2015 - History: Part Five - Freeport in Question

 

An Informal History of the
Grand Bahama Port Authority,
1955-1985

Part Five: Freeport in Question  

"It was inevitable that the explosive growth of the mid-1960s would not continue forever, but the combination of the softening world economy and the negative effect of the PLP Government’s intransigence and inefficiency caused Freeport’s development to cease expanding and then slowly but inexorably deflate. Even tourism declined for the first time in 1970 to further exacerbate the situation. The Grand Bahama economy was in distress, but it was the Government that would not bend, not the GBPA. Banks  and businesses moved away, cut back operations or like Freeport Savings and Loan and Bahamas Agricultural Industries, closed down. A need for competent secretarial help blocked by the new immigration bureaucracy even contributed to the sudden failure of Bahamas Airways in 1970 [Report of the Royal Commission, 1971:63]. In an effort to overcome the decline, the Government on one hand passed bills such as the Industries Encouragement Act (1970) and instituted programs such as Pindling’s sensible “Friendship Campaign” to improve the tourist experience, while on the other putting up roadblocks to their success.
On September 19, 1970, the “Royal Commission appointed on the recommendation of the Bahamas Government to review the Hawksbill Creek Agreement” began its investigation and deliberations of the advisability of maintaining or substantially changing Freeport’s governance, “in light of the social and economic conditions now prevailing in the Bahamas Islands…particularly having regard to the correspondence between the Government and the Port Authority in the months of August and September, in 1968…”, i.e., the Benguet deal and subsequent disagreements. We have already cited some of their discoveries. Among the Commission’s other observations were the following:

• “On their performance to date, significant capital investment in Freeport is unlikely to come from Bahamian investors. Thus far they have exhibited no interest in land development there. They have taken little part in industry in any of their Islands. Hence it may not be unfair to say that, had it been left to Bahamian investment, Freeport would have remained the barren it was 15 years ago.” [p. 43]
• 99% of about 5,000 Devco land transactions were by non-Bahamians. [p. 27]
•  “… neither in numbers nor in the required skills and proficiencies are Bahamians and persons possessing Bahamian status adequate for the expansion of the economy or even its maintenance at its present level.” [p. 41]
• In 1969, substantial fees for permits to work anywhere in the Bahamas were instituted. [p. 53]
• When the commission brought verified examples of licensee complaints to the notice of the Government, they were “met with complacency”, i.e., treated as of no consequence and no indication of any problem. [p. 62]
• The paperwork involved in applying for a simple work permit was unnecessarily complicated; “Although we tried very hard, we failed to understand its requirement for so much detail.” [p. 64]
• Whether or not the Government had acted unethically or not, appearances were certainly against it (and the commentary deserves to be quoted at length): 
  “174. There can be no doubt that the immigration dispute has affected Freeport adversely. And not only Freeport, but the Bahama Islands as a whole. This was not merely a case in which one party alleged that some other had committed a breach of contract. It was one in which the party who it was alleged had committed the breach was a Government. It was, moreover, a Government formed by a political party which had fought to overthrow discrimination and privilege and had but recently won the battle for democracy. It was therefore a Government whose every act would fall under scrutiny, both locally and abroad.
  175. It was a case too in which it was alleged that the Government set out deliberately to withdraw benefits and incentives which its predecessor had granted. The inference therefore was that it had acted in bad faith for oblique reasons and in disregard for the true interests of the Bahamian people. The persons affected by its alleged breach were principally foreigners who had invested in total vast sums which they had brought in from abroad and who by their foresight, enterprise and industry had created a community out of nothing and ushered in an area of great prosperity. They were moreover foreigners seeking to attract more foreigners to bring in more money from abroad for further development and in the interest of further prosperity.
  176. It was a case also in which the Government had used its executive powers to direct the course of action that constituted the alleged breach and in which it ended by using its legislative powers to abrogate the provisions of an agreement granting the benefits and incentives which it alleged were withdrawn wrongly and in bad faith…” [p. 59]

• “The [Hawksbill Creek] Agreement subsists and continues to bind the Government, the Port Authority and the licensees. Each is entitled to expect the others to honour it according to its terms.” [p. 75]

As Colin Hughes summarized, of the 1,400 current GBPA licensees only 155 were Bahamian, and only 34% of the workforce was native-born, and there was a low proportion of Bahamians in better-paid positions. [Hughes 1981:167] Recommendations “in the interests of the Bahamas Islands as a whole” made by the commission were:

• No further amending of the Hawksbill Creek Agreement—it would impossible to get the necessary four-fifths of the licensees to agree, and not worth the effort or expense to do so. [p. 74]
• Maintain the agreement that grew out of the Benguet transaction approval process allowing the Government to assume its appropriate role in civil administration. “Freeport is a part of Grand Bahama and Grand Bahama is a part of the Commonwealth of the Bahama Islands. In principle it is wrong that any part should be isolated from, rather than integrated with, the rest of the Bahamas community.” [p. 74]
• Not to legislate unilateral solutions. “The Port Authority should be ready to co-operate fully since it agreed to the arrangement as a condition of the Government’s approval of its transaction with Benguet, and, further, because by assisting in removing all fears it would help make the way clear for unimpeded progress.” [p. 75]
• Fix the immigration problem by a) reconciling the ideal of greater Bahamian employment with the reality that is often not practical in many cases, b) don’t allow the Permanent Secretary of the Immigration Ministry to delegate permit approval responsibility to lesser bureaucrats, c) appoint a small committee to advise the Minister, d) make decisions in a timely manner (and insist the applications not be last-minute, as was often the case), e) allow for appeals, f) publish clear guidelines about obtaining work permits, g) simplify the application forms, and h) allow permits for a practical length of time, i.e., three years.
• Maintain national security by increasing and improving the police force on Grand Bahama, and maintain an effective customs, excise and immigration operation by using the police to do the enforcement rather than personnel from other departments. “We are satisfied that the reports of criminal activities in Freeport have been grossly exaggerated.” [p. 80] There should also be a local prison.
• Regularize and improve schooling, which was a governmental responsibility.
• The GBPA, on the other hand, should live up to its responsibility in actually training Bahamians for future jobs, providing local employees with housing near their places of work by continuing construction beyond the previously mandated 200 workers’ houses, improving public transportation, and encouraging agriculture in particular.
• Their final suggestion was that the Government should communicate more effectively with its Freeport citizens.

Content of the report aside, the damage done by both the gaming scandal and the immigration controversy was fundamental. Freeport never fully recovered its early promise. Development and industrialization continued on a reduced level, as investment “slowed down to a trickle’. Building in the new housing estates in eastern Lucaya, which were announced with optimistic pride in the late 1960s, stagnated and then stopped. The massive Grand Lucayan Waterway project, begun in 1967 and completed in 1978, brought canals and waterside aesthetics to 3,200 acres with 35 miles of waterfront access, but few lots were built upon and the property slowly reverted to an overgrown barrens landscape bizarrely intersected by roads to nowhere. Today the extensive infrastructure of streets and canals is still largely under-utilized, although spotty progress is being made.
Yet Groves’s dream survived and prospered, after a fashion. He had built well with the resources available to him, and those who came after him, notably Edward St. George, continued to move things forward through the uncertain years that followed. Once the scandals and squabbles died down, and the Bahamas achieved independence in 1973, Freeport dropped out of the news and, incidentally, the finely detailed studies we have been relying on to this point, dried up as well. Even the section of Freeport in the annual Bahamas Handbook decreased in size and in detail. The scandals that had intrigued researchers and provoked two Royal Commission studies were over, and Freeport was not as interesting a topic. The drug smuggling scandals of the 1980s also pushed gambling concerns out of public consciousness.

