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JOHNNY IS IN AGUA HOT

Aug. 03, 1970
Aug. 03, 1970

Table of Contents
Aug. 3, 1970

Don't Drink The Water
Man Of Machismo: Part 3
Pro Football
Frisbee
Alessio
19th Hole: The Readers Take Over

JOHNNY IS IN AGUA HOT

The 'lovely little guy' of San Diego, John Alessio—patron of the arts, friend of the poor and boss of that gaudery of gambling, Caliente—catches a tax rap that inspires some Californians to crocodile tears

It is an adventure to send the spirit soaring. It takes not much more than two death-defying hours down the dicey freeways from Los Angeles to the border and then a mere 15 minutes more to the track itself. Those last few miles through the streets of Tijuana offer the ideal overture to the lyric setting beyond. The broad boulevards are lined with the corpses of yesteryear's cars and some of the most irresistibly evil bars and strip joints between Macao and Marrakesh. On a hill south of town—beyond the scaly old jai alai palace, beyond the claptrap bullring, beyond the withered golf course and out of earshot of all the small fry trying to sell their sisters—there looms the magnificently shabby Caliente racetrack itself. In its peeling, neo-Castilian grandeur it is a sight to bring an instant shiver of anticipation. For more than four decades now it has been a glorious monument to the industry of greed.

This is an article from the Aug. 3, 1970 issue Original Layout

By late Friday afternoon the traffic has begun to coagulate along the route to Caliente. Those who make it by nightfall can revel in a full card of greyhound racing until almost midnight and, with or without some recreation at the nearby fleshpots, return by Saturday noon for a dozen thoroughbred contests. While the prices on the final horse race are still blinking on the tote board, the quarter-mile track is being wheeled into place in front of the stands for another evening of dogs. And so it goes, day and night, night and day, dog and horse, horse and dog, until Monday morning.

Through it all, an infinity of betting windows offers exotic paths to riches. There is, of course, the routine daily double. There are the quinella and the perfecta and the 1-2-3 and Caliente's own 5-10, in which you are invited to pick the winners of six consecutive races. Although the track carves an initial 25% and more from each pool, the payoffs can be spectacular. A local nightclub character once drew a record $98,063.80 from the 5-10, or so it is claimed.

As if all that were not enough, Caliente's Foreign Book opens in time for breakfast. The side of one entire room is covered with the entries, odds and results on half a dozen thoroughbred racetracks in the U.S. from Monday through Saturday, with betting wickets across the way to handle wagers on these faraway happenings. Every morning 500 or so scrofulous-looking addicts assemble there, their sandwiches and beer and coffee and racing forms spread out on the tables before them. Each spring Caliente also runs the largest winter book on the Kentucky Derby, establishing odds that are accepted from Vegas to Tattersalls. The pitfalls in this sleepless emporium are almost too trivial to mention—such as mutuel clerks who have a sleepy way of forgetting your change until a hostile glance reminds them of their oversight.

Too soon the curtain falls on a Caliente weekend. The Caddies, the dune buggies, the campers and countless items of motorized free-form sculpture line up at the border for immigration inspection. There they are joined by the aficionados from the corrida, the jai alai freaks, the seminude surfers from Rosarita Beach and many other strays who have survived the margaritas, the salads and the friendly señoritas. It takes no more than two or three hours among the fumes of their restless cars before one is homeward bound, officially cleared of trying to smuggle pot to Stateside school kids.

