[From Investigation of Organized Crime in Interstate Commerce: Hearings before the Special Committee to Investigate Organized Crime in Interstate Commerce, U.S. Senate, 81st Cong., 2nd Sess. and 82nd Congress, 1st Sess., Part 10, US Government Printing Office, Washington DC: 1950., pp. 94-103.]

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94        ORGANIZED CRIME IN INTERSTATE COMMERCE

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TESTIMONY OF ROBERT J. KALTENBORN, LAS VEGAS, NEV.

            The CHAIRMAN. Mr. Kaltenborn, do you solemnly swear that the testimony you will give this committee will be the truth, the whole truth, and nothing but the truth, so help you God?

            Mr. KALTENBORN. I do.

            Mr. HALLEY. What is your full name?

            Mr. KALTENBORN. Robert J. Kaltenborn.

            Mr. HALLEY. What is your address?

            Mr. KALTENBORN. Rancho Road, Las Vegas.

            Mr. HALLEY. What is your business?

            Mr. KALTENBORN. It is varied, sir. I am the owner of the largest -wholesale automobile parts store in Las Vegas, and varied real-estate ownerships. At the present time I am building a subdivision housing project.

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            Mr. HALLEY. Were you ever convicted for a violation of the internal-revenue laws?

            Mr. KALTENBORN. I pled nolo contendere in March of last year.

            Mr. HALLEY. Were you sentenced?

            Mr. KALTENBORN. To 6 months in a Federal prison, Tucson, Ariz.

            Mr. HALLEY. Did you serve?

            Mr. KALTENBORN. Four months and eight days.

            Mr. HALLEY. In connection with what business did you find yourself indicted?

            Mr. KALTENBORN. Well, they arrived at the deficiency from a net worth standpoint, and of course the earnings were from varied interests, but at that time it would have been from—my income would have been from my earnings of the wholesale parts business, which I have had since 1932, from varied real-estate transactions, and a half ownership in a very small gambling club which I formulated in September of 1942 and sold out in April of 1944. Of course the period of the charges was for the years 1942 and 1943.

            Mr. HALLEY. Did you have any business partners during those years?

            Mr. KALTENBORN. Yes, sir.

            Mr. HALLEY. Who were they?

            Mr. KALTENBORN. I had varied partners. I don't know how far you want me to go to break it down.

            Mr. HALLEY. In your principal business.

            Mr. KALTENBORN. In the automobile parts business?

            The CHAIRMAN. Anyway, the three who owed a tax like you owed.

            Mr. KALTENBORN. There was only one other, sir, Mack.

            Mr. HALLEY. Was he indicted, too ?

            Mr. KALTENBORN. No, sir.

            Mr. HALLEY. Now, at some time were you asked to purchase stock in a copper mine?

            Mr. KALTENBORN. Yes, sir.

            Mr. HALLEY. Would you tell the committee about that?

            Mr. KALTENBORN. Well, it was in the early summer of 1945, after which I had known that I was being investigated, that a man by the name of Hartman came to my place of business and started the conversation by saying to me that "Senator Scrugham and I registered at the Salsagel Hotel last night and that at breakfast this morning the Senator insisted that I contact you," that he wanted me in this company, "that he was a very close associate of a friend of yours"—and the Senator was, I knew him very well. And immediately it flashed through my mind that the man was not telling me the truth because I know that Senator Scrugham never stopped any place in Las Vegas except at the National Hotel.

            I thought that possibly the man was telling me the truth, but I had doubted it, and I excused myself for a moment and went to a phone sway from him in my store, and I called the Salsagel Hotel, and he was not there and didn't register there, and then I called the National and the Senator was in town but he wasn't at the Salsagel Hotel, so I went back, didn't tell the fellow, of course, what I found out, but confirmed my opinion that this man was a damned liar.

            So I said to him, "Mr. Hartman, you have got me in a very busy time. I would like to buy your lunch at noon and go into the matter

96        ORGANIZED CRIME IN INTERSTATE COMMERCE

of this investment more thoroughly because of Jim Scriigham asking you to come to see me. I would like to go into it more thoroughly."