Gerald Goldsmith

The Benguet reorganization had been accomplished by C. Gerald “Gerry” Goldsmith, who became chairman of both the GBPA and Devco in 1973. Acording to Alan Block, Goldsmith diverted $4,431,600 from ICD for political payoffs in the Bahamas—as well as a little for himself [Block 1998:98]. Goldsmith had been one of the investors in Charles Allen’s consortium in 1959, and was in a good position to take over when the changing of the old guard took place. According to Donald De La Rue, the revelation of Goldsmith’s “diversion” caused a great stir in the GBPA. Jack Hayward apparently erupted in indignation (as he seems wont to do), and confronted Wallace Groves over the activities of “his” man Goldsmith. Edward St. George, who had appeared upon the scene as “Hayward’s man”, arranged some sort of voting trust in which the Groves shares were to be bound up with Hayward’s for five years. On  February 19, 1976, St. George bought 25,000 shares in ICD from Goldsmith for $181,250. Groves didn’t put up with this for long, and in early 1978 told Hayward that ICD wasn’t big enough for both of them, and to either sell out or buy him (Groves) out.

Groves’s interest, held in his wife’s name, was bought by Jack Hayward in August, 1978, for about $33 million (not $42 million). There was also a SEC (U.S. Securities and Exchange) action taken in 1978 against ICD concerning Goldsmith’s activities.
C. Gerald Goldsmith was born in Orlando, Florida, and grew up in Coahoma, Mississippi and Helena, Arkansas. He received a BA from the University of Michigan in 1950, and a MBA from Harvard in 1952. After a stint in the U.S. Air Force, he worked at A.G. Becker & Co. from 1956 until he struck out on his own in 1959 (and invested in the GBPA). He became Chairman of the Freeport companies when they were still part of Benguet, and the company undertook new developments in California, Florida and the Canary Islands, thus extending investments away from the Bahamas and the Philippines. In 1971 he observed that “The economic health of Freeport obviously is not as good as it was in 1969, but I believe that we’ve come through the serious part of readjustment … What Freeport needs is confidence and stability. We have all the other assets here that will give rebirth to commercial, industrial and tourism expansion.” [Bahamas Handbook 1971:427]
Once the Benguet maneuver was completed and the shares for the Bahamas vested in the  Intercontinental Diversified holding company, the struggles went internal. Goldsmith was forced out in 1976 before any real recovery was possible, but he was right about the worst being over—for GBPA and Devco if not for Groves and his party. Wallace Groves is quoted in a rather distracted interview as saying “I don’t particularly want to retire” [Bahamas Handbook 1970:415], but he was already on the verge of doing so, at least as chairman. Groves retired as chairman of the GBPA in 1970, and Keith Gonsalves, who became president of the GBPA after Lou Chesler and chairman following Groves, had quit by 1973. This would appear to indicate that Groves left reluctantly. The forces arrayed against him were led by Jack Hayward, son of Sir Charles and last member of the original team who had put it all together in the late 1950s. In 1975, ICD was recapitalized with a one to four split. After Goldsmith resigned and Groves tied up in the restrictive deal with his “partners” (before he was pushed off altogether), Edward St. George became chairman of ICD and Jack Hayward chairman of the GBPA. They then essentially divided up Intercontinental Diversified between themselves and thus became owners of the GBPA and some of its subordinate companies. As the question of their respective holdings of IDC stock has become Freeport’s most recent scandal, it might be useful to try to see how this came about in some detail.
Wallace Groves and Jack Hayward officially parted ways on August 4, 1978 when Hayward bought all of the Groves’s shares, following the show-down by Groves.

During the spring of 1978, as a result of disagreements concerning the management of ICD, the Groves interests and Hayward concluded that it would not be in their mutual best interests, or the best interest of ICD, for both the Groves Interests and Hayward to continue to own their blocks of ICD stock. Accordingly, a series of negotiations took place culminating in a proposal by the Groves Interests that Hayward either purchase all of the stock of the Groves Interests in ICD at the price of $32 per share or that Hayward sell all of his ICD stock to the Groves Interests at the same $32 per share price. The choice was left to Haywood. ICD stock was trading in the low 20’s during this period. [Abramson & Fabricant vs. Intercontinental Diversified Corp. Supreme Court of the State of New York, County of New York, 78 Civ. 3684 (CHT) no. 13657/78, 1980, p. 5]

In July, 1978, there were 2,250,000 shares of ICD stock outstanding. Of these, 1,032,831 shares belonged to Freeport Holdings, Inc. (a Panamanian holding company) in the name of Georgette Groves. Jack Hayward and his holding company, Variant Industries, had 361, 247 shares. The remaining shares were held by various people, including St. George who had bought another 25,000 shares in April 1976, 50,000 more (for $531,250) in October, 1977 (and perhaps more in April, 1978?). 
Haywood bought the “Groves Interest” and then turned around and on August 9, 1978, offered 832,831 shares to ICD itself at $ 32.24 a share. The ICD board authorized Edward St. George to form a new company to buy the stock. He founded the Port Authority, Ltd., of which he would own 50% and “the government of the Bahamas and/or other Bahamian interests would own the other 50%” [Abramson & Fabricant 1980:10]. On July 19, 1979, ICD also agreed to sell nine Freeport utility subsidiaries to PAL for $30 million in cash and $4 million in notes.
However, once news of this got to the other stockholders (ICD had attracted some outside investors while being publicly traded), a spirited protest erupted. Officially the stock was only worth $23.63 a share. The minority holders were incensed therefore that the corporation would pay $32 a share for these holdings. A class action lawsuit was filed in the New York courts by two of the minority holders, demanding that the other stockholders be allowed to get a similar price for their stock. The plantiffs wanted more than $34 million for ICD sale, and more than $32 per share. Agreement was reached on December 20, 1979 that ICD would buy everyone’s stock at $35.50 per share. Notice of this decision was sent to all 13,000 stockholders between June 12 and  November 24, 1980, and no written objections were received. A new Panamanian company, the Lucayan Corporation, was formed to merge with ICD and give shareholders their $35.50 per share (or if they held round lots, the option of continuing as shareholders). This was approved by the New York court on March 17, 1980, and ICD ceased to be publicly traded.
Yet it wasn’t as simple as that. ICD didn’t have enough cash to buy up all 800,000 shares, so they tried to arrange a loan to cover it—and were unsuccessful. This and the economic turn-down in 1980 caused Port Authority, Ltd., to withdraw its offer to the ICD shareholders, which put them in a quandry. ICD was still trading at $24. If news got out that the sale was off, the stock would plummet in value, and they would be stuck with it. Also, there was the question of the plantiffs’ counsel fees of $775,000 and legal expenses of $44,083.83. A new deal was arranged in late 1980 whereby PAL (or St. George) agreed to buy each outstanding share at $21 in cash and $21 in promissory notes, and this was to include the fees and other costs.
In June, 1981, 525,247 (79%) of the ICD shares were owned by Sir Jack Hayward, 100,000 (15.1%) by Edward St. George, and 39,477 (5.9%) by the public. The public shares were bought up for $1,184,310. By July 14, 1981, Edward St. George and Jack Hayward were the only shareholders, and St. George was chairman of ICD. On August 6, 1982, an internal ICD board decision was made to issue 1,635,143 shares of class B common stock (par $2) to Fiduciary Management Services, Ltd. [St. George’s “private bank”], and 1,209,896 shares of class B common stock (par $2) to Jack Hayward. Both partners would then have an equal number of shares; 1,735,143. On January 20, 1983, an official letter of resolution was issued to ratify this division. When this was finished, ICD owned 92.5% of GBPA stock and 100% of Port Authority, Ltd. The remaining 7.5 GBPA stock was of course still owned by the Bahamian Government.
It appears from this that St. George played a leading role in both squeezing out Groves and in taking the Intercontinental Diversified Corporation private, which is why the equal division apparently took place. He also took over the responsibility of keeping the PLP, or rather Lynden Pindling, happy, which was vital to the GBPA’s interests. St. George began to cultivate Pindling after the 1977 election, and made sure that the Prime Minister developed a personal interest in Freeport. Between 1977 and 1983, Craton notes that Pindling’s income was five times as much as he was receiving as his official pay. In particular, there was a free gift of $750,000 from St. George and Hayward. When in London, the Prime Minister and his family was given the use of a luxurious Knightsbridge flat owned by St. George, and Pindling’s daughters “finished their education alongside the children of billionaires and princes at Le Rosey in Switzerland, reputed to be the most expensive in the world—largely thanks, it was said, to the munificence of Edward St. George.” [Craton 2002:326] Sir Stafford Sands would have understood.
The 1977 Bahamas Handbook includes an article (“Revitalizing the Future”) that essentially announces that Groves is out and Hayward and St. George are in charge. It also notes that investors had lost confidence in acquiring land. Another article, “DEVCO Formulates New Land Policy”, gives notice that property speculation was no longer acceptable. As if to demonstrate this, the list of available developments is considerably shortened. For example, in 1968 at the height of the boom, there were 23 developments (by 7 different developers, including Devco) to choose from, and by 1970 with the construction of the Grand Lucayan Waterway, another 17—mostly subdivisions of the Waterway—were added:
1968 (those without a specific developer noted are Devco ventures):