Behind then is the domain of Johnny Alessio, "a lovely little guy," as almost anyone who knows him has sometime said. It is Johnny who has made Caliente what it is today, the largest legal gambling book on the North American continent. Johnny is, indeed, the paradigm of a dying American ethos—shoeshine boy to millionaire. In the expanding country village of San Diego, where he grew up, Alessio has assumed the panache of local folk hero. A couple of years ago he was awarded the honorific Book of Golden Deeds of the Exchange Club, a society of businessmen dedicated to golden deeds. The Jockey Guild of America named him Man of the Year in Racing in 1957 for introducing the plastic safety helmet at Caliente. In 1962 the Border Cities Conference presented him with a citation for "furthering the international relations between Mexican and American people." He was Mr. San Diego of 1964. Happy Chandler once commissioned Alessio a Kentucky colonel because he annually stages "the biggest Kentucky Derby party west of Louisville" at the Caliente track, with special Derby betting windows and closed-circuit television of the race. Bishop Francis J. Furey awarded Johnny an honorary doctorate of law from the Roman Catholic University of San Diego, which is quite a leap from the seventh grade, at which level Johnny abandoned academics to help support his family. His honors are, as the saying goes, endless.

So it comes as quite a jolt to discover that Alessio—the most influential San Diego "corporate head with diverse business interests," as ranked by a group of San Diego graduate students—is suddenly in the grip of the law. Early in April a federal grand jury indicted him for income-tax irregularities of $434,649 over a four-year period starting in 1963. In the same action Johnny's son, Dominic—or Bud, as he is known—and three of Johnny's brothers were charged with more than $861,000 of the same. The Government claims they used a lot of Caliente money for their own private purposes and then failed to list it as personal income.

The most influential "banker with corporate and industrial interests" in San Diego, according to the same students, is C. Arnholt Smith, president of the U.S. National Bank and chairman of the San Diego Padres baseball team. Most of the $10 million for the Padres' National League franchise came from "Arnie" Smith, as he is called by just about everyone around town, and Smith's daughter, Carol Smith Shannon, is president of the ball club. Smith is regarded as the major power in Republican Party politics at the southern end of California, having raised something in the neighborhood of $1 million for President Nixon's 1968 campaign chest, a quarter of it purportedly from Smith's own pocket. At the time that Alessio's indictment was pending—a secret that had been on everyone's lips for months—Smith used his considerable influence in his friend Johnny's behalf. But nevertheless the indictment was filed—just one week before the statute of limitations would have run its course on the first of the four charges.

Thus, in their devious ways, sport and politics and intrigue get all tangled up together in what appears to be about the sunniest, least complicated community on the whole Western shelf. California's thoroughbred horsemen have been suggesting—if not hoping—that this would happen for years, but lots of people thought they were just giving Johnny Alessio a bad time because he was not one of them, didn't cut his jackets out of the same piece of tweed. For instance, there was the time back in the mid-1960s when Johnny came up with a gorgeous plan to take over the Del Mar racetrack, fix up its decaying grandstand, build a beautiful marina nearby and convert the entire place into Fort Lauderdale West.

Ever since it was started by Bing Crosby and his friends back in the '30s, the Del Mar racetrack has operated a cozy little summer meeting with something of a Saratoga social flavor. Because the track is only a skip and a jump from his home town, Alessio began to eye the place as soon as he had built himself a comfortable nest egg at Caliente. There was the urge to run a racetrack on the respectable side of the border, and it would give the good old civic image a boost. At first Johnny tried to buy the Del Mar lease from Clint Murchison Sr. and Sid Richardson, who had been using its profits to help support their charities. The deal for the lease was almost made when those gilt-edged Texans backed off, allegedly under pressure from California horsemen. "I shook hands with Murchison Jr.," Alessio says with heat, "and then they reneged on me."

Four years ago the bidding was opened on a new Del Mar lease to begin in August, and Alessio jumped in with a syndicate of his friends called Del Mar Associates, Inc. While hearings were going on before the executive committee of the 22nd Agricultural Association District, which owns the plant and premises, a number of California's more prominent breeders and track operators were ganging up against the Alessio group, pointing out that the California Horse Racing Act specifically forbids gamblers from owning any interest in a racing establishment. What business the track owners think they are in is not clear.

