Richard Oulahan and William Lambert.

The Scandal in the Bahamas.

Life 2/3/1967 pp. (58) 60 - 74.

U.S. and Canadian insurance brokers have become understandably suspicious of any underwriter using a Bahamian address, so some Bay Street lawyers have resourcefully thought up a new gimmick. For a fee of $1,500 and up, they provide respectable-sounding mail drop addresses in London for their clients. One such mail drop turned out, on investigation, to be a brothel.

One of the most lucrative enterprises of the modern pirates of the Bahamas is the floating of dubious securities in the U.S., using Bahamian addresses and mailbox numbers and representing companies that have no assets. Wherever the SEC can put the finger on such illegal securities dealers, it blacklists them. Currently 17 are outlawed in the U.S.

A recent example was a firm called the Compressed Air Corporation, Ltd., registered in Nassau (but not on any legitimate bourse), whose flamboyant mailed advertising played heavily on the U.S. public's alarm about alleged hazards in American auto designs,. The firm listed the telephone of Nassau's Playboy Lounge.

Oddly, there seems to be more banks along Nassau's Bay Street than there are bars and restaurants—surely a unique situation for a resort town. And, until recently, there were dozens of other so-called "banks" which were nothing more that Nassau mail drops conveniently incorporated by Bay Street lawyers for a tidy fee, no questions asked and no Bahamian law violated. The operators of these phony banks, mostly Americans, had built a lucrative business by issuing themselves spurious certificates of deposit which they used as collateral for loans from U.S. financial institutions. After strenuous pressure was exerted by the American and British governments, the islands' banking laws were tightened last year, and dozens of invisible "banks" vanished overnight.

Of the 17 legitimate banks in the Bahamas, most remain a handy repository—just 35 air-minutes from Miami—for ill-gotten, un-taxed money that can be stashed in accounts closed to the scrutiny of U.S. and other outside authorities. The process, which removes the tattle-tale gray of tax evasion, is known as "laundering." No one can guess how much U.S. money is flowing into the vaults of the Bahamas, but a source in Canada estimated that currency going out of that country alone to Nassau amounts to $2 million a week.

Crime and violence have flourished in the Bahamas for centuries, since Columbus discovered America on the Bahamian island of San Salvador and his Spanish followers introduced the inhabitants, the gentle Lucayan Indians, to civilization. They were conquered by the Spaniards, then decimated by measles and smallpox or carried off to work and die in the mines of Cuba and Hispaniola. The Spaniards never considered the place worthy of colonization, and in the 17th Century a British group, the "Eleutherian Adventurers," tried to settle the islands. They suffered hunger at first and later were frustrated by the swarms of pirates who had already made the Bahamas their base and were the de facto rulers.

By the end of the 18th Century piracy in the islands had died out. During the American Revolution, the colony's sparse population of 4,00 was nearly tripled by the immigration of some 7,000 southern American Tories. The newcomers planted cotton in the thin Bahamian soil, got the slaves they had brought with them to pick it, and completely changed the economy/ and ethnic mix of the Bahamas. Then in 1838 slavery ended in the British Empire, and the islands had to find another means of survival.

One was already at hand. Early in the 19th Century, the people of the colony had turned enthusiastically to the business of salvaging wrecked ships. Since the Bahamas lie athwart one of the Atlantic's main sea lanes, and since the prevailing winds and currents are hazardous for sailing ships, business for salvors was good. The islanders made it a lot better by decoying ships onto reefs with moving lights along the shore and by making bargains with unscrupulous ship captains who were willing to wreck their ships for a share of the spoils. Between 1858 and 1864, while 313 ships were lost on the Bahamian shores, the Assembly was made up almost entirely of the owners of the colony's 302 salvage ships, and most of the eligible electorate consisted of their crews. Then, over the violent protests of the Bahamians, Sir Rawson W. Rawson, a resolute royal governor, ended the wrecking business by building an effective system of lighthouses in the archipelago.

The bloody American Civil War brought the biggest boom ever to the colony. Nassau became the primary chink in the Union's sea blockade of the Confederate States. The merchants of Bay Street jumped at the opportunity to run arms to the South and transship its cotton to the mills of England.

Imports leaped from £234,000 in 1860 to more than £5 million in 1864 and Nassau danced.

After the Civil War, the Bahamian economy plunged to its lowest depths and remained there for more than 50 years. In 1920, though, the institution of national prohibition in the U.S. sent the Bahamas reeling into their longest binge of prosperity, again as blockade-runners.

In Nassau, warehouse space ran out and the streets were piled high with cases of pre-Prohibition whisky from the U.S. and imports from Britain, all destined for mainland bootleggers and racketeers. American gangsters built stucco palaces on the islands, and many of today's leading Bahamians-including the Premier Sir Roland Symonette himself-amassed their fortunes smuggling whisky into the U.S.

With the repeal of prohibition in 1932 the Bahamas sank, with the rest of the world, into the Great Depression. Not until 1950 were the Bahamas prepared for the postwar era of increased autonomy and tourist-borne prosperity. The Bay Street Boys were ready.

The islands today are almost entirely self-governing. The British Crown is responsible only for defense, external affairs and internal security; and the office of royal governor is mostly ceremonial.