• Arden Forest 6 miles east of Freeport Freeport Mall, 488 acres
• Bahama Reef (Lucaya) 4.5 miles from central Freeport, 648 acres; Freeport Realty
• Bahama Terrace, 200 acres; Bahama Terrace Yacht and Country Club
• Bahamia Estates North, adjacent to International Bazaar, 345 acres and golf course (late 67); Yorkshire Development
• Bahamia Estates South, adjacent to King’s Inn, 1,000 acres; Yorkshire Development
• Buckingham County 15 miles east of Freeport Mall 1,044 acres
• Chesapeake 8 miles east of Freeport Mall, 700 acres
• Fortune Bay Units 1-3 (Lucaya) on Bell Channel, 379 acres; Tamarind Developments
• Fortune Bay Units 4 & 5 (Lucaya) 8 miles from Freeport Mall, 380 acres
• Fortune Point Unit 2, 8 miles from Freeport Mall, 165 acres
• Grand Lucayan Waterway Phase 1,10 miles east of Freeport Mall, 460 acres
• Grasmere Units 1-3 6 miles east of Freeport Mall & north of Arden Forest, 483 acres
• Greening Glade Units 1&2, 5 miles from Freeport Mall surrounding Lucayan Country Club, 257 acres
• Leicester County 14 miles east of Freeport Mall, 2,167 acres
• Lincoln Park, Units 1-3 8 miles east of Freeport Mall, 2,167 acres
• Lucaya Estates Units 1-40 12-18 miles east of Freeport Mall ,17,315 acres
• Lucayan Knoll 5 miles east of Freeport Mall, 93 acres
• Queens Cove 3 miles northwest of central Freeport, 3,500 acres; Bahamas Developers
• Richmond Park, Queen’s Highway 4.5 from Freeport Mall, 525 acres; Tamarind Developments
• Royal Bahamian Estates, Sunrise Highway 2 miles from central Freeport, 400 acres; Grand Bahamian Hills
• Shannon Unit 1 8 miles east of Freeport Mall, 174 acres
• Sherwood Forest 5.2 miles east of Freeport Mall, 174 acres; Tamarind Developments
• Yeoman Wood Units 1-4 5 miles east of Freeport Mall, 621 acres

1969 (added to the above list)

• Bell Channel Bay Units 1-4 4.5 miles east of Freeport Mall
• Cannon Bay Units 1&2, Colony Bay, Coral Bay, Discovery Bay, Galleon Bay, Pearl Bay, Pine Bay, each 10 miles east of Freeport Mall on the Grand Lucayan Waterway

1970 (further additions)

• Bristol Bay, 8.5 miles east of Freeport Mall, Caravelle Bay 9 miles east of Freeport Mall, Dover Sound Unit 1, Royal Palm Bay, Surrey Bay, Voyager Bay, and Windsor Bay, on the Grand Lucayan Waterway
• Suffolk Units 1&2
• Emerald Bay Units 1-3, (nw of Caravelle)
• Windemere 10.5 east of Freeport Mall

These and more were still being advertised in the 1975 Bahamas Handbook. In 1977, however, many of these projects were no longer viable, and the advertised list had shrunk to eight!

• Bahamas Marina between Bahamia South and the ocean, 240 acres; Princess Realty
• Bahamia North, adjacent to International Bazaar, 370 acres; Princess Realty
• Bahamia South, adjacent to Bahamas Princess Hotel (former King’s Inn), 1,035 acres; Princess Realty
• Bahamia West, from Sunrise Highway to ocean, 647 acres; Princess Realty
• Fortune Bay Units 1-3 (Lucaya) on Bell Channel, 379 acres; Tamarind Developments
• Richmond Park, 5.25 from Freeport Mall, 450 acres; Tamarind Developments
• Sherwood Forest 5.25 miles east of Freeport Mall, 523 acres; Tamarind Developments

This dramatically illustrates both the altered vision and the grim economic reality that occurred in Freeport during the GBPA’s shift from Wallace Groves to Hayward and St. George in the 1970s. The world recession following the international gas crisis in 1974-76, with its “stagflation”, high unemployment and widespread decline in investment, moved the Bahamas out of the development cycle. There were still only eight active developments (although different ones in some cases, as Devco was back in the action) listed in 1979.
Tourism was also a problem. Reduced rates to Europe in the late 1960s drew Americans away from the Islands, and recovery was temporary after the drop in 1970, and slow after that of 1974. On Grand Bahama, visitor numbers were as follows:

Year	By Air	By Sea	Total
1969	358,360	160,519	518,879
1970	324,778	158,347	483,126
1971	330,864	171,744	502,608
1972	326,735	157,137	483,872
1973	324,061	119,903	443,964
1974	292,521	70,754	363,275
1975	274,868	80,737	355,605
1976	343,180	38,990	382,170
Totals before 1977 included people on gambling junkets who only stayed a few hours and had little or no impact on the community. From 1977 on, the figures only include visitors who stayed at least 24 hours.
1977	333,530	20,800	354,330
1978	401,920	67,260	469,180
1979	433,920	74,250	508,170
1980	454,910	85,130	540,040
1981	557,605	67,884	625,489
1982	398,140	272,480	670,620
1983	546,198	304,030	850,109
1984	520,160	279,949	818,109
1985	408,170	340,890	749,060
1986	595,479	553,652	1,149,131

It should be noted that the economic impact of the arrivals by air has always been more valuable than that of those who come by cruise ship, but some of these figures include people who came for longer stays by the various “ferry” services that were on offer from time to time".