Meanwhile, Alessio's friends were rallying to his side. San Diego's two major dailies, the Union and the Evening Tribune, owned by the rich and powerful and highly conservative Copley family, wrote glowingly and often of Johnny's value to the community. Governor Edmund G. (Pat) Brown, who had been well supported by Alessio's financial contributions through the years, made it clear on several occasions that he thought Alessio should have the lease. Brown pointed out that Alessio makes book only in Mexico, where it is legal, and that the Horse Racing Act did not mean to exclude legal gamblers. Alessio was both angered and hurt by all the opposition and said despairingly, "I don't want to be immodest, but I've been a wonderful fellow. All of a sudden I've turned out to be a bad guy." Johnny really talks like that.

As it turned out, there was no need for Johnny to worry. The lease was awarded to his group—even though some other San Diegans had made a higher bid—but the victory was brief. General Services Administration, a superagency of the California government that must approve all state contracts, vetoed the award on the grounds that the losing bid was higher, and the state legislature asked the attorney general's office to investigate the proceedings.

Here enters a rather shadowy individual named Lewis Lipton, a transplanted New Yorker who had been running restaurants in San Diego for 30 years. Like his friend Alessio, Lipton was an active civic figure in such things as the Elks and the YMCA. Lipton was serving on the board of the 22nd Agricultural District at the time the Del Mar lease was being considered. To make the web even more tangled, Lipton had been an employee of Arnholt Smith's U.S. National Bank and was a vice-president of the San Diego Padres. Among Alessio's partners in Del Mar Associates were Smith's daughter Carol and Harold S. Jurgensen, the owner of a chain of fancy grocery stores in California, who also serves as a director of the U.S. National Bank. "This entire procedure," the attorney general's report concluded, "should be studied by the Legislature, the Governor, and General Services, with the purpose of improving the protection of California public bidding procedures and safeguarding the subversion of the sanctity of the sealed bid."

Although it has no direct bearing on the Del Mar lease, it is interesting to note that Lipton, who has had such close business connections with Alessio and Smith, had been arrested for bookmaking in San Diego in 1938 and had been cavorting around under the name of Felix Aguirre. Charges were dismissed for lack of evidence, and the records have since been mysteriously lifted from the files of the San Diego Police Department.

Following the imbroglio over the Del Mar lease, Alessio dropped all further efforts to run the place, but there is still a bitter taste in his mouth when he thinks of it. Driving past there one day not long ago, Johnny mused sadly on what had happened. "I cannot understand why the people at Hollywood Park and Del Mar take this vicious attitude toward me," he said. "I am John S. Alessio, U.S. citizen. And yet they have harassed me continuously because they are the power. All these nice people in San Diego—all the best citizens—ask me to head up a syndicate and join in the bidding, and then they take it away from me and give it to the other people. Give it away. I was going to put $150 million into a beautiful resort there, and now they will have nothing, no improvements, nothing. I can't be a good guy on one side of the street, and a bad guy on the other. I am at a loss to understand."

The Californians who oppose Alessio prefer to stalk him in the high grass. They will talk frankly enough about him, but not for attribution. "For one thing," said a California track official, "I don't think a man who is making book on California races should be running one of our tracks. It presents too many temptations." Alessio replies that it is not he but his brother Russell who operates the Foreign Book at Caliente. Johnny explains he is simply the executive director of the racetrack. It is a distinction that falls on deaf ears.

From the handsomely manicured breeding ranches of the Central Valley to the executive suites at Santa Anita and Hollywood Park the chant of the snipers has a repetitive ring to it, prefaced always by "Keep me out of this but..." or "I don't want to get personally involved but...." They point out that Johnny likes to hang around the baths at La Costa with all those types from Las Vegas in their Sulka terry cloths or to enjoy the view and the company from the terrace of Cabo San Lucas. They remind you how Johnny's brother Russ was convicted of racketeering in San Diego not long ago and how baby brother Tony was strangely abducted and held for $200,000 ransom. "Don't quote me," they keep telling you, "but I don't think this kind of fellow should be running a racetrack in California."