            So he said, "Well, I would like to tell you a few of the people that are interested in the company and who the officers are," and so forth and so on. I tried to get away from him without taking mush more time, but he insisted upon telling me a few of the details, and as he got further along I thought that—he broached the subject of me not having met the right people in Nevada.. "You have done an excellent job for yourself and for the community, but you haven't met the right people. You wouldn't be in this problem if you had met the right people." So again he mentioned the fact that he had Clark—he is now gone—who was a very influential man and a very dear friend of mine, that he had $10,000 worth of stock.

            Senator TOBEY. What was the name of the company?

            Mr. KALTENBORN. Mountain City Consolidated Copper Co. I know it is the company in question. I am sure it is Mountain City Consolidated Copper Co.

            Mr. HALLEY. Did he mention the name to you?

            Mr. KALTENBORN. Yes, sir.

            Mr. HALLEY. Did he mention Patrick Mooney?

            Mr. KALTENBORN. Yes, sir.

            Mr. HALLEY. Who did he say Mooney was?

            Mr. KALTENBORN. He said Mooney was head of the State income tax department.

            Mr. HALLEY. You mean the Federal?

            Mr. KALTENBORN. That is right. I mean in our State he was the head, in our State.

            Mr. HALLEY. Did he say that Mooney had an interest in this company ?

            Mr. KALTENBORN. He told me he was the secretary-treasurer, and he told me to send my money there.

            Mr. HALLEY. Did he say directly that if you bought the stock you would not be indicted?

            Mr. KALTENBORN. That is right. He told me that Mr. Mooney would show me how to charge it off so that I could take a short-term loss.

            Mr. HALLEY. Did he indicate that you were sure to have a loss?

            Mr. KALTENBORN. Well, he told me that I was just buying the stock for the purpose of evading income-tax prosecution.

            Mr. HALLEY. In other words, you weren't to expect any possibility of making any money?

            Senator TOBEY. What is this fellow's name again?

            Mr. KALTENBORN. May I, as long as you ask me—I want this understood. I went to see Ed Clark, who is a very important man. At one time he was very, very well known in town, very important man. I always went to him for counsel. So he asked me to take this man to dinner and to get all the information I could get out of him, which I did.

            Mr. Hartman asked me, after we got through with dinner, if I wanted to introduce him to four other people in town, one of which I know was—one of which was my partner named Mack. So when I got through with my lunch I went back, or I told Mr. Hartman, rather, that I would have to try and raise the money, that I—I had no intentions of buying it—but that I didn't feel I could go $3,500, but would

ORGANIZED CRIME IN INTERSTATE. COMMERCE       97

$2,500 suffice? He said absolutely not. He said, "You are on the list for $3,500."

            So I reported back to Mr. Clark, who supposedly owned $10,000 worth of the stock, and Mr. Clark told me he didn't intend for me to buy any of the stock.

            In 3 or 4 days I got a telephone call from Mr. Mooney, who I presumed to be Mr. Mooney. I never met the man. The telephone call came to my store, and he says, "I understand you are making some derogatory remarks in regards to my connections with the Mountain City Consolidated Copper Co., and I would like to know what you said." I said, "What am I supposed to have said ?"

            "That if you buy this stock you won't have any income-tax problems, that you will have met the right people," and so forth and so on.

            And I said, "Well, let me tell you this, Mr. Mooney. Undoubtedly you have a telephone in your office, a dual telephone line. 'Will you put Mr. Hartman on the phone, and I want you to listen in." I said, "Now, Mr. Hartman, I want Mr. Mooney to hear this. I want to say this to you, that you have undoubtedly told—undoubtedly Clark has told Mr. Mooney, or somebody in turn who has told him what took place, and you have denied it, naturally. And I want to tell you two things that have happened to cause me to think that you are a damned liar, and then I am going to let Mr. Mooney use his own judgment. You first stated that you stayed at the Salsagel Hotel with Jim Scrugham, and I knew that was not true because he never stays there. I have entertained many friends of Jim Scrugham's in town."