2015 - History: Part Four: Commission Reports and Governmental Intervention

 

An Informal History of the
Grand Bahama Port Authority,
1955-1985

Part Four: Commission Reports and
Governmental Intervention  

"The January 10, 1967 election resulted in a surprising tie between the ruling United Bahamian Party and the Progressive Liberal Party opposition. Each party received 18 seats in the House of Assembly, with the two remaining going to Labour candidate Randol Fawkes and Independent Alvin Braynen. The moderates of the National Democratic Party came up empty. The UBP and the PLP each approached the two mavericks for support, but both threw their support to Pindling and the PLP, which was then able to form the new government. With the “radicals” now in charge, new fears over the status of Freeport arose, but Pindling, who was generally pragmatic and no racist (not that he was above playing the race card on occasion), said he had no intention of killing the goose that laid the golden eggs or rescinding the Hawksbill Creek Agreement. However, he also stated that his government intended to exercise more control over Grand Bahama, and the vexed questions of “Bahamianization” (increased govermental control as well as more jobs and economic ownership for native Bahamians) and immigration were to be firmly addressed.
Following up on the Wall Street Journal’s exposé, Life magazine (Richard Oulahan and William Lambert, “The Scandal in the Bahamas,” Feb. 3, 1967) and the Saturday Evening Post (Bill Davidson, “The Mafia: Shadow of Evil on an Island in the Sun,” Feb. 25, 1967) published investigatory articles about the suborning of the Executive Council in securing the Certificate of Exemption and of the Mob’s influence in Freeport, further exciting the critics of the GBPA and Bay Street, and handing the PLP prime election ammunition. On March 13, the “Commission of Inquiry into the Operations of the Business of Casinos in Freeport and in Nassau” began its investigation. The careful and painstaking (if sometimes frustrated) process of hearings and analysis of documentary evidence resulted in a report issued in November, 1967, which essentially supported the more vivid accounts in the American media. Firstly, the crucial Certificate of Exemption had involved interesting payments to the members of the Executive Council (in the form of “consultancy fees” and other commissions):

• Premier Sir Roland Symonette was given $10,000 as a political donation in 1962, and later was to receive £6,000 a year for five years as a “consultant”, but he ended the agreement after 10 months and only received £5,000;
• Charles Trevor Kelly, Maritime Affairs Minister, received a subsidy for the use of his freighter, Betty K, for twice-weekly transport between Florida to Freeport (later a compensatory payment of $100,000 was substituted when the service proved impractical);
• Dr. Raymond Sawyer, a dentist and owner of Nassau’s Hobby Horse Hall racetrack, was offered £2,000 a year for five years as a medical consultant for Freeport, and took the entire £10,000;
• Capt. Frederic W. Brown, a pilot, who got £2,500 for advising on pilotage in the Freeport channel;
• Sir Etienne Dupuch was given a personal donation in 1962 for his political campaign of $10,000, and $20,000 was given to his newspaper, the Nassau Tribune (there was also a gift of $2,760 to the rival Nassau Herald). He was later given a £500 a month fee, to a total of £12,000. His paper, which had seriously criticised the idea of gambling eventually became rather timid on the subject; and then there was
• Sir Stafford Sands. Not surprisingly, Sir Stafford made out the best. He received £200,000 for his work on the Certificate. In addition, he was given a retainer of £17,800 ($50,000) a year for “advising on promotion” for ten years as well as other fees, which in the end (1966) totalled over $1,800,000—not bad for a county lawyer.

The other member of the Council, Canadian-born Donald E. d’Albenas and known to be opposed to gambling, was left untouched. In addition, Robert H. “Bobby” Symonette, Speaker of the House of Assembly as well as Sir Roland’s son and a yachtsman, was offered £5,000 a year for five years to advise on marina construction, and received £25,000. As there were then no conflict of interest laws in the Bahamas, there were no charges brought. However, all but Sir Roland left government service, Dupuch later moved to Florida and Sands went into exile in Spain.

 

Freeport: Not Just Sand and Sun

 

Secondly, there was the matter of Syndicate involvement in the casino. Once McCrory’s disclosures hit the papers, the presence of Lansky’s cohorts, as well as Chesler’s connections, were revealed. American gambling criminals were indeed in control of or working at the Monte Carlo casino, including:

• Frank Ritter, alias Red Reed (“credit manager”),
• Morris Schmerzler, alias Max Courtney (“general manager”),
• Charles Brudner, alias Charlie Brud (“floor manager”)—all three employed at $100 a day plus 30% of the net profits as “annual bonuses”;
• George Sadlo (Lansky’s 80-year-old sidekick),
• Dino Cellini (“craps supervisor” and casino management expert),
• James Baker [no relation to the author] (“craps supervisor”),
• Roy Bell (“craps supervisor”),
• David Geiger (“craps supervisor”),
• Howard Kamm,
• Al Jacobs (“craps supervisor”),
• Anthony Tabasso,
• Hyman Lazar (“floor manager” after Courtney was deported),
• Frank Farrel, and
• Ernie Braca

Cellini, Baker, Geiger, Jacobs and Bell were deported from the Bahamas in March, 1964. Ritter, Courtney, and Bruder lasted until 1967. In January that year they made a deal with the casino in which they “leased” their files on the “credit-worthiness” of known American “high-rollers”—an important factor in a business where most losses were handled on credit rather than cash—to Bahamas Amusement, Ltd. for $2,100,000, to be paid over a ten-year period! Although the Bahamas Amusement administrators had not blinked and paid up, the Commission understandably found this excessive. Perhaps this was compensation to the Mob for the loss of their cash cow.
In June, the new government voted to levy a tax of a million dollars a year on Freeport’s casinos, upon which the Monte Carlo promptly closed in favor of the new El Casino, with the explanation that the company was not yet ready for such a financial burden. In the end, the Syndicate seems to have either departed or become subdued enough that no further charges were made after the “clean-up” of fiscal and managerial irregularities suggested by the Royal Commission. It is too much to believe that all underworld activity departed with the above mentioned “personnel”, but there doesn’t appear to have been any further scandals. One wonders whether Bahamas Amusements, which quickly agreed to cooperate with the Commission investigation, hadn’t welcomed the process as a way in which to free itself from the heavy hand of the Syndicate?
A secondary development involving Bahamas Amusements, Ltd. briefly at this time was the introduction of gambling to Paradise Island, across the harbor from Nassau. The island (formerly “Hog Island”—from the common colonial expedient of setting an island or a fenced-off peninsula apart where the community’s swine could be allowed to forage without endangering anyone’s crops) had belonged to the wealthy Swedish Electrolux billionaire, Axel Wenner-Gren until he sold it to A&P heir Huntington Hartford for $14 million in 1960. Hartford unsucessfully tried to secure a gaming concession for his resort in 1963, but he made the mistake of not going to the right lawyer (Sands) and was unable to follow in Groves and Chelser’s footsteps. He also contributed to the new PLP, which was not the way to make friends among the Bay Street Boys. However, a new initiative by Bahamas Amusements, Ltd. and the incongruous Mary Carter Paint Company (there was no actual “Mary Carter”) was able to buy up the the old Bahamian Club in Nassau without difficulty in 1965 and on August 17, 1966, receive a Certificate of Exemption for a new Paradise Island casino; one of the redoubtable Sir Stafford Sands’s final successes. There were some conditions attached, such as the building of a bridge (which Hartford had also fruitlessly proposed) from New Providence Island by April 1, 1967, and construction of a 500-room hotel by the end of that year. As Bahamas Amusements, Ltd. was the primary legal gaming concession in the islands, it made sense for them to be involved with the new venture. However, the 1966 scandal of Bahamas Amusements’ dubious connections with the Syndicate (and the Bahamian Government) caused them to divest the Paradise Island stock in March, 1967. Apparently alarmed by the the Freeport casino scandal, Mary Carter Paint bought out the Groves’s interest (and eventually cheated Hartford out of both his purchase price and his remaining shares).
Mary Carter Paint was incorporated in 1958, involving paint companies dating back to 1908, and retailed paint in Florida, the Bahamas and elsewhere. However, president Jack Davis and CEO James Crosby had bigger ambitions and decided to exploit the corporation to quite different ends. They bought out Bahamas Developers, Ltd. on Grand Bahama in 1962 and, hearing about the troubles Huntington Hartford was having on Paradise Island in 1964, decided to enter the profitable gaming and resort field. At Sir Stafford Sands’ suggestion, they joined with Bahamas Amusements (and the unfortunate Hartford, who held onto a 20% share for a while) in early 1966. The partners opened the Bahamas’ third major casino  (the Monte Carlo had already closed) in December, 1967. Mary Carter Paint also acquired the Queen’s Cove property in Freeport from Daniel Ludwig, who was busy developing his Princess Resort at Xanadu Beach. In May 1968, Mary Carter Paint sold its paint division to Delafield Industries for just over $10 million and became Resorts International NV (based in the Netherlands). The new corporation acquired additional amusement companies in America, and bought the Bahamian company, Chalk's International Airline, Inc., in April 1974. After Wallace Groves retired, his successors shifted the management of El Casino to Resorts International (and the old Monte Carlo was resurrected as the Lucayan Beach Hotel and Casino). Resorts international was also successful in introducing gambling to Atlantic City in 1976. 

