KVIG Informative

Nevada’s Tax Commission tried to suspend the Thunderbird Hotel’s gambling licenses in 1955 over loans traced to Meyer Lansky’s brother. The Nevada Supreme Court threw out the suspension two years later, ruling the commission hadn’t proven its case under its own procedures — a defeat that exposed exactly the enforcement gap Nevada’s modern licensing system was built to close.

On Feb. 10, 1955, the Nevada Tax Commission cited Marion B. Hicks, Clifford A. Jones and seven other operators doing business as the Thunderbird Hotel Company, ordering them to show cause why their gambling licenses should not be revoked, according to the Nevada Supreme Court’s later opinion in the case, Nevada Tax Commission v. Hicks. The commission, Nevada’s gaming regulator before the state created the separate Gaming Control Board and Gaming Commission, focused on two loans tied to the Thunderbird that Hicks had never reported.

The first, $160,000 in 1947, came from George Sadlo, with Meyer Lansky’s brother, Jake Lansky, sharing in the loan; the money financed construction of the hotel itself. The second, $37,500 in 1948, came from Sadlo directly into the gambling operation as working capital. The court later found substantial evidence that Hicks knowingly failed to report the second loan, though not that he had willfully concealed it; it found no comparable evidence regarding the first, because the duty to report it had not been clearly established at the time.

Donate

Donate

The commission held a hearing on March 30, 1955, and ruled on April 25 that Hicks and Jones, a former Nevada lieutenant governor who had left that office in December 1954, were unsuitable to hold gambling licenses. It suspended the licenses of all nine Thunderbird operators until Hicks and Jones disposed of their partnership interests in the business — a suspension, the court later noted, not the revocation the commission had originally threatened.

The operators sued the following month. A district court granted a temporary restraining order, then an injunction pending trial, and after a trial in October 1955, issued a permanent injunction on Dec. 19, 1955, finding the commission’s suspension unsupported by substantial evidence. The commission appealed, and the case reached the Nevada Supreme Court.

Donate

Donate

On May 3, 1957, the court, in an opinion written by Justice Merrill and joined by Chief Justice Badt and Justice Eather, sided with the Thunderbird’s operators. It held that a reviewing court may only check whether substantial evidence supports the commission’s factual findings, not reweigh them, and that the district court had erred by admitting new evidence instead of confining itself to the commission’s own record. Several of the commission’s grounds collapsed under that standard, including its claim that Hicks’s dealings with Sadlo had attracted underworld figures to the property. Other grounds held up, including that Hicks had employed former associates of organized-crime figures and that Jones had improperly refused to answer the commission’s questions. The court let the suspension order fall but left the commission free to act again on the findings that did hold up.

The ruling exposed a regulator nearing the end of its run. The Nevada Tax Commission had regulated gaming since 1945, when it took over from county governments, according to the Nevada State Library and Archives. The Nevada Legislature created the State Gaming Control Board in 1955, the same year the commission first cited the Thunderbird, as a dedicated enforcement and investigative unit, and it established the Nevada Gaming Commission in 1959 under the Nevada Gaming Control Act, with the Control Board becoming the new commission’s investigative arm. The Tax Commission’s loss in the Thunderbird case is exactly the kind of defeat that two-tier structure replaced it to prevent.