            That was the No. 1 lie. He started trying to alibi that, that he didn't mean to say that; he meant to say that he had breakfast at the Salsagel with Jim Scrugham, said that isn't what he said.

I said, "You told me he had—Clark had—$10,000 worth of that stock," and I said, "Clark told me that is not true, and asked me to take you to dinner and bleed you for all the information I could get, and I presume he has passed it to Bob Douglass, who is Mr. Mooney's superior officer." I said, "You lied to me twice and that is all there is to it. Mr. Mooney can do whatever he pleases," and that is exactly what took place.

            The CHAIRMAN. What did Mr. Mooney say on the telephone?

            Mr. KALTENBORN. He, of course, wanted me to tell him whether this man offered to give me immunity for my problems, and I assured him that that man wanted to say that, and he wanted to defend the man, to tell me that I wasn't telling the truth. And that is when I asked the fellow to get on the phone, to let him listen, to tell him two of the lies he told me, and let Mr. Mooney use his own judgment of what took place. That was in '45.

            Mr. HALLEY. Did your associate, Mack, buy any stock?

            Mr. KALTENBORN. I do not know.

            Mr. HALLEY. Did you ever discuss it with him?

            Mr. KALTENBORN. Yes ; I discussed it with him.

            Mr. HALLEY. Did he tell you whether or not he had bought stock?

            Mr. KALTENBORN. No; he did not tell me, but he was in the same business and he was not indicted. As a matter of fact, he was allowed to make an amended return, and I wasn't.

            Senator WILEY. How much was involved?

            Mr. KALTENBORN. That is one thing.

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            Senator WILEY. What did they claim ?

            Mr. KALTENBORN. They claimed $77,000 tax that I owed. I just received my bill the other day with my $4,200 forgiveness of 1942, if you understand that you lose your forgiveness if fraud takes place. My total bill was less than $19,000. That includes 50-percent fraud penalty and the 42-percent tax, and I must say one thing to you, that this is the truth. My brother—I don't want to go into too great detail—gave me $6,000 that he won in gambling games in camp before he was shipped overseas, and he was having trouble with his wife, and I invested the money for him. He paid income tax on the $6,000, and they refused to take my story and said that they had never heard of such a thing. And also that had it not come up in my net-worth basis, with the $4,200 I lost in my 1942 forgiveness, I wouldn't have

            The CHAIRMAN. What is Mr. Hartman's first name?

            Mr. KALTENBORN. I refreshed my memory since all this came up, and he is registered at the hotel under two different initials, but I only remember him as Mr. Hartman, and at the Salsagel Hotel he registered as E. H., and once as L. H., and I am sure it is the same man because it is the same time. But, of course, from all I understand, he has been using many aliases. I think you have him down as Martin or something.

            Senator WILEY. You said the original assessment was $77,000?

            Mr. KALTENBORN. Yes.

            Senator WILEY. What office assessed that?

            Mr. KALTENBORN. The San Francisco Fraud Division of Internal Revenue. We went into these—after I plead nolo contendere—and that is a long story. I don't think they could have ever convicted me. I am sincere about it. When I went to San Francisco about 4 months ago with my tax counsel, in San Francisco, very decently, and so forth, in a very friendly way, my total bill, with the 42 percent interest and the 50-percent fraud penalty and the forgiveness that I lost, why, it would come to less than $20,000.

            Senator WILEY. What. I am getting at is, they double up on you. That would be 36. wouldn't it, from 72?

            Mr. KALTENBORN. No, sir. The bill that they claim—in other words, the amount of money that they claim that I had in excess of what I covered by the taxes I paid would have required me to have paid another $77,000 tax. Had they found that I defrauded them of an amount of money, that would have required the payment of $77,000 tax. Let's call it. $70,000.

            Senator WILEY. For what year?

            Mr. KALTENBORN. Two years. Then if they found that I had defrauded them out of an amount of money, that would have required an additional payment of $70,000 taxes. The first thing that would be done would be a 50-percent penalty; that would have made it $35,000 more. Then 6 percent interest on both the amount of the taxes and the penalty, which in 7 years would have been 42 percent, so the $77,000 would have become a little more than—but I would have owed them $150,000.