 

Sir Lynden Pindling

There was also other would-be gambling enthusiasts chasing the golden certificates of exemption at the time. Michael J. McLaney, an associate of Lou Chesler and former operator of the Hotel Nacionale casino in Havana (which he bought from the Syndicate three months before it was seized by Fidel Castro), had managed the Cat Cay casino in Bimini for Louis Wasey’s daughter Jane in 1963-64. In 1966 he approached Lynden Pindling with an offer to help him in the upcoming election. He supplied Pindling with a helicopter to take him to his constituency in Kemp’s Bay, Andros for 8 or 9 days; a Cessna aircraft to take him to various Out Islands for 7 to 10 days, and a DC-3 plane for 2 or three days for the same thing. McLaney also supplied Pindling for a month with the services of a financial consultant from New York named Colasurdo, who initiated some complicated business dealings with the future Prime Minister involving a blueberry plantation and $1.9 million. There was no actual deal involved, but McLaney estimated that the combined contributions amounted to about $60,000. He also rented 13 rooms on the fourth floor of the Trade Winds building on Bay Street that he made available to members of the PLP, including Arthur Foulkes and James Shepherd. McLaney ended up with no return for his investment, but Lynden Pindling had gotten a tempting taste of what political power could attract.
While all this was going on, Wallace Groves and his partners were struggling with their public relations debacle and the potential changes in the Bahamian power structure. They seemed to have worried that the PLP might possibly abrogate the Hawksbill Creek Agreement and even nationalize (or “Bahamanize”) the Grand Bahama Port Authority, which was only a private corporation with no influencial connections outside of the Bahamas. As a hedge against such a move, they embarked on a complicated expedient to get GBPA stock publicly traded on the New York Stock Exchange, apparently hoping to make a straight power grab less likely. They converted 92.5% of the GBPA stock to that of an American-controlled Philippines gold mining company—Benguet Consolidated. The involvement of a Philippines corporation may seem like an odd move, but there were several good reasons for the choice. Firstly, 97.5% of Benguet Consolidated stock was actually owned by American investors, the largest amount of which belonged to Charles Allen’s brother and partner, Herbert. Secondly, Benguet Consolidated was facing a threat similar to that of the Grand Bahama Port Authority. The new Philippines’ constitution mandated that by 1974 a majority of the stockholders be Filipino citizens. Dictator Ferdinand Marcos had imposed legislation restricting foreign ownership of the country's mining companies to just 40 percent, and by 1971, Benjamin Romualdez, Imelda Marcos’s brother, had effective control of the company. As the Report of the Royal Commission  … to Review the Hawksbill Creek Agreement (1971) observed, “It  would therefore be to their advantage if [Benguet Consolidated] could amalgamate with another corporate entity and thus be enabled by the due date to ‘spin off’ assets other than its natural resources properties in the Philippine Islands and so secure their long term interests.” [Report of the Royal Commission, 1971:46]. This they did successfully on May 15, 1968, despite some resistance by the PLP Government that was over come by agreeing to further modifications to the Hawksbill Creek Agreement, and allowing the Government to purchase of 7.5% of the new stock at a discount to become a “partner” on the board of the GBPA.
The Bahamas Handbook had a (probably paid) sidebar entitled “What’s this Business about Benguet?” [Bahamas Handbook 1969:355] which announced that “Benguet shareholders approved the acquisition of 2,010,000 Port Authority shares in exchange for 9,990,075 Benguet shares, a swap totalling some U.S. $150 million.” The reorganization involved the Hayward’s Variant Industries shares as well as those of the Allens and the Groveses. Benguet Consolidated’s American investors were able to extract their holdings from the Philippines and placed the Bahamian assets in a new Panamanian (later reorganized in the greater safety of the Cayman Islands in November, 1984) holding company, Intercontinental Diversified (ICD), in early 1974. The remaining assets were taken up by the Allens, who then had no further part in the Grand Bahama story. Benquet itself was largely taken over by Marcos’s family and cronies, who also extracted some $329,439 from the investors for approval by the Philippines Government for that end of the deal. With its stock safely tucked away in Panama, ICD, now the owner of the GBPA, became an internationally-traded company in its own right and beyond the easy reach of the PLP Government.
The Benguet venture had a significant downside as well, as the conditions demanded by the Bahamian Government led to a serious conflict between the Port Authority and the PLP. In exchange for the necessary approval of the Government for the Benguet merger, the GBPA agreed in principle “…to the measures which the Government proposes to take for the good government and proper control of the Port Area…”, which involved the standardization of immigrant and customs controls as well as approval from Nassau for further development and new business licenses. However, although the Government specified “controls”, the GBPA referred to them as “procedural arrangements”, which led to an ongoing conflict over what was actually agreed upon. Furthermore, any amendment legally required the approval of four-fifths of the Port Authority licensees, and they were not being told what was going on.
While the GBPA might have agreed to new “controls” or “procedures”, the licensees rightly saw this as an unwarranted surrender of the rights they had under the Hawksbill Creek Agreement. New restrictions on employing foreign personnel were particularly unwelcome. Despite wishful thinking by the Government, there simply were not enough capable Bahamians to be had, and although the GBPA could have done more in the way of training, it could not meet any immediate need. Counsel for the Port Authority in Britain was of the opinion that if it could be shown that a) no “key, trained and/or skilled” personnel could be found in the Bahamas, and b) the foreign candidates were in fact actually “key, trained and/or skilled”  and c) were of good character, then the Government had “no [legal] discretion to withhold permission to the employer, to bring in the personnel required and the number so required.” [Report of the Royal Commission, p. 54]. The PLP Government did not agree, and insisted on exercising final control over all recruits, whatever their qualifications or their employer’s requirements, contrary to the Hawksbill Creek Agreement. In addition, the machinery set up by the Government to do this proved to be costly, inefficient, dilatory and often unreasonably arbitrary in practice. They limited work permits to a year or even six months, which was hardly inducive to the recruitment of professionals asked to relocate with their families. When the Royal Commission investigated licensee complaints, they found them to be so overwhelmingly true that they “stopped the investigation because it became embarrassing to continue.” [Report of the Royal Commission, 1971:64]. There was even a government white paper prepared in late 1968 suggesting that Freeport “was eminently suitable” for reorganization as a unit of local government—except the Hawksbill Creek Agreement still stood in the way, so nothing was done.
Another strong signal of the Government’s intentions concerning Freeport was lobbed into the fray by Lynden Pindling on July 26, 1969, in the famous “bend or break” speech he gave at the opening of the BORCO refinery on Grand Bahama. According to Michael Craton, it was a last-minute departure from a bland planned address, and one that left little doubt about the PLP’s resolve to curb the independence that had enabled Freeport to prosper so dramatically in the mid-1960s.

