The Batista-Lansky Alliance

How the mafia and a Cuban dictator built Havana's casinos
| By Matthew Reiss | From The Cuba Issue, May/Jun 01
The Batista-Lansky Alliance
Illustration/Dieter Braun

It was December 31, 1958. Cuban dictator Fulgencio Batista raised a New Year's Eve toast to his cabinet members and senior military officers and wished them hasta la vista. After seven years of building Havana's tourism industry by inviting gangsters such as Meyer Lansky to construct casinos, helping to fund their enterprises and taking a large chunk of the proceeds for himself, Batista knew his presidency was over. His plundering had weakened Cuba's treasury and demoralized the army. He filled three cargo planes with all he could carry and was on his way to the Dominican Republic before the sun came up on 1959.

Nine days later, Fidel Castro's guerrillas took the capital and installed what would become the longest-lasting communist government in the Western Hemisphere. But while Castro could close the casinos, arrest the gangsters and deport or imprison Batista's henchmen, he could not bury the skyscrapers that had drained the wealth of the island. Castro inherited from Batista a Havana of overt poverty and ostentatious wealth, where the haves of the world's richest nations had come to exploit the have-nots; where statues of Lenin and Marx would be dwarfed by glass and stone monuments to the Mob; where the nation's architectural landmarks would be a constant reminder of the days when criminals were in charge and the Mafia roamed free.

But until that last day of 1958, the only revolution that mattered to Mafia financier Lansky involved a roulette wheel. During the Batista years, Cuba was a place where a crooked man could make an honest living. After a half century on the wrong side of the law in the United States, the celebrated gangster was legit. America's high rollers and celebrities were living large in the casino of Lansky's luxury hotel, the Riviera, and the drinks were on the house.

As a kid in Manhattan's Lower East Side ghetto in the early part of the century, Meyer Lansky learned how to cheat, bribe and split fees with other cheats. He ran into Charlie "Lucky" Luciano, as legend has it, in a street fight, and Lansky's tenacity convinced the Sicilian Luciano that this Jewish kid had possibilities. Together with another local Italian, Frank Costello, and a young tough named Benny "Bugsy" Siegel, they created a powerful network of numbers runners and bookies throughout the city. With Luciano at the helm and Lansky at the register, the combination soon expanded nationwide.

When Prohibition took effect in 1919, Lansky's and Luciano's gambling alliances helped provide contacts with illicit liquor distributors across the country. The pair soon controlled a healthy share of the import and transportation of bootleg liquor.

After 14 years of windfall profits, many bootleggers were put out of business by the market forces of competition when Prohibition was repealed in 1933. Lansky's financial success had already made him a target of law enforcement. When New York started getting too hot, Lansky looked for other places to take his gambling operations.

In the mid-1930s, a Cuban army sergeant named Fulgencio Batista took advantage of political chaos in the former Spanish colony and formed his own government. At the time, the island republic was foundering, as was its gambling industry. Years before, Havana's nightlife had attracted wealthy entertainers from the United States, such as Sarah Bernhardt and Enrico Caruso. But Cuba's gaming industry had become mired in cheating and corruption by the 1930s. So, in 1939, Batista recruited a New England racetrack owner named Lou Smith to revive Havana's Oriental Park track and Meyer Lansky to clean up the casinos.

Soon, gamblers who were familiar with the professionalism of Lansky's stateside operations were eagerly making the flight to Havana, where they could be separated from their earnings in style. Within months, Cuba was back on the map as a gambling destination. Lansky's success did not escape Batista. The pair developed a close relationship, which is best chronicled in Robert Lacey's biography of Lansky, Little Man.

The resurgence of gambling and the return of rich tourists helped foster a wave of confidence in the island's economy. Batista scheduled an election in 1940 and won handily, only to have his hand-picked candidate defeated in 1944 by Dr. Ramón Grau San Martín of the opposition Autentico party. Under Grau, gambling was frowned upon. Lansky returned to the States to take care of his other investments. (He did, though, attend a Mafia summit in Havana in 1946 when the leaders decided Bugsy Siegel's very brief future.) Grau was followed by Autentico's Dr. Carlos Prío Socarrós in 1948. Both Grau's and Prío's terms were tainted by corruption.