            Senator WILEY. Was the settlement compromised?

            Mr. KALTENBORN. When my tax people sat down with the conferee in San Francisco and fought out how much money my various properties were worth, and allowed for living expenses, and so forth, the

ORGANIZED CRIME IN INTERSTATE COMMERCE        99

amount of money that I apparently defrauded them out of would have been about $10,000 instead of $77,000.

            Senator WILEY. Then someone, either intentionally or through negligence, figured that seventy-thousand-odd dollars?

            Mr. KALTENBORN. There is only one thing that I want to say to you. I was so pleased to have the matter over with, because it is a thing since 1943 that has been like a sword over my head. Everybody in the city of Las Vegas knew all about my troubles and my problems. Seemingly, some way or another, there must be method in their madness of letting everyone in the world know that I was being investigated. I don't know why. I was pretty prominent in this town, I must say : Past president of the chamber of commerce, past president of the Kiwanis, chairman of the Red Cross, chairman—I started city management of the government of Las Vegas. I have been mayor pro tempore. But instead of even coming to me and giving me any chance whatsoever to settle my problems with them, like they did Mr. Mack, my partner—they let him settle his problem—they slapped the hooks to me by telling everybody in the city that I was under investigation. I had two gentlemen—and I would like to have you put the names down, Donavon and Shemke, two income-tax experts in Los: Angeles. Mr. Donavon was 27 years with the Internal Revenue Department, and he came down here — I am going to have to refer to it this way --2 days after Molly Malone was elected — put it that way, because I remember it so distinctly — and offered to settle my problems for a $15,000 fee.

            I ask you, how does Donavon, Shemke, find out that I was in tax problems?

            The CHAIRMAN. Are they attorneys?

            Mr. KALTENBORN. They are tax consultants. I think it is S-h-e-m-k-e. They are very prominent people in tax matters. Mr. Donavon was 27 years with the Internal Revenue.

            The CHAIRMAN. They came and saw you ?

            Mr. KALTENBORN. They came to me in the presence of witnesses. "We cannot guarantee you," they said, "we can get you out of the jam. We know the jam you are in. We know that you are going to be indicted for $50,000."

            Mind you, I hadn't been indicted yet.

            "And for a fee of $15,000 and 25 percent of what we save for you, we will take your case—and we want you to know we have never lost a ease."

            Senator TOBEY. Where are they located ?

            Mr. KALTENBORN. Los Angeles. And they came here to Las Vegas.

            Senator TOBEY. The same kind of racket is going on in Washington. More about that later. It is the same kind of a racket.

            Mr. KALTENBORN. In all clue sincerity, and I have great confidence in Mr. Ruymann—I have dealt with him. I ask in the strictest confidence, what is a fellow like myself going to do? I have a good moral obligation. I got out of the gambling business because I don't like it. What is a fellow going to do like myself who has seven more years to settle with those people? I don't think—and I say it from the bottom of my heart—I think Pat Mooney was the brains of the deal, but his life is spent.

            The CHAIRMAN. What does he do now ?

            Mr. KALTENBORN. He is retired now.

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            The CHAIRMAN. Is this fellow Hartmann in the service?

            Mr. KALTENBORN. He was just a stock salesman.

            Mr. RUYMANN. Bob, did Blom have anything to do with that?

            Mr. KALTENBORN. Blom was the investigator who investigated me and who was later dismissed from the service because of an unsavory character, reputation, writing bad checks and getting drunk in Las Vegas.         

            Mr. RUYMANN. Do you know whether Rex Blom had anything to do with this copper company?

            Mr. KALTENBORN. I want to correct that. I would not know if he did have.

            Mr. RUYMANN. In the course of his investigation did he ever mention it?

            Mr. KALTENBORN. No, sir. He was a pretty smart boy. At one time, from all the information I was able to get, he was the top man in the department. He went completely haywire.

            Senator TOBEY. Is that the Union Pacific representative?

            Mr. RUYMANN. This is off the record, Senator, but to say that that man is anywhere near the best man in the service is an insult to the Treasury Department.