In this city, where, regrettably, almost anything goes, where, promisingly, some economic opportunities have come to Bahamians, Bahamians are nevertheless still the victims of an unbending social order, which, if it now refuses to bend, must be broken. [Craton 2002:167]

The frustration felt by the licensees, who found it difficult to manage their businesses, conduct desperate searches for suitable employees and afford newly-tightened customs duties, was aggravated by the discovery that the GBPA had already “bent” in principle to the Government’s demands in order to secure approval for the Benguet merger. Their case was put forward by the Licensees’ Division of the Freeport Chamber of Commerce, represented by its president, Peter Bannock. Bannock met with Prime Minister Pindling and proposed a rather assertive compromise, but to no avail. The GBPA reluctantly yielded to the demands of the licensees and served notice to the Government that the issue should be put to arbitration, as specified in the Hawksbill Creek Agreement. However, the Government ignored this and passed an act, the Immigration (Special Provisions) Bill, 1970, that essentially nullified the clauses respecting immigration in the Hawksbill Creek Agreement, and asserted that the Bahamian Government was to have sole control over all immigration. The original agreement to work out such disputes through Port Authority-Government arbitration was a obviously a dead letter.
This example of governmental breach of faith, as the Royal Commission recognized, may have been strictly legal under the new 1968 constitution, but it was unethical and had far-reaching negative consequences, not only for Freeport but for the Bahamas as well. Capital investment, whether one approves of capitalism or not, is how the world works, and it is notably fluid. No one was going to put money into Bahamian development if there was a chance the Government might interfere and make it impossible to proceed or profit. Foreign investors took one look at the PLP move and shied away. “Capital is so sensitive that it will not tarry to find out who is in the right legally or who is in the wrong.” [Report of the Royal Commission 1971:66].  Wallace Groves was disgusted by the shortsightedness of the PLP Government, wondering why it should “stupidly wish to destroy a city that was furnishing approximately one-fifth of their governmental revenues.” [Block 1998: 97] 
To the Government, however, this appeared to be a matter of national pride and an almost obligatory assertion of its perceived rights in the aftermath of the struggle with the Bay Street elite in the overheated atmosphere of “black power” that pervaded the late 1960s. The PLP still had a jaundiced eye on the bothersome “foreign” and largely Caucasian enclave on Grand Bahama, and was determined to assert control, whatever the consequences. It might be wrong-headed and short-sighted, but the Government felt it was their responsibility to kick against any overt outsider influence—even a beneficial one. New challenges, such as another Royal Commission appointed in 1970 to review the Hawksbill Creek Agreement, would follow.
To further complicate matters, the long postwar economic boom that had enabled Freeport’s growth came to an end. British sterling was devalued in November, 1967, followed by the French franc in 1969, and in 1971, the U.S. dollar ceased to be convertible into gold. In Grand Bahama, the boom reached its height in 1968, but then leveled off, and a downturn was evident the following year. The United States went into a recession in mid-1969, and as has often be observed, “when the U. S. economy sneezes, the Bahamas’ catches cold”. No substantial new projects were begun after July 1969, and an exodus from Grand Bahama to more promising places for investment took place".

2015 - History: Part Three: The Gambling Scandals - Freeport, Grand Bahama

 

 An Informal History of the
Grand Bahama Port Authority,
1955-1985

Part Three: The Gambling Scandals

"Although we will cover the brouhaha that erupted with the Wall Street Journal exposé “Las Vegas East” in October, 1966 in greater detail in the next section, there needs to be a brief introduction at this point because Louis Chesler (together with Stafford Sands) was responsible of most of what followed. Chesler was an avid gambler in both the stock market and at the gaming table. Like many high-rollers, he was intimate with the underworld figures who controlled the latter, and, thanks to the genius of Meyer Lansky, had begun to infiltrate the former. It appears that Chesler was not only the angel who brought in the timely $12 million investment, but also the imp that acted as go-between for Freeport and the Syndicate.
There is a fascination with conspiracies in popular historical analysis. People see them everywhere—in government, in big business, and just about any powerful or extensive social network. Back in the 1960s, this tendency wasn’t as pronounced as it is now, but in international anti-communist politics or the deliciously intriguing sphere of organized crime, the tone was already excited and shrill. It was the presence of the dreaded “Mafia” in Bahamian casinos that precipitated much of the media fascination as to what Wallace Groves was really up to on Grand Bahama. The problem with conspiratorially-minded sources on the Freeport gambling scandal, such as Hank Messick’s Syndicate Abroad (the best of the lot), is while there is a great deal of valuable information, the focus is sensationally on the wickedness of Meyer Lansky and his cohorts. Lansky is presented as almost supernaturally in control of events, far more powerful, organized, aware and efficient than the poor dupes he was dealing with.

 

Meyer Lansky

While the sources are convincing that Lansky et al did indeed have a hand in the pot (to their considerable profit), the conclusion that the entire venture was planned out in advance by a criminal mastermind or that men like Chesler were nothing but pawns in the Syndicate’s game, is seriously exaggerated. It is more plausible to see the Freeport bosses and Lansky’s associates each involved in a calculated game of their own, trying to get as much as they could out of what was essentially a symbiotic relationship. There is more than a casual similarity between high-stakes stock speculation and angling for advantage with the Bahamian government or the Syndicate, so that Chesler and Groves were better positioned than most people for the situation they found themselves in. They really did need experts to manage their casino (and perhaps found it was better to deal with the dubious types directly than risk infiltration), while Lansky had little hope of operating in the Bahamas without collusion with the Bahamian Amusements Company. Little strong-arm intimidation seems to have occurred and whatever “skimming” of profits took place appeared to be accepted as the cost of doing business. There was an instance where three American crooks; Nate Saunders, Rudolph DiBeradino and John Sidoruk and a young Bahamian tough named Gadvill Newton (once bodyguard for Sir Stafford Sands) known throughout the Bahamas as “Skiboo”, set up a drugs and prostitutes ring in  the King’s Inn, however. The pious horror that governmental figures expressed about the evils of gambling at the time sound quaint today—now that gaming has been embraced by civic authorities across America.
However, although there was no crime wave as a result, any possible Chesler/Lansky pact was both illegal and, at the time, immoral. How did the whole thing come about? It seems to have begun with Stafford Sands, who, both Chesler and Groves asserted, was the first to suggest a casino. Sands had a long history of interest in legalized gambling in the Bahamas. His familiarity with the rich tourists of the ‘Twenties and ‘Thirties, whose natural environment included Monte Carlo, convinced him that a casino would greatly enhance the Bahamas’ attraction as a tourism destination. Gambling was illegal in the Bahamas, but there had long been an exclusive seasonal gambling club (the Bahamian Club, which had operated a casino three months a year since 1920) in Nassau. In 1939, Sands, who as a member of the House of Assembly was already seriously trying to attract more of rich and famous visitors to come and leave their cash in his home islands, introduced an act before the Bahamian legislature to legalize both this club and a new operation proposed by American Lewis Wasey for the Cat Cay Club in Bimini. They amended the Lotteries and Gaming Act (1927) with a clause that gave the Governor in Council the authority to grant annual certificates of exemption to certain “persons, clubs or charitable organizations” to allow gaming, which was done for the two clubs in question. The certificates essentially allowing only leisured visitors to indulge in gambling by forbidding minors, native Bahamians, foreigners working in the colony and Government officers and employees from doing so. In 1946 Sands tried to get the certificates extended for a 25-year period, which failed. His efforts to secure permission for a new casino on the former Oakes Field property, and another attempt for a syndicate of English noblemen in February 1959 also failed.
The matter rested there until the Freeport partners found they needed something to speed up the new Lucayan development. The chosen stimulus to create a new cash flow was casino gambling. As the Royal Commission of Inquiry observed in 1967,

During 1962 it became increasingly apparent that the Freeport area was not developing as rapidly as had been planned. Land sales were below the level necessary to justify the enormous investment which the Development Company had already made in that area, and by the later half of the year that Company was running into severe financial difficulties. [Commission of Inquiry 1967:20]