Not too many people around San Diego care to think of John Alessio in these terms, however, and those who do are generally regarded as troublemakers. The popular image is that of the self-made tycoon, civic benefactor and philanthropist. They know that through his ownership in Westgate-California Corporation, a holding company that is intertwined with virtually all the business interests of Alessio and Arnholt Smith, Johnny touches just about everybody's life at one point or another. Ride in a taxicab in San Francisco, Los Angeles or Oakland and not just your health but your wallet is indirectly in Alessio's hands. Pour some Girard's salad dressing on your lettuce, and Johnny is titillating your taste buds. Eat a little tuna or salmon or crab, and the chances are that one of Johnny's men has caught or packed it. Around the airports of the West Coast, one of Alessio's chaps may be hustling your luggage or driving you into the city in one of his buses. He may even hold a policy on your life or good health.

Which is not bad for a fellow who started with a shoeshine stand on the corner of Fifth and E Streets. Johnny's father had been a coal miner in West Virginia, and when his lungs gave out he brought his wife and seven sons to California on a chair car, arriving in San Diego one fine day in April 1920. The boys ranged in age from 18-year-old Frank to 6-year-old Tony, with John, age 10, somewhere in the middle.

Everyone worked, and when Johnny started his shoe-shine stand one of his regular customers was C. Arnholt Smith, already tall, handsome and sun-tanned. Arnie Smith was a high school dropout and then a grocery clerk, but he wisely transferred to A. P. Giannini's Bank of Italy, where he learned about finance. By the time little Johnny Alessio was tending his shoes, Arnie Smith was already building the rundown U.S. National Bank into the city's second-largest financial institution.

Alessio was 19 years old and still shining Arnie Smith's shoes (a few snide types claim he does even today) when they tore down the building on Fifth and E. It was the Depression and jobs were scarce, so Smith steered Johnny to a messenger's job at the Banco del Pacífico across the border in Tijuana.

Those were the glory days of the border town. It was the nearest legal drink for Californians, so 40,000 of them would flood the place on weekends. For a time Tijuana combined something of the glamour of Deauville along with the plastic culture of modern Las Vegas. Rita Cansino was discovered dancing there and hauled off to Hollywood to have her last name changed to Hayworth. B. P. Schulberg (Budd's father), Joe Schenck and Sid Grauman made it part of their weekend drill. The Coffroth Handicap, the world's first $100,000 purse for thoroughbreds, was run there. Then came that sad Saturday night in August 1935. Làzaro Càrdenas had lately been inaugurated President of Mexico, and one of his early official acts was to shut down the nation's gambling. No one yet knows whether it was out of idealism or pique at not getting a decent presidential cut of the vigorish. Still it was a night to remember. Among the many, Howard Hughes and Cary Grant were in the Agua Caliente casino with the Moffett sisters, New York's most dashing young society debutantes, while Hughes' great steam yacht rode at anchor in San Diego harbor.

All this time John Alessio was diligently improving his status at the Banco del Pacífico. By 1943 he was the manager, and by that time politics had changed and it had been arranged for Caliente to resume ontrack betting and bookmaking activities. Despite some rather shabby management, the track prospered through the war years under the patronage of San Diego's sailors and aircraft workers, but in 1947 Alessio was summoned from the bank to put the track's affairs in order.

Within the year a major scandal exploded at Banco del Pacífico. Without proper authority from the parent bank in Mexico City, Alessio had arranged overdrafts of some $4 million for the financially distressed Tecate Brewing Co., one of his largest customers. Johnny was arrested and sat in a Tijuana jail for 117 days pending trial. Then, in the mysterious way of Mexican justice, he was released and all charges were dropped. By a happy coincidence, it turned out that the father of Alberto Aldrete Jr., the head of the brewery, was a close political ally of President Miguel Alemàn, and the two of them kept a firm grip on the more profitable aspects of life in the state of Baja California, including the Caliente racetrack.

Soon afterward further embezzlement charges were filed in San Francisco against Tecate, Aldrete Jr. and Alessio. These were based on a fraudulent loan obtained by the brewery from a San Francisco corporation through the Banco del Pacífico. Alessio drove to San Francisco and surrendered voluntarily, but the indictment against him was soon dropped on the grounds that he had not even been in San Francisco at the time of the alleged swindle. The others were convicted.