            Mr. KALTENBORN. I was only told that. I want you to know that. I was asked by the Department to plead nolo contendere, and I was threatened—I am talking too damned much. I can't help it. I was told not to do it.

            Mr. RUYMANN. Who asked you to plead nolo contendere?

            Mr. KALTENBORN. The Internal Revenue Department.

            Mr. RUYMANN. Who ?

            Mr. KALTENBORN. Do I have to answer that?

            Mr. RUYMANN. Yes.

            Senator TOBEY. We would like to have you.

            Mr. KALTENBORN. The man that took Mr. Blohm's place.

            Mr. HALLEY. What is his name?

            Mr. KALTENBORN. Howard Werner.

            Mr. HALLEY. Who told you not to talk about it?

            Mr. KALTENBORN. My attorney. They told me to answer your questions. But this sears my heart, that something has to be done about these things.

            The CHAIRMAN. We agree with you on that. Howard Werner—what is he now ?

            Mr. KALTENBORN. He is the head of the Frauds Division of the Internal Revenue in this area.

            Senator TOBEY. Where is he located?

            Mr. KALTENBORN. Las Vegas.

            Mr. RUYMANN. You are saying that he told you to plead nolo contendere ?

            Mr. KALTENBORN. He asked me to plead nolo contendere.

            Mr. RUYMANN. Who was present at the time he asked you ?

            Mr. KALTENBORN. Nobody. He told me that if I didn't, and fought them, that they would have to arrest my wife.

            Mr. RUYMANN. Where were you at the time he told you that?

            Mr. KALTENBORN. I don't know whether I was in his office. I believe I was in his office here in this building. He told me they would have to throw a jeopardy assessment against me, for $100,000.

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            In 1942 I had a partner in the second wholesale automobile-parts business that I had forgotten about, and that business got involved very seriously in '46 financially, and I was in damned bad financial shape for cash money. I had to put out $78,000, and so when—when they threatened me that if I fought them they would throw a jeopardy assessment on my business, it would have meant the wrecking of my business; and that if I pled nolo contendere they wouldn't arrest my wife, they would waive the fraud, which they did against my wife, and they would do everything they could to get me an easy sentence

            Mr. RUYMANN. How long before the trial did he supposedly tell you this?

            Mr. KALTENBORN. I would say 2 or 3 months.

            Mr. RUYMANN. He told you 2 or 3 months before the trial to plead nolo contendere?

            Mr. KALTENBORN. Yes.

            Senator WILEY. Any more fellows in this community that you know have been bled ?

            Mr. KALTENBORN. Only gossip and what this man Hartmann told me.

            The CHAIRMAN. Where is Mr. Hartmann now ?

            Mr. KALTENBORN. Sir, I don't know.

            Mr. ROBINSON. I have him subpenaed in San Francisco.

            Mr. KALTENBORN. He is an ex-convict. I will say this, that the SEC has been after me for 4 or 5 years to testify, and I have refused to do it, because I was afraid of the consequences.

            Mr. RUYMANN. You made that statement, that you were the only man that served time for income tax in Clark County?

            Mr. KALTENBORN. No; I didn't say that. I think it is probably true. No; I wasn't, either.

            Mr. RUYMANN. Dr. Davis served 2 years.

            Mr. KALTENBORN. I only wanted to let you know this, that I have Conway & Moe, very high grade tax accountants, who said to me that had they been taken into my employ before I pled nolo contendere that they positively would not have handled my case, had I pled nolo contendere, because they didn't have nothing on me.

            Gentlemen, when you have had a good reputation, and as I said to you, I don't think I came here in '42 broke flatter than a pancake. I made a lot of money. I worked hard. I have been president of the chamber of commerce.

            When a man has gone through life and has daughters and grandchildren, and they threaten to break you, they will hound you the rest of your life. You are not shocked to death because you know that is what they do to everybody.

            The CHAIRMAN. Mr. Kaltenborn, did you get anything in writing at all from Mr. Hartmann, or any of these people?

            Mr. KALTENBORN. No, sir.

            The CHAIRMAN. All oral?