Officially, they began their considerations in 1962—or in 1961, as the Commission concluded from testimony—with Chesler and Sands leading the way. As the plan was a highly “sensitive” issue, they kept it under wraps as far as possible. One interesting clue that the casino concept had been part of their thinking early on is that a casino is mentioned—without detail or exact location (it is listed as #26 on a map of Lucaya on page 47) in the Cornell plan in 1960, before Chesler was formally involved in the project.
With his painful experience in the matter of certificates of exemption in mind, Sands developed an elaborate plan to insure that this time the application would receive favorable attention, which including waiting to see how the November 1962 election would come out. The Bay Street Boys were gratified by the success of the United Bahamian Party in the election, and Sands, who had been reappointed to the Executive Council, knew that it was time to act. On 20 March 1963, a new corporation was formed called the Bahamas Amusements, Ltd. Shares in the Amusements Company were divided between Chesler and Mrs. Groves, who each received 498 shares of 500 Class 1 shares and 498 Class 2 shares. The remaining Class 1 shares went to two of Chesler’s Canadian partners, while the two Class 2 shares went to Keith Gonsalves (future director of the Grand Bahama Development Company and of Bahamian Amusements, Ltd.), and Sir Charles Hayward, another GBDC (Grand Bahama Development Co.) director. That same day, the new company made an application, drafted by Stafford Sands, for a Certificate of Exemption to the Governor in Council, in great secrecy. The certificate was quietly granted without difficulty eleven day later on 1 April 1963, allowing the Amusements Company to operate an unlimited number of casinos on Grand Bahama for a period of ten years. The casino was assured.
Chesler was also instrumental in securing the investment for the actual construction of the Lucayan Hotel, designed by architect A. Herbert Mathes, from a fellow Canadian named Allen S. Manus. Acting for the Atlantic Acceptance Company, a development firm in Toronto, he moved the operations of a prefab building company called Dalite (Canada), Ltd. to Freeport as Dalite (Bahamas), Ltd., through which millions of dollars flowed to build the hotel—and casino. The construction costs were exorbitant: the 256-room hotel cost $7.5 million to build in 1960s dollars, at a cost of $25,000 per room! There was no way that the hotel could recoup its costs at that rate, although the Lucayan Hotel and others to be constructed were vital to the growth of the Freeport development. As the “Report of the Royal Commission … to Review the Hawksbill Creek Agreement (1971)” put it, “Mr. Groves came up with an ingenious answer.”—it was agreed that all of the profits from Bahamas Amusements, Ltd. were to go to Devco to support the island’s hotels, as well as subsidizing advertising, Bahamas Airways flights to Grand Bahama and encouraging cruise ships to stop there. The Bahamas Amusement Company apparently distributed millions to its dependents, and this is what made Freeport’s subsequent success possible. It might be inferred that this may have been what Groves had intended all along in supporting Chesler and Sands’ casino scheme. Atlantic Acceptance, after advancing almost $11 million to Devco, went dramatically bankrupt in June, 1965.
The Monte Carlo casino in the new Lucayan Hotel opened on January 11, 1964. The casino did what it was intended to do—it brought in enough money to guarantee the entire Freeport venture at a sensitive time in its evolution. As the Bahamas Handbook for 1964, put it, “Gambling is the spark which has lighted the new booster-jets under Freeport in many phases. One of the awakening giants is the fresh boom in land development…” (p. 369). Freeport might not have survived without the introduction of gambling—but it was a Faustian bargain, as the later controversy about the way in which it was brought about and the criminal element it introduced made clear.
Management of a successful casino required professional skills—and since casinos were generally illegal, the only professionals available who could effectively handle the typical American clientele were men who had been involved with illegal gaming in the United States since the Prohibition era, who were generally members of “the Syndicate.” Although the Sicilian Mafia (about to be re-christened the “Cosa Nostra” following the revelations of Joe Valachi in 1963) dominated the popular conception of organized crime, there had been in fact a broader consortium of criminals including Jewish, Irish and other ethnicities as well as Italian, who coordinated illicit activities across the U.S. It was from among this cohort that the managers of the new casino were recruited—despite efforts to preclude hiring American employees for that very reason. This inevitably involved the most important figure in American gaming circles, Syndicate leader and Florida resident Meyer Lansky, who was responsible for organizing such ventures in the U.S. and, until Castro took over in Cuba, in Havana as well. Now his “boys” (one of them was in his 80s) were profitably ensconced in Freeport.
Although Louis Chesler was the power broker who made the casino possible, he was perhaps its first victim as well. The other partners had very much needed his money and his underworld connections to make the Grand Bahama Development Corporation and Bahamas Amusements viable, but his volatile character and unreliable nature also made him a liability once things got under way. As Dan Moldea notes in Interference (Morrow, 1995), this problem had already gotten Chesler in trouble in Florida:

Chesler didn’t control General Development, but he brought the company the money with which it could go forward and develop these various parts of Florida. Chesler was way ahead of that parade. The trouble with Chesler was that he loved to get drunk at night, and that was dangerous. [Moldea 1995:]

During the sensitive negotiations with the Governor and the Executive Council, Sands and Groves were horrified to discover a leak, which they attributed to Chesler’s drunken behavior. In a letter to Chesler dated 28 March 1963, Groves pleads:

“Stafford is really concerned over leaks, rumours, etc. and says the matter [the Certificate] can still be defeated. It will take two weeks more or less for certificate of exp. to be signed and in addition he has promised no publicity until he returns from England. Stafford blames S. Kelly and us (He thinks you). Please, please be careful.
Elis of Freeport News (and one other) says you laid at Caravel Bar 50 to 1 bet that there would be gambling at Freeport before end of year and Frank Stream told all over that Wednesday was D.Day—and that you did. We are being flooded with requests for information. Too bad.” [Messick: 1969:110]

Manus became the owner/operator of the new Lucayan Hotel for $6 million, but not the casino, which leased its rooms from the hotel for $750,000 a year. Predictably, friction arose between the hotel and its exotic subsidiary. Manus resented the role of the casino, worried about filling his rooms with paying patrons rather than gamblers on all-expenses-paid junkets, and had to deal with revolts among the native staff. In addition, he and Chesler had been involved in a personal feud for years that erupted again as things grew difficult. Chesler had plenty of other problems as well. Groves and Sands (now Sir Stafford) had had enough of their erratic and flamboyant partner. Now that his vital role as financier had been fulfilled, they began to edge Chesler out of the picture. Although Chesler tried to hold on to his investment by offering to buy Groves out for $17 million, the offer was refused. Simultaneously, Uncle Lou’s ties to Seven Arts, whose stockholders had decided that they no longer wanted to be part of the Grand Bahama venture, began to unravel. The stockholders bought up Chesler’s shares in the company and Seven Arts sold off the Grand Bahama Development Company investment. Groves was able to acquire enough stock to gain full control of Devco and Chesler found himself replaced as Director by banker Keith Gonsalves in May, 1964. He was even evicted from his suite at the Lucayan Hotel by Allen Manus. Manus had no luck with the hotel and the Lucayan Beach went in receivership by 1966.
Apparently not given to crying over spilt milk, Chesler is quoted as saying of his removal “I’m not an administrator and I shouldn’t be president. So now I’m sales manager.” He moved on and became one of the founders of Roberts Realty, of which his son Alan was a vice president in 1966. Even if in April 1967 he could describe himself as “probably the biggest loser in the Bahamas”, an article in Queen magazine by Ann Leslie that October describes a Roberts Realty venture in which Chesler is still a major figure. He eventually moved on and became owner of a “lush hotel” in Jamaica.
Between 1964 and 1966, Freeport’s growth finally took off. In 1966, Devco racked up over $40,000,000 in property sales, and the unprecedented “International Shopping Bazaar” designed by Hollywood set designer Hilliard Morris Brown (now so sadly diminished from its glory days in the ‘60s) appeared across from the King Inn, which planned an $8 million, 350-room expansion. Golf courses, new hotels including the 614-room Holiday Inn (then the largest in the Holiday Inn chain) and the 12-story Oceanus Hotel in Lucaya (originally combining apartments and hotel rooms) next door, and elegant apartment houses such as the Riviera Towers were built. The population of Freeport almost doubled between 1964 (4,700) and 1966 (8,500). Hospitals, libraries, schools, churches, and commercial establishments blossomed on the Grand Bahama landscape—just as the Devco plans had promised. Tourist visitation to Grand Bahama expanded dramatically as well:

Year	By Air	By Sea	Total
1963	23,000	3,000	26,000
1964	89,000	20,000	109,000
1965	127,769	68,231	196,000
1966	155,456	48,714	204,170
1967	229,635	23,500	253,135
1968	295,117	36,909	332,026

Now that Freeport was a fully functioning community, the GBPA (Grand Bahama Port Authority) and the Bahamas government took another look at the Hawksbill Creek Agreement. A new amendment was signed on March 1, 1966 with the intent of regularizing some of the social service functions that had been assigned to the Port Authority when Groves’s plans were still untested. The government agreed to take responsibility for educational and medical services that the Port Authority had been assigned earlier, as these were in fact more properly functions of the state rather than a for-profit corporation. In return the Port Authority agreed to pay for or provide land and structures for such services, build 1,000 modest worker’s homes and extend certain utilities such as running water to other Grand Bahama neighborhoods.

