group were apparently informed of the incident at various times between May and September 1979, yet the matter had not been communicated to senior corporate financial executives at the time they became aware of it in November 1979."

Incomplete credit cards continued at the Sahara, even after the scam. The New Jersey investigators examined a sample of 108 credit cards during July 1980, each with minimum lines of $20,000. Eighty-seven applications were not completely filled out. Eighty-six lacked bank or credit checks.

Of 33 cards filled out between January and April 30, 1980, all lacked authorized signatures, financial checks wee not obtained on 23 of them and 15 did not contain Central Credit checks.

The investigators also examined markers for 17 gamblers from Kansas City who played at the Sahara from June 1977 to February 1978. They left owing $178,000. There was no bank or Central Credit check and the cards were incomplete.

Spach said a Sahara shift boss guaranteed the Kansas City group’s credit. "When you give a guy money and don’t let him walk with it, what have you lost?" asked Spach. "So wouldn’t you say it’s a lot more feasible to give a lot more money in the gambling business than in a bank?"

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