Operation Rocky Top: How the Tennessee political scandal played out – The Tennessean

Randy McNally was walking around the imposing, cavernous halls of the state Capitol when he was playfully slapped on the back by one of his colleagues.

“What’s on your back? You carrying a pistol?” then-Sen. Milton Hamilton asked, oblivious to the fact that McNally was surreptitiously wearing a recording device while working for federal and state investigators.

His stomach dropped.

“I think my suspenders have come loose in the back,” McNally, a first-term state senator at the time, recalls now, more than 30 years after the fleeting but harrowing interaction.

That’s the moment he decided he needed to relocate the recording device tucked beneath his shirt to underneath his pants with the support of a neoprene leg brace. 

The year was 1987, and McNally was deeply involved in an investigation that would expose what seemed like a mafia tale out of Chicago, New York or Los Angeles.

Bags full of cash, rigged outcomes, threats of violence and death, an undercover agent, discreetly recorded conversations, suicides and corruption that seeped into the legislature and state government.

In the mid-to-late 1980s, Tennessee was the epicenter of such nefarious activity thanks to an illegal bingo scheme.

A joint federal and state investigation, formally known as Operation Rocky Top, lasted more than three years, and netted nearly 80 people, including current and former lawmakers, a judge, lobbyists, state officials and countless bingo operators.

The bingo industry’s pitch to lawmakers

In 1985, a bingo lobbyist named Jim Long invited McNally, a four-term Republican member of the House of Representatives from Oak Ridge, to dinner.

Prior to the meeting, McNally had heard from a constituent about concerns regarding a bingo operator in East Tennessee. After some digging, McNally relayed his own uneasiness to the Secretary of State’s office, which oversaw bingo.

In those days, bingo was prevalent throughout the state. Charities, including churches, had been allowed to operate bingo thanks to a 1971 law the legislature approved.

At the dinner with Long, McNally listened to the lobbyist’s pitch: The bingo industry was big, involved in elections and gave lawmakers political contributions. It was a run of the mill conversation — until McNally heard something that bothered him.

Long told McNally, who is now lieutenant governor and the No. 2 politician in the state, that some legislators he worked with liked to receive money all at once, around election time, while others wanted it throughout the year. 

“That’s when the red light went off,” he said.

McNally worried that lawmakers had the ability to decide when and how they would receive money — it sounded like a bribe. He took the weekend to think about the conversation. He didn’t want to overreact.

On the following Monday, McNally called the local office of the Federal Bureau of Investigation. Later that day, he met with agents from the FBI and the Tennessee Bureau of Investigation. At the time, the federal and state agencies had been hearing rumors about illegal activities among lawmakers, but their inquiries were fruitless.

“That’s when Randy McNally walked into the office,” said Richard Knudsen, who would eventually become the FBI’s case manager for what was later known as Operation Rocky Top. “He really opened the door.”

The agents asked McNally to act normal and contact them again if there were any other developments with the bingo lobbyist.

A few weeks later, Long approached McNally again, this time as the lawmaker went into a legislative committee meeting. There, in the hallway of the legislative office building, Long handed McNally an envelope.

“We appreciate you,” Long simply said.

Once again, McNally contacted the agents, who picked him up and drove to a nearby McDonald’s parking lot. When they peered inside the envelope, there were three $100 bills.

The investigation quickly became a higher priority. An undercover agent was brought in to meet with lawmakers and those in the bingo industry.

McNally had a recording device added to his home phone. And he was outfitted with devices that allowed him to record conversations in person. He ended up recording his conversations around the Capitol for years.

Reporters begin digging

As law enforcement’s investigation into charitable bingo continued, the media began its own probe. Coverage of bingo was led by The Tennessean, which in May 1987 began publishing a 20-part series.

“Charities get only tiny part of money,” the first headline read, with the story detailing the magnitude of charitable bingo in Tennessee.

“The more we started figuring out that what was really going on was gambling,” Jim O’Hara, one of the Tennessean’s reporters, recalls.