The district attorney of San Francisco at the time was Pat Brown, and he and Alessio have been fast friends ever since. Well aware of how so many of the state's racing people put down Alessio, Brown stoutly supports his friend. "I have the greatest admiration for him as a person," Brown said recently. "I didn't interfere at the time of the Del Mar lease, but I thought his group could do the better job. I don't see any reason why he should be disbarred from racing in California. There is no reason why gambling on racing should be holy water on one side of the border and devil's ointment on the other. And I'd like to add that Alessio is one of the finest little men I ever knew." To back up his sentiments, Brown usually turns up to stand by Johnny's side whenever Alessio is dedicating a new building or hotel.

Local legend runs that Alessio's permanent appointment in 1953 as executive director of Caliente was his reward for having taken the rap in the Tecate Brewery dustup. But the track's true ownership has always been obscured by the usual Mexican niebla in such matters. Around the premises Alessio is indeed the boss, all 5'7" of him bustling from terrace boxes to counting rooms like a mother hen, his gray-black hair in perfect pompadour and his chubby little figure splendidly tailored in shiny mohair. Dale Carnegie himself could take lessons. The décor, too, is pure Alessio: the dozen chandeliers (an Alessio hangup) that Johnny has collected the world over, including one dazzling example that surmounts the saddling enclosure and might well have come from the Trianon at Versailles; also the murals of Ceasar Rodríguez, a Tijuana cop whose glossy oils of jockeys and horses are among Johnny's favorite works of art.

Yet there can be little doubt that Alemàn and some of his cronies help call the shots and share in the profits. Johnny often speaks enigmatically of having to go to Mexico City to consult his "directors," and it is they who usually get the blame when the critics get rough—such as the time a few years ago when Alessio discontinued Caliente's annual Christmas party for the area's underprivileged, a moving scene in which Johnny would personally hand out gifts to upward of 15,000 waifs and their parents patiently queued up for hundreds of yards.

On the other hand, when Alessio's attorneys replied to some interrogatories in his current tax indictment, a listing of the directors of the Hipódromo de Tijuana, as the track is legally incorporated, turned up nothing but a bunch of guys named José. Only six of the 21 have an address in Mexico City (the rest are from Tijuana), and no one was named Alemàn or anything else reminiscent of the caterans of Mexican politics. It may be years—if ever—before the suit reaches court and anything definite is learned of the opaline affairs of Caliente.

In the meantime Alessio is giving the California racing Establishment something new to stew over. A year ago Johnny invited 2,000 or so of his friends to celebrate the opening of a lovely new "training track" called San Luis Rey Downs. Some 15 miles inland from Oceanside in one of Southern California's gentlest valleys, San Luis Rey Downs will be little more than an hour from Los Angeles and less than half an hour from San Diego once the new freeway that will run close by is completed. The track itself is a one-mile oval ideally suited for all kinds of horse racing and even has a 15-acre lake in the infield for scenic effect.

The whole area, with its golf course and shopping center and condominiums and estate homes and miles of bridle paths, is one of the latest projects of Westgate-California, the ubiquitous holding company so entwined with the destinies of Johnny Alessio and his old friend, Arnie Smith. Naturally, the question on everyone's mind is: Can a onetime shoeshine boy from San Diego put up a great big grandstand at San Luis Rey Downs and finally breach the fortress of respectable Stateside racing that has so far resisted him at every turn?

Asked the question directly, Alessio just smiles and says, "You never can tell what might happen."

PHOTOPHOTOLighting up Caliente's luxurious lounges for horse and dog players are ornate chandeliers collected from around the world.PHOTOFollowing an afternoon of 12 thoroughbred races, the quarter-mile greyhound track is wheeled into place for the late show.TWO PHOTOSArnie Smith (above, right) gets his Mr. San Diego plaque his from hanker A. J. Sutherland in 1964. They became friends from civic leader Fred Heilbron in 1961, and Johnny Alessio gets after meeting around a shoeshine box, Johnny shining.