The Bay Street Boys saw nothing wrong in manipulating the government and passing laws to make themselves richer. After all, goes their smooth rationalization, as part-time government officials they receive no salaries, so they had to make a living elsewhere and somehow. It was, invariably, a very good living. One of Pindling's main campaign pledges was to end the conflict of interest and pay salaries to office-holders.

While the Bay Street Boys live in opulent mansions strung up and down the coastline around Nassau, the average Nassauvian is not so fortunate. The typical tourist sees only the smiling face of the place, but it is only a 10-minute walk to the brawling, sprawling district called "Over the Hill," a festering slum, teeming with crowded shacks, with no plumbing, few paved roads and fewer schools. Here and there a neat/ pastel bungalow, like the one Sidney Poitier built for his mother, may bloom in the jungle, but over the Hill is, almost all of it, an appalling place where the city's Negroes live. A single room in a ramshackle wooden house costs $35 a month. Epidemics and fires are frequent, and during the rainy months, Over the Hill often becomes a fetid swamp: there are no rain-sewers or streams to carry the water off. It is the heartland of the P.L.P.

It is true that there are other, more squalid slums in the Caribbean islands, but the irony of Over the Hill is that is it should exist at all. "The governmental system is almost medieval," says an American diplomat. "It's too bad they can't run the government like Kuwait, where the nation's riches are used to serve the small population."

Though the Bay Street Boys held the power in the Bahamas for a generation or more, theirs was a minority government. Through a system of vote-buying, gerrymandering and rotten-borough districting, they maintained an iron clutch on the legislature until the Jan. 10 election. The result surprised everyone, but should have been foreseen. Cracks in the authoritarian walls of Bay Street had begun to appear nine years ago, when a general strike crippled the island for 19 days, Limited redistricting and universal male suffrage were introduced, and in 1962, the female franchise was approved. Meanwhile, during those nine years, the number of seats in the Assembly, all told, increased by nine to a total of 38—and the control of the Bay Street minority diminished.

No executive club, fraternity or protective association ever operated with such solidarity as the Bay Street Boys. This is remarkable because the Boys do not especially admire one another and some—Sir Stafford Sands and Sir Roland Symonette, for example—have been know to say derogatory about each other. But to outsiders Bay Street presents a solid phalanx, as Huntington Hartford, the hapless A&P heir, discovered to his chagrin when he embarked on a grandiose Bahamian project in 1959 without greasing the proper palms.

Hartford, who has an instinct for throwing his millions into noble and picturesque but ruinous undertakings, decided to go into the resort business. He bought most of Hog Island—changed its name to Paradise Island and spent $30 million building a luxury playground there. But then he discovered that the place could not break even without a casino and a bridge across the harbor. No other big investors would consider going in with him unless they heard the click of dice, and he found he could not ferry over nearly enough tourists by motorboat to pay the bills.

As a matter of economic necessity Hartford decided to add a casino. But all efforts to obtain a gambling franchise and a permit to build a bridge failed. He even offered to give 50% of the casino's profits to the Bahamian public. But he made the mistake of retaining the wrong lawyer to plead for his gaming concession and, worse, he had committed the terrible faux pas of contributing some $15,000 to Bay Street's enemy, the P.L.P. As the stalemate stretched on, his troubles in Paradise were costing him $1 million a year by 1964. So Hartford gave up and sold most of his holdings to the quaintly named Mary Carter Paint Company, whose owners wanted to diversify their holdings.

Miraculously, Paradise Island's difficulties began to melt away. Gambling there became possible merely by purchase, for $750,000, of a Certificate of Exemption from the owner of the Bahamian Club, a sedate little gaming room in Nassau. The permit will be transferred to the Paradise Island Casino when it opens at the end of this year. Approval for the bridge was graciously granted by the Bahamian government, which decided that a span across the harbor would not be a hazard to shipping. And the attorney who represented the Mary Carter Paint Company was Sir Stafford Sands.

Of course, some troubles did develop. The paint company had to yield 4/9 of the casino and all of the management of it to Wallace Groves's Bahamas Amusements, Ltd., because, as Sir Stafford explained it, when it came to gambling, the government preferred to deal with just one group. Under the Bahamian Club's present management, Lansky & Co. pull the managerial strings and are slated to/ run the Paradise Island Casino when it opens. They have been cut in for a flat 15% of the gross gambling profits.

If the Paradise Island caper was a bravura performance by Sir Stafford, the Grand Bahama deal was his masterwork. Grand Bahama was the ugliest, least promising of all the habitable islands in the Bahamas. But thanks to the legal legerdemain of Sir Stafford in his capacity as Wallace Groves's attorney, a big chunk of the unsightly place was converted into the swinging community of Freeport, with its big, garish hotels, a casino that looks like an Arabian harem, an olde Englishe pub with deep-chested wenches for waitresses, and International Shopping Bazaar, girlie shows "direct from Las Vegas," gangsters, discothèques, a scuba club, the works—and an atmosphere that melds Miami Beach with Monte Carlo.

Freeport—all 211 square miles of it—is Groves's absolute demesne. He controls everything from the local police payroll to the décor of the new buildings (gaudy portraits of Queen Elizabeth in the hotel lobbies). With the authority of a feudal baron he distributes privileges and business licenses—and when the whimsy serves him, he takes them away.

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