The 1960s: Overview

The survival of the SP bookmaking business despite the establishment of the TAB was but one element in the rapid expansion of organized crime activity in New South Wales during the decade following the election of a State Liberal-Country Party coalition government in 1965. Symptomatic of a major change in the character of organized crime in New South Wales during the late 1960s, a variety of new syndicate enterprises flourished in Sydney: open casino gambling, professional but illegal abortion clinics, and illicit drug trafficking.

Emerging from World War II with accumulated police contacts, capital and blackmarket experience, Sydney’s second generation of organized crime leaders expanded the scale of their operations steadily but not dramatically during the 1950s. Operating in a manner generally similar to the Sydney milieu of the 1930s, the postwar criminal class showed few signs of a formal hierarchy and demonstrated a good deal of flexibility as new figures rose or fell on their individual skills. During the 1950s newly arrived ethnics and a younger generation of native Australians were readily absorbed into an expanding and loosely structured network of criminal associations.

Beginning in 1965, however, there was a sudden and dramatic change in the character of the Sydney underworld. Following an unprecedented wave of underworld executions in 1967-8, the small group of allies that emerged from these battles transformed the character of organized crime in New South Wales. No longer threatened with strong opposition from within the milieu, Sydney syndicate leaders turned their efforts to expanding their investments in the city’s illicit economic sector. Protecting themselves with massive payoffs to police and politicians, organized crime leaders opened a network of new casinos, syndicated the city’s abortion racket, penetrated the State’s licensed clubs and their lucrative poker machine operations, and began experimenting with illicit drug traffic. Secure within their New South Wales refuge, Sydney criminals expanded into interstate organized crime activity, eventually involving Australia-wide distribution of cannabis and heroin.

The changing character of organized crime in New South Wales generally escaped public notice until a wave of media and parliamentary scandals in the early 1970s prompted the establishment of a Royal Commission into Organized Crime under Mr Justice Moffitt. Despite the restrictive nature of his terms of reference, the Commissioner conducted the first serious inquiry into organized crime in New South Wales and concluded that it was already well established. But neither the police nor the government acted on his evidence or recommendations, with the result that organized crime continued to expand. As Moffitt had clearly warned might happen, Sydney’s syndicates emerged from the Commission’s inquiries intact and later became heavily involved in the importation and distribution of drugs, producing a rapid increase in illicit drug use and heroin addiction across Australia. By the late 1970s organized crime had reached unprecedented proportions in New South Wales and ranked as one of the most powerful criminal milieux anywhere in the world.

The changing fortunes of the so-called ‘McPherson Group’ were indicative of the transformed milieu that Mr Justice Moffitt discovered. All natives of the Balmain-Annandale area of Sydney’s inner west, Leonard McPherson and his two younger associates, Stanley Smith and George Freeman, were hard men who accumulated criminal records for a range of ordinary offences in the 1950s and 1960s. Although well-known to the police by the early 1960s, they were generally considered unexceptional criminals. Maintaining their mateship into the 1970s, however, each of them established independent reputations as leading Sydney personalities. Police documents tendered before the Moffitt Royal Commission and later parliamentary inquiries alleged that McPherson was Sydney’s ‘Mr Big’, Freeman became known as ‘Sydney’s leading off-course bookmaker’, and Stanley Smith was identified as ‘either No. 1 or 2 in the underworld’.

Lennie McPherson and Stan Smith off to Hong Kong
Lennie McPherson and Stan Smith off to Hong Kong

During the 1950s and 1960s there was little intimation of the wealth and influence that organized crime would later achieve in New South Wales. Although the milieu still maintained a distinct identity and the criminal class was to that extent organized, the underworld seemed to have suffered a marked loss of influence over the illicit economy in comparison to its halycon days of the 1920s and 1940s.

The remarkable career of Joe Borg as the ‘King of Palmer Street’ demonstrates the overall lack of control the milieu exercised over prostitution in the late 1950s. Born in Malta in 1933, Joe Borg left the island for Australia on 10 March 1952, and by 1955 began to appear in N.S.W. police records as a ‘gunman, thief, shopbreaker and pimp’. As large numbers of Maltese migrants began arriving in Sydney during the 1950s many were attracted by the low rents in the city’s least desirable district and began renting terraces in the narrow lanes of East Sydney. By the early 1960s the Palmer Street brothel area — known locally as ‘The Doors’ for the way prostitutes solicited from doorways that fronted directly on the footpaths — was engulfed by a Maltese ghetto.

With the Maltese providing him with a natural security network, Joe Borg began buying up terraces in the Palmer Street area and converting them into brothels. Purchasing his first house on 5 July 1963 at Woods Lane, East Sydney for. £1,000, he continually reinvested his profits from the brothel trade and by 1967 owned a complete row of terraces on Woods Lane and twenty East Sydney houses worth an estimated $80,000. Protected from police interference or criminal standover by a network of elderly Maltese cockatoos, Borg managed an efficient enterprise which earned him up to $2,000 per week. During the 1930s, it would have been impossible for an individual operator like Borg to assume such control over the brothels without encountering strong resistance.