Two months before the 1952 presidential elections, Batista snatched control of the government that he had relinquished, and quickly put gambling back on track. Once again, the dictator contacted Lansky, but this time he gave him an annual salary of $25,000 to serve as an unofficial gambling minister.

The high rollers followed Lansky to his new project, the Montmartre Club. While the casino was a hit, every night Lansky's customers would cash in their chips and hustle off to catch the floor show in the outdoor gardens of the Tropicana or at the Capri's Red Room nightclub, which was controlled by Tampa-based Mob boss Santo Trafficante Jr. Both nightclubs offered larger, more comfortable settings. To compete, Lansky persuaded Batista to give him a piece of Cuba's national treasure, the Hotel Nacional, built in the 1930s. The Nacional was where the cream of Cuban society went to wet their whistles. Under Lansky's impetus, a wing of the Nacional's grand entrance hall was refurbished to include a bar, a restaurant, a showroom and a casino. Lansky put his brother, Jake, in charge of the room, which by the spring of 1957 was bringing in as much cash as the biggest casinos in Las Vegas.

In 1955, the Batista government passed a law granting a gaming license to anyone who invested $1 million in a hotel or $200,000 in a new nightclub. And that meant anyone. Unlike the procedure for acquiring gaming licenses in Vegas, this provision exempted venture capitalists from background checks. As long as they made the required investment, they were provided with public matching funds for construction, a 10-year tax exemption and duty-free importation of equipment and furnishings. Although Batista's ostensible aim was to create new jobs, he gutted the labor laws to allow casino owners to bring their American croupiers.

Under the Batista-Lansky administration, Havana was ripe for foreign investment, especially for the glut of illegal earnings that Lansky and his cronies had accumulated from bootlegging, numbers and other rackets. The FBI was developing new ways of tracking down dirty money; to gangsters with loads of tainted cash, Havana looked like a stable offshore depository. The climate was so attractive that Lansky decided to build his own hotel, the Riviera, on the Malecón, Havana's wide boulevard along the seawall. In 1957 it rose over the horizon like a beacon, advertising the city as a refuge from the law.

"In the '50s there was this byzantine atmosphere," recalls Cuban émigré Arturo Quintana. "Every connection, every kind of deal. Everybody was so sure about everything." Quintana recalls meeting Lansky during that time. "You wouldn't imagine he was any kind of gangster," he says. "On the contrary, he looked more like a professor. Short, with glasses. Smiling."

In that lawless atmosphere, Lansky became a respected businessman -- and not without reason. He rid the casinos of cardsharps and cheats, offering legit games to attract the high rollers. His hotel had the best food on the island and it was the only one with central air conditioning. The Riviera and neighboring hotels "played a role in the '50s and later on by concentrating a lot of life in certain spots in the city," says Havana architect Mario Cuyola. "With the people going in and out, it radiated to the surrounding areas, making the city more livable."

Havana became the destination of choice for thousands of Americans, the famous and tourists alike. Tony Bennet sang at the San Souci; Ginger Rogers opened the Copa; Nat King Cole played the Tropicana. Frank Sinatra and John Wayne were regulars at the Hotel Nacional.

During the same period, however, the people of Cuba suffered. Government corruption was endemic, while in Havana's streets prostitution and poverty were rampant. In the countryside, the peasants were suffering as well; Batista poured the nation's wealth into the capital. He gave the gangsters millions in government funds for hotel construction and spent millions more reclaiming valuable waterfront real estate from the sea. Construction of Lansky's Riviera went for about $18 million, while the Hotel Continental cost $20 million. The $14 million Capri, which housed Trafficante's Red Room nightclub, was the only hotel that did not receive any money from the government.

But Batista's plan for building a Monte Carlo in the Caribbean was not complete until the Hilton Hotel's logo was hoisted above the coast. Conrad Hilton had stayed away from the island for years, concerned about possible run-ins with Cuba's powerful unions. Under Batista, however, even this risk seemed manageable, as the $23 million cost of constructing 650 rooms of luxury accommodations was financed by the pension funds of the Cuban restaurant workers' union. Finally, the chain agreed to operate Cuba's biggest hotel. A lot of cigars were lit in celebration of the economic fortunes of those who were lucky enough to have a piece of the Cuban capital.