            Mr. KALTENBORN. Except one statement; a Charles W. Pipkin--you would never believe this, but this story—my name got involved --

            The CHAIRMAN. Stay with this: Did you get anything in writing, and tell us anything in writing that you know of?

            Mr. KALTENBORN. No.      

            Senator WILEY. What were you going to say about Pipkin ?

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            Mr. KALTENBORN. After I took this man to the El Rancho Hotel for lunch at noon—and the reason I know it was an early summer is because the day was very bright—I left him off in front of my store, which is just at the Sal Saveg Hotel. It is just a couple hundred feet farther south. I parked my car in front of my store, told Mr. Hartmann that I would see if I could raise the money, and what not and what all, and he went on toward his hotel. I went into my office—our store was very overcrowded at that time ; we moved in the meantime. We had a very small office, and he walked—my desk was setting—this desk would be turned around here, and the door—the entrance was just where that door was, back of it was a filing cabinet, and Charles W. Pipkin, who subsequently was arrested on SEC violation and fined $500 in Reno, was sitting behind that filing cabinet.

            Hartmann walked in, stuck his head into my door, saw me, didn't see Lipkin, and didn't see my bookkeeper, who was in another part of the office, who since has died, and he said to me, "Don't forget, Kaltenborn, when you buy that copper company stock, your income-tax problems are over."

            Pipkin spoke up and he said, "Hello, Hartmann. Where the hell have you been?"

            Hartmann like to fell through the floor. Pipkin heard him make such a statement.

            The CHAIRMAN. Where is he?

            Mr. KALTENBORN. He is out in the hall.

            So he overheard it, and in his SEC troubles he was convicted of failing to put a few stamps on something, and was fined $500 by the SEC, when he was in court. He got to popping off and told about this matter, about the attempt to extort this money from me, and the SEC has been trying ever since to get me to testify about this thing. I have refused because I am afraid of the consequences. I am afraid of it now.

            Senator WILEY. That is a matter of court record, then?

            Mr. KALTENBORN. Oh, yes.

            The CHAIRMAN. Did you borrow a lot of money from the Federal Government somewhere?

            Mr. KALTENBORN. At the present time I am building some rental property of which the Prudential has bought the paper, and there will be FHA commitments.

            The CHAIRMAN. You handled it through the Prudential?

            Mr. KALTENBORN. It is only a housing project. The housing project, however, sir, as far as the houses that I am building, which are FHA-financed through the Prudential Life Insurance Co., is a corporation of which I am a part owner. But I am at the present time building four duplexes—I want to correct that, too. These four duplexes I am now building I am financing through the First National Bank.

            Mr. RUYMANN. We are interested in who are interested in the corporation.

            Mr. KALTENBORN. Tony Tollino.

            The CHAIRMAN. What is the name of the corporation?

            Mr. KALTENBORN. Paradise Realty Co.

            The CHAIRMAN. Are they all good citizens?

            Mr. KALTENBORN. There is only one other, Toleo, T-o-l-e-o.

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            The CHAIRMAN. Is he a good citizen?

            Mr. KALTENBORN. He has been a young man that has been in town for years and years and years. May I ask a question, sir, if it is not out of order? Is it improper that I could get an FHA loan?

            The CHAIRMAN. I don't think so. It is just my opinion. You are complying with the regulations.

            Whatever comes before us, we try to clear up. You are interested in a corporation and borrowing money from the Prudential, which handled the matter through the FHA?

            Mr. KALTENBORN. Prudential knows about my income-tax problem. And the local banks know about it.

            The CHAIRMAN. Anything else of Mr. Kaltenborn ?

            Mr. KALTENBORN. The only thing say to you gentlemen is that the only thing I am reluctant about----

            The CHAIRMAN. Sooner or later you will be called on to testify in connection with other matters about this income-tax question, and I would tell the whole story just like you have told us.

            Mr. KALTENBORN. What is going to happen when you don't get all the people?

            The CHAIRMAN. Well, we will do our best, anyway.

            Thank you very much.

            (A press conference was held by the committee with members of the press, after which the hearing was adjourned, subject to the call of the chairman.)