Virtually free from any kind of syndicate controls, the East Sydney brothel trade was open to almost any entrepreneur with the necessary capital and police connections. Among the most controversial of the many alleged Palmer Street proprietors were Mrs Aileen Patricia Donaldson and her long time ‘friend’, Detective Sergeant Harry Giles of the Darlinghurst Vice Squad. Appearing in the Bankruptcy Court in April 1965, Mrs Donaldson was subjected to a searing examination by J.T. Hiatt who alleged that her lover, Sergeant Giles, was her silent partner in a brothel she had operated since October 1962. In the midst of a major police campaign against brothels in The Doors area during the latter months of 1962, Mrs Donaldson was able, according to Crown allegations, to operate her Palmer Street brothel since she was under Sergeant Giles’ protection. When Police Commissioner Norman Allan suspended Giles from his Darlinghurst vice duties pending an investigation of Crown allegations, Mrs Donaldson wound up in hospital after swallowing a bottle of pills. Giles himself resigned from the N.S.W. police and retreated into the bedroom of his Gymea home where he was ‘under sedation’ and ‘unavailable for comment’.

While Sydney’s milieu neglected prostitution and exercised only limited influence over SP bookmaking, it did have considerable control over illegal gambling in the Kings Cross area. There were frequent reports during the 1950s indicating that the wartime baccarat boom had continued. In 1947 police finally raided the baccarat school established by Sidney Kelly and Phil Jeffs but discovered little evidence since Kelly had apparently been warned by police contacts. During the early postwar years there were some six baccarat schools in the Kings Cross area. The largest, a luxury venue known as The Excitement, was established by Melbourne baccarat capital and made some £250,000 from an elite clientele during its two years of operation. For the next twenty years there were repeated reports of baccarat schools in the Darlinghurst area, but police remained unable or unwilling to suppress gaming houses that operated openly with a walk-in clientele and city-wide reputations. Following a public call for a Royal Commission into all forms of gambling by protestant clergy in February 1962, the N.S.W. Vice Squad sealed off Kellet Street in Kings Cross and arrested forty-nine people playing baccarat. Once the controversy died, however, police pressure evaporated and business returned to normal.

The full scope of baccarat gambling was not revealed until 1965 when a Sydney solicitor was charged with malversation of £16,065 and gave evidence about his baccarat compulsion in open court. Testifying on his own behalf Reginald Prentice detailed £50,000 in alleged gambling losses at four city baccarat schools from 1962 to 1964: at the Victoria Club operated by Percival Galea and Eric O’Farrell; the Goulburn Club owned by George Walker and Harry Patses; the Kellet Club, managed by Reg Andrews; and at baccarat games operated by Eli Rose at the International Club. Police Commissioner Norman Allan assured the public that these clubs ‘have been subjected to intensive police action for a considerable time’. But, the revelations produced little action and were soon forgotten.

Among all the baccarat operators of the early 1960s Richard Gabriel Reilly was the most influential. Reilly began his career in the 1930s as a bouncer in a dance hall and later moved to a similar position at Phil Jeffs’ 400 club. Charged with the murder of a known gunman outside the Windsor Hotel on Castlereagh Street shortly before World War II, Reilly was acquitted and continued his rise in the underworld. During the war he was arrested for operating a blackmarket business in clothing coupons. Apparently acquiring an interest in Phil Jeffs’ former luxury nightclub, Oyster Bills, on the Princes Highway, Reilly was charged with ‘sly grog’ offences there on 5 May 1951.

Arrested for the last time in 1952, Reilly subsequently developed some important political and police allies. Widely known in the underworld for his close political contacts with the State Labor Party, Reilly emerged by the early 1960s as the most powerful criminal in Sydney. Although a bankrupt radio technician in 1952, a decade later he wore $200 suits, drove a $17,000 Maserati, owned a $100,000 home in Castle Cove and maintained an expensive mistress. His exceptional income came from ownership of two baccarat schools in Kings Cross, the Kellet Club and the Spade Room Club, and a neatly kept little notebook containing figures and some three hundred names and telephone numbers — including a senior police officer, some abortionists, several massage parlour operators, the former N.S.W. Minister of Justice Mr M. N. Mannix, and the Labor MLA, A.R. Sloss. Reilly was assassinated in the 1967-8 gang wars and the discovery of his famous black book caused an enormous controversy. Mannix explained that he had known Reilly for twenty years, exchanged Christmas cards with him for ten years and had found employment for released prisoners upon his recommendation. ‘I knew he was a criminal’, said Mr Mannix, ‘but I saw nothing wrong in having him for a friend while I was Minister of Justice’. Somewhat less expansive in his explanations, Sloss said his relations with Sydney’s leading criminal were of ‘a normal parliamentary nature’.

As Richard Reilly’s rise and demise demonstrates, the sudden change in the character of organized crime was influenced, at least indirectly, by the outcome of the 1965 State elections. After a quarter century in power, the N.S.W. Labor Party was defeated by the Liberal-Country Party coalition under the leadership of Robert Askin. Established criminal leaders like Reilly suddenly found their well-cultivated Labor Party contacts useless and rising criminal syndicates with allies in the new government were now in a position to contest his influence over the milieu. While the N.S.W. Labor Party was open to influence from organized crime leaders, its structure discouraged any single group from trying to impose controls over the city’s various vice trades. The complex, Byzantine quality of the Labor Party allowed almost all illicit operators access to power, but prevented any one from monopolizing police or political protection. However, the concentration of power at the peak of the Liberal-Country Party allowed a smaller number of criminal syndicates to monopolize police protection and impose their control over the milieu. As Reilly and his mates went out in a blaze of gunfire, syndicates with closer contacts to the new government rose to dominate the milieu.

from Drug Traffic by Alfred McCoy


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