As Batista's regime grew more decadent, Cuba became increasingly divided. A young Fidel Castro took advantage of the growing gap between rich and poor to advance his own agenda. On July 26, 1953, he and a small band of guerrillas attacked the Moncada and Bayamo military barracks in Oriente Province, at the eastern end of the island, giving a name to Castro's revolutionary July 26 Movement. Batista captured and tried him, but it gave Castro the opportunity to register an impassioned sound bite to the world. "Sentence me," he declared. "No matter. History will absolve me."

Ordered to prison for 15 years, Fidel served less than two. Batista ran a rigged election in 1954 in an attempt to legitimize his government, and six months later he granted amnesty to political prisoners. Castro took advantage of his freedom by founding a guerrilla training camp 20 miles outside of Mexico City. In late 1956, he embarked with an expeditionary force of 81 men in an ill-equipped boat, the Granma, that he had acquired in Mexico. They sailed to Cuba and landed at Los Colorados beach, on the southwestern coast of Oriente Province. Castro's forces were attacked by the Cuban military, but he and 20 men survived by escaping into the wooded mountains of the Sierra Maestra.

Batista dismissed the action as a local problem without major significance and went back to his game of canasta, according to Cuban author Nestor Carbonell. Havana's prosperity appeared to have lulled Batista to sleep. Despite a growing gap between the urban rich and the rural poor, per capita income in Cuba by 1958 was higher than Japan's, nearly equal to Italy's and third highest in Latin America. Batista's own fortune was estimated to be as high as $300 million.

The July 26 Movement regularly conducted strikes against Cuban military and economic targets, and New York Times correspondent Herb Matthews, who traveled with Castro in the Sierra Maestra, romanticized the rebel's war. Soon Castro gained support in the States. In March 1958, amid rising pro-Castro propaganda, the U.S. government ordered an embargo on arms to Batista.

The writing on the wall did not escape the dictator. In an act of desperation, he sent one of his most feared officers after Castro with a force of 500 men. But even this effort backfired. Many troops pulled up lame with self-inflicted injuries. Others sold the rebels their guns. Castro captured the army's communications trailer and opened a number of fronts that went unchallenged.

President Dwight Eisenhower relayed a message to Batista that he was welcome to return to his Daytona Beach, Florida, estate.

On that New Year's Eve of 1958, while Batista was preparing to flee to the Dominican Republic and then on to Florida (where he died in exile in 1973), Meyer Lansky was celebrating the $3 million he made in the first year of operations at his 440-room, $18 million palace. At that time, Lansky "was very mellow," recalls Quintana. He could see no reason to be alarmed. "Intelligence was very deficient in those days," says Quintana, who is now an attorney on Long Island in New York. "And everyone underestimated Castro. The only one who believed in him was Fidel himself. People believed in mathematics; in logistical and military power. No one could dream of the development of a revolution."

In a pirate radio broadcast from the mountains, Castro stated that he preferred executing gangsters to deporting them. Now his bearded battalions were less than 500 miles away, marching to Havana. Ché Guevara would be in charge of public safety by the end of the week.

In a lifetime that spanned Prohibition, the Depression, the Second World War and the nuclear age, Meyer Lansky evolved from a Lower East Side schtarker (strong arm) to the business partner of a head of state. In that time, he had become a symbol of everything that Castro's revolution sought to overturn. On January 8, 1959, Castro marched into Havana and took over, setting up shop in the Hilton. Lansky had fled the day before.

When Castro nationalized the island's hotel-casinos in October 1960 and outlawed gambling, Lansky lost an estimated $7 million. After a lifetime of careful bets, this founding member of organized crime retired a loser. He settled in Miami Beach, where he died in 1983.

"When Castro came to power," says Wayne Smith, the former chief of the U.S. interests section in Havana, "the image of Havana was as the center of graft, corruption, vice and the Mafia. All the money in the country was siphoned off by Havana." After he took control, Castro announced that resources would be shifted to benefit those who had produced the wealth. Since that time, says Smith, "Havana has become quite run-down." Since 1959, the Castro government has concentrated its efforts on building rural schools and clinics.

For decades, the revolutionary government shunned tourism, Smith says. "To them, tourism was identified with the past, the Mafia, with Americans coming down and pissing on the statues of their heroes." Although Cuba's economic difficulties have again opened the country to foreign tourists, gambling and casinos remain illegal. Says Smith, "They're very careful not to let the Mafia back in."

Matthew Reiss is a freelance writer.