October 10-16, 2002
Take away the name and the philanthropy and the Annenberg family history reads just like any other mob story.
Walter Annenberg is dead. Long live Walter Annenberg’s billions. One of the richest men in the United States, Walter Annenberg was a generous philanthropist who gave millions to universities, art museums, charities and PBS. He was a friend to kings and presidents. Annenberg was the U.S. Ambassador to the Court of Saint James, London, for Richard Nixon. A media magnate who once owned local institutions like the Philadelphia Inquirer, TV Guide, the Daily News and Channel 6, Annenberg split his time between his estate in Wynnewood and a second one in Palm Springs, Calif.
And, oh yeah, Walter Annenberg was indicted in one of the largest tax evasion cases in the history of the United States. Annenberg was indicted with his father, Moses Annenberg, and two other business associates in 1939.
They were charged with evading more than $2 million in taxes and another $3 million in penalties and interest.
On Aug. 18, 1939, Walter Annenberg, his father and two other business associates surrendered to the U.S. Marshal. They posted bond, and were released to await trial.
Later that same month, Moses Annenberg, Philadelphia nightclub owner Jack Lynch and two others were indicted for conspiring to bribe a Philadelphia detective. Lynch allegedly wanted to influence the detective if and when he was called before a grand jury investigating four corporations owned by Moses Annenberg.
In April 1940, Moses Annenberg agreed to plead guilty to one count -- "willfully" evading $1,217,296 -- and to pay almost $9 million in fines and penalties. In exchange for his plea the government agreed to drop all charges against his son, Walter Annenberg.
Moses was sentenced to three years in prison. He was sent to Lewisburg federal pen, but released early because of poor health, and he died a month later.
Walter parlayed the family fortune into billions and spent the rest of his life making people forget how Moses Annenberg had acquired this great American fortune in the first place.
The story of Walter Annenberg's father is a tale of a hardworking immigrant and financial genius who got his start working alongside violent Chicago gangsters while employed by newspaper titan William Randolph Hearst at the turn of the last century. It was a time when "circulation wars" literally meant gunmen and sluggers beating and killing rival news dealers to gain a monopoly for their newspaper.
Both Moses and his older brother, Max Annenberg, were involved in the brutal Chicago newspaper wars in the first decade of the 20th century in which 14 news dealers were murdered.
Max and Moses Annenberg were hired by William Randolph Hearst as circulation managers for his newspapers. Their job was to hire and dispatch gangs of plug-uglies to intimidate anyone selling The Chicago Tribune.
One member of the Annenberg crew was the exceptionally notorious and bloodthirsty Dion O'Banion. O'Banion captained his own gang of neighborhood toughs. A decade after working for the Annenbergs, O'Banion headed his own mob, but was rubbed out by gangland rival Al Capone in 1925.
Bleeding -- literally -- people and money, the owner of the Tribune, Bertie McCormick, decided to hire Moses Annenberg away from Hearst. For a while, the Annenberg brothers were sending out thugs to battle each other. Fifteen years later, Max Annenberg was alleged to be an associate and friend of Chicago crime boss Al Capone.
In 1938, the Secretary of the Interior, Harold Ickes, traveled from Washington D.C. to give a speech in Philadelphia condemning Moses Annenberg, who, at that time, was backing the Republican candidate for governor of Pennsylvania.
Ickes charged it was Annenberg's violent tactics during the Chicago newspaper wars that inspired gangsters like Al Capone. Ickes said that "the hiring of Moses Annenberg by Hearst was the beginning of the subsequent flood of lawlessness that almost engulfed law enforcement in the United States."
But Moses Annenberg didn't just rely on gangsters to improve newspaper circulation. He also came up with the idea of giving away free silver teaspoons to each new subscriber and made so much money he branched out on his own, buying newspapers in Milwaukee and New York.
But it was Moses Annenberg's involvement in the shady world of illegal gambling that put him in touch, and in business, with mobsters all across the nation.
In 1924, Annenberg got involved with a racing news service in Chicago and Milwaukee. The service provided horse race information to gambling parlors -- also known in those days as "pool rooms." With that information, bookies could set odds and collect from gamblers or pay out winnings. It was called the General News Bureau and it was owned by Chicago's largest gambler/bookie, Mont Tennes. Tennes agreed to sell out to Annenberg after his house was firebombed.
Annenberg took on a partner named Jack Lynch. But Lynch sued Moses, alleging that more than a million dollars had vanished from their business.
Annenberg's lawyers argued that "the General News Bureau is aiding and abetting an illegal enterprise," and the Illinois Supreme Court agreed, ruling that it was an illegal business; therefore, the dispute between Lynch and Annenberg was outside the scope of the law.
Lynch turned to Al Capone's number-one guy, Frank Nitti, to back him against Annenberg. Moses reputedly enlisted the trigger-happy organizer for the Chicago Motion Picture Operators' Union, Ralph O'Hara, to watch his back. But when O'Hara's boss was murdered gangland-style, the Chicago mafia took control of the union.
Before the disagreement between Lynch and Annenberg was settled, George Downs, an Annenberg lieutenant operating in Miami, Fla., was found shot to death, execution-style, in the Everglades. At the time Downs was killed, Moses Annenberg was running newspapers in Florida, the Midwest, New York and Philadelphia.
Critics charged Annenberg was using his newspapers to back local politicians who would close down rival bookmaking services and allow his illegal racing wire to operate without competition. Within a few years Annenberg had a nationwide monopoly. Annenberg's Nationwide News Service and subsidiaries were servicing bookies in 223 cities, 39 states and three Canadian provinces.
Gamblers, bookies and underworld syndicates were Annenberg's customers.
Ironically, there were reports that those who didn't take the Annenberg race wire service were themselves the victims of beatings, fire bombings and, on occasion, murder. The crime syndicates had come to be dependent on Moses Annenberg. Without his service they couldn't operate their illegal gambling rackets.
Moses Annenberg made millions and millions of dollars until the federal government indicted him for not paying taxes on his illegal businesses. This underworld money was the source of the great Annenberg fortune and helped to finance Walter Annenberg's own generous philanthropy.