12

to "go to court" (id.). [In March 1961, Hyman Siegel returned his $5,000 retainer to Playboy (Preuss, R. 180-1).]

Berger, then or shortly