 

John “Tex” McCrary

 

The future looked bright and assured, but events were about to take a turn in which Freeport’s prospects would be deferred for many years. The first setback was primarily a public relations one, when the Wall Street Journal published a startling expose on October 5, 1966 that revealed the shady back-room deals that had made the casino possible, and also its underworld connections. Journal reporters, Monroe Karmin and Stanley Penn, received a Pulitzer prize for their work. The information that Sir Stafford Sands and Wallace Groves had tried so hard to cover up was apparently passed on to the Journal reporters by publicist and TV personality John “Tex” McCrary, who had worked for Chesler at Seven Arts and then on Grand Bahama. He had gone to work for Hill & Knowlton on New Providence but feeling let down by the Bay Street Boys, he decided to work for their defeat by embarrassing them with the facts behind the Lucaya casino deal:

McCrary began feeding documents on the corruption of the Groves-Sands regime in Grand Bahama to Allan Witwer, the U. S. Justice Department, the New York Times, the Wall Street Journal and anyone else who would listen. When Pindling was elected, McCrary got his reward. He and his associate Bill Safire (later to become a speech-writer for Nixon) eventually took over the large public relations contract previously held by Hill and Knowlton for the Bahamas. [Miller 1974:341]

The inside source of the scandal’s details was author Allan Witwer. Witwer also worked in the Devco office as a PR man. He concluded in 1964 that an expose of financial shenanigans he saw going on around him was a good book prospect, so he began to make copies of confidential documents that were easily accessible in the loose security of the Freeport office. Once he had milked Devco of everything he needed, he got a job with Hill & Knowlton, the New York PR firm that worked with Sir Stafford Sands’s Bahamas Ministry of Tourism. Assigned to Nassau, he proceeded to rifle the Ministry’s files for more material. In April, 1965 he quit and set to work on his book, which he called The Ugly Bahamian. He met James Maher, a Chesler associate who had been let go after his boss was pushed out. Maher provided documentation that clarified the Syndicate’s involvement, of meetings between Chesler and Lansky, and details about the immense sums paid to Sir Stafford and others in the Bahamian establishment.
Once Witwer let it be known he had an explosive manuscript, he was quickly contacted by Hill & Knowlton, who arranged to buy it (along with a guarantee not to publish) from him for $50,000. However, McCrary had seen to it that the cat was let out of the bag, much to the benefit of the Progressive Liberal Party and its leader, Lynden Pindling. Also, U. S. Attorney for the Southern District of New York Robert Morgenthau subpoenaed both the manuscript and Allan Witwer to appear before a federal grand jury investigating organized crime. Witner later wrote a series of 11 articles in Las Vegas Sun in 1971 about corruption in the Bahamas. He had secretly kept copies of his notes and texts for The Ugly Bahamian and these were eventually acquired by Hank Messick, informing his revelations of the Bahamian Syndicate scandal. One can only hope that the Witwer materials will someday be made available to historians of the Bahamas.
The Wall Street Journal exposé was only one indication of the problems facing the GBPO. More significant were the political struggles taking place in Nassau, which would shortly overturn the old colonial order that had enabled Sands and Groves to create the island enclave in the first place. Following World War II, European colonialism, which had dominated the world order through the previous century and before, underwent a speedy decay around the world. Colonies and protectorates in Asia, Africa, the Caribbean and elsewhere seized the time to declare independence from an exhausted Europe, which no longer had the power or will to sustain its former political supremacy. In the Bahamas, the local political establishment joined in the demand for dismantling overseas British rule—in a cautious way, at first. Although local contests between the Bay Street elite and the islands’ first real political party and opposition, the Progressive Liberal Party (established in 1953), were more visible, the growing Bahamian challenge to British overseas control that lead to eventual independence in 1973 was more significant. The efforts to secure freedom from the Foreign Office mandarins in Westminster set in motion the changes that would threatened the Grand Bahama Port Authority’s virtual autonomy and economic progress in the late 1960s.
If Sir Stafford Sands and Lynden Pindling could agree on one thing, it was home rule. Both were patriots (or nationalists) in their own way, putting the Bahamas first against outside interference from Britain—or the United States. Of course, each wanted his own faction in control of the political process. Here Sands found himself on the “wrong side of history”, vainly contending against the tide of majority rule, while Pindling was able to ride the populist wave sweeping the Caribbean nations to victory. Nevertheless, both recognized that change was inevitable and did their best to turn it to their faction’s advantage. What Sands wanted was to free Nassau from its subordinate political status but be able to manipulate the distant authority of the British government to perpetuate the white Bahamian establishment. We assume he was shrewd enough to realize this was a risky venture, which is how he was so quickly able to recognize defeat and slip quietly away to Spain after the 1967 elections. Pindling, on the other hand, wanted to carry the process through to its logical conclusion of national independence as quickly as possible. He knew that the old power structure, and the racist culture it perpetuated, could not easily survive the departure of direct British rule. The question was how long could the old system hang on, and whether it could refashion its economic and political grip as the colonial system slowly devolved.
There is no need to recapitulate the well-known history of the Bahamian progress towards independence beyond considering how the political moves and counter-moves impacted Freeport. The 1962 elections, involving the new extended franchise to women, were a decided victory for the United Bahamian Party, representative of the old establishment since 1958. The process of constitutional reform moved forward apace and the government was reorganized with the support of both parties (with some PLP disagreements). The old representational system was abolished, the Legislative Council became the Senate, the House of Assembly enlarged (at the next election) and an appointed Governor’s Cabinet formed. Rising racial tensions—each side being equally guilty in this regard—and concern over electoral process that still discriminated against the black majority resulted in a dramatic confrontation over the report of the Constituencies Commission in 1965, when Pindling performed his splendid symbolic act of tossing the Mace (which Mr. Butler followed with the hour-glasses used to limit debate) out of the window of the House of Assembly. The PLP then became embroiled in a struggle between Pindling’s radicals and more conservative members, leading to the secession of the latter as the National Democratic Party.
Amid this political furor, Freeport became a pawn in the struggle between the PLP and the UBP. The PLP had opposed the 1960 amendments to the Hawksbill Creek Agreement, but serious opposition to what was going on on Grand Bahama arose over the very real concerns of the rapidly-expanding foreign community (and alien workers) in Freeport. The sudden departure from tradition in the establishment of the gambling casino and the influx of outsiders became matters of debate. In 1966, the PLP and the NDP (National Development Party)“attacked both gambling and the very existence of Freeport. Its population had grown to 8,500 and that of Grand Bahama as a whole to 21,000. [Paul] Adderley warned that in twenty years Freeport could control the Bahamas, ‘a monster in this country, which can only devour the Bahamas, unless the Bahamas controls it now…” [Hughes 1981:111] while others shrilly asserted that Freeport’s population was largely made up of gangsters. When the Wall Street Journal article appeared in October, it was gleefully hailed by Freeport’s opponents, and roundly denounced by the other side. In December representatives flew to London to request an official investigation into the gambling problem, which even the Bahamas Amusements Ltd., supported. The stage was now set for the next election confrontation, scheduled for January, 1967".