The Tennessean’s reporters and editors visited bingo halls. O’Hara said he once heard about operators taking bags full of cash out of smoke-filled bingo halls.

Meanwhile, Phil Williams, who was a police reporter for The Tennessean at the time, worked his law enforcement sources.

“While we were reporting on what we were finding, it became pretty clear that the FBI and IRS were developing a pretty serious interest in the same subject matter,” he said.

O’Hara and Williams made several key findings. Among them, only $2.6 million of the $124.7 million taken in through bingo between 1985 and 1987 were for charitable purposes.

The massive bingo operation had a political action committee — Tennesseans for Better Government — and an organization known as The Association, which members paid into to ensure their protection from surprise searches by inspectors.

The reporters also discovered the complexities of Tennessee’s charitable bingo operation. Cash-hungry charities rented their names to allow questionable bingo groups to operate. Fake charities were created by reactivating defunct organizations. And legitimate charities were overtaken by outside groups run by bingo operators.

When the newspaper first began reporting about bingo, readers were reticent to show interest in the subject. The paper tried to highlight the human toll.

Teresa Wasson, The Tennessean’s city editor at the time, noted how those who went to the bingo halls tended to be older, working-class or blue-collar types.

The Tennessean reported how Annie Mae Switzer, who ran a small African American church in Memphis, said she was threatened by professional bingo gamblers if she returned.

“(They) took her church’s name and used it for a bingo hall,” said Williams, who noted a state bingo regulator put Switzer in touch with professional gamblers.

As the newspaper’s investigation continued throughout 1987 and 1988, reporters began to expose how the massive money-making operation was operated by shady figures that had significant ties to state government.

“That’s when people started to care,” Wasson said.

In 1990, The Tennessean was named a Pulitzer Prize finalist for its work related to the illegal charitable bingo scheme.

Federal indictments begin 

In August 1988, a federal grand jury indicted two Memphis bingo operators on fraud and conspiracy charges. They would be the first of many indictments.

Among the most significant developments occurred in January 1989, when W.D. “Donnie” Walker pleaded guilty to federal racketeering, conspiracy and tax evasion charges. Walker, the former chief enforcement officer of charitable bingo, also pleaded guilty to state charges for offering a $10,000 bribe to McNally.

The allegations and the news of McNally’s involvement, including the fact that he had been recording conversations around the statehouse, rocked Capitol Hill.

At the same time, O’Hara said there was also a sense of relief. “Those of us who had been covering the story and had a sense of how deep the corruption had become were really proud to see that somebody in that morass actually had an ethical compass,” he said.

Another bombshell development occurred when The Tennessean reported in July 1989 that Ken Walsh, an Atlanta businessman known around the Capitol as Ken Wilson, was actually an undercover FBI agent.

At the time the newspaper disclosed Walsh’s role in the investigation, David “Peabody” Ledford, who was later indicted and charged with bribing McNally, said, “Oh s—. Are you serious? I introduced him to a lot of people up there. I kinda suspected he might be an agent when he suddenly disappeared but I thought I was just crazy. Now I feel like I’ve been used.”

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The scope: ‘Tentacles went out everywhere’

In addition to Walker, the corruption probe led to the indictment of as many as 77 others, according to one FBI account. Among those who faced charges were former lawmaker Jack Burnett, state election commissioner and former lawmaker Tommy Powell and former lawmaker and General Session Judge Ira Murphy. William McBee, a bingo industry figure, was indicted for allegedly having a “hit list.”

The bingo investigation led officials to discover other corrupt activity, which generated additional indictments.

“Tentacles went out everywhere,” remembers John Gill, who served as U.S. Attorney for the Eastern District of Tennessee from 1981 to 1991.

Then there was state Rep. Tommy Burnett. The House majority leader was a deal-making, rising star in the Democratic Party, so much so that he was reelected to the statehouse a few years earlier while in prison for failing to file income tax returns. For his role in the bingo scheme, Burnett was charged with mail fraud, illegal gambling, conspiracy and perjury.

But for all the indictments and guilty pleas that were handed out, two other officials took a different route: suicide.

In 1989, investigators were looking to indict Rep. Ted Ray Miller for allegedly trying to extort $75,000 from a Knoxville lawyer in order to halt a bill in the legislature. But instead of facing charges, Miller shot himself with a shotgun in July 1989.

Five months later, Gentry Crowell, Tennessee’s secretary of state, shot himself while facing scrutiny by investigators.

Like Burnett, Crowell was a powerful figure in state politics — he was known as “The Godfather” from his days as head of the House Democratic caucus.

Crowell had testified in front of two grand juries as they investigated the bingo scheme and was set to appear before a third. In December 1989, Crowell shot himself while on the porch of his home in Lebanon. He did not immediately die, as the bullet remained lodged in his brain.

Eight days later, Crowell died. 

Scandal led to change, still felt today

The size, scope and actions in the aftermath of the massive corruption probe are among the most significant aspects of the bingo scandal.

The state put in place an independent campaign finance system and implemented other reforms. But it wasn’t easy.

A Tennessean editorial cartoon published in May 1989 featured two state senators sweeping an ethics bill under a rug. Another cartoon featured a worried man holding a briefcase and an ethics bill with seven pairs of eyeballs looking at him while he thinks, “This year I think the eyes have it!”

“We were changing the way the society had been up there for many years and it was hard to do,” said former Democratic House Speaker Jimmy Naifeh, who became the chamber’s leader in the aftermath of the scandal.

Lobbyists’ interactions with lawmakers changed.

“Lobbying at the state Capitol and legislative plaza had been pretty much wide open up to this point,” said Keel Hunt, author of Tennessee political history books “The Coup” and “Crossing the Aisle.”

Prior to the reforms, lobbyists gave legislators what was called “walking around” or “suit and cigar” money. Afterwards, lobbyists faced much stricter rules that largely remain intact today.

ANATOMY OF A STORY: How Tennessean reporters helped expose a widespread gambling operation

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‘One-party control … is an invitation for bad behavior’

For all the unique qualities the Rocky Top scandal had, now, more than 30 years after it became public, Tennessee politics features several parallels.

Republicans are dominant, much like Democrats were in the 1980s — an issue that some say can contribute to corruption.

“Overwhelming one-party control is a lot of times an invitation to bad behavior,” Middle Tennessee State University political scientist Kent Syler said.

There’s also speculation around the Capitol of investigations, including calls for probes after the brief reign this year of former House Speaker Glen Casada, whose actions Democrats have tried to highlight as a reason for necessary change.

In a 1989 newsletter sent to more than 500 Republican leaders, Tommy Hopper, who was executive director of the state Republican Party at the time, said the scandal wasn’t about bingo but about the “integrity of state government.”

“It energized the Republican Party,” Syler said.

Likewise, earlier this year, Tennessee Democratic Party chair Mary Mancini sent out a fundraising email saying Republicans during the Casada scandal wanted the issue to “blow over as quickly as possible.”

“It’s our job to shine line on these wrongdoings and propel Democrats who are committed to restoring integrity to our legislature,” she said. 

Overall, some observers see Operation Rocky Top and other scandals that have come before and after as part of the ebb and flow of government.

“These corruption things sort of go in waves, like an ocean,” says Michael Cody, who was state Attorney General from 1984 to 1988. “They come up and you get a wave and then it goes back down and people relax and you’ve got another kind of corruption opportunity that comes up and somebody will take advantage of it.”

For now, Operation Rocky Top remains arguably the most widespread corruption scandal in state history that serves as a harbinger while highlighting the role that reporters, investigators and whistleblowers can have in righting governmental wrongdoing.

Reach Joel Ebert at jebert@tennessean.com or 615-772-1681 and on Twitter @joelebert29.

Published 10:51 AM EDT Oct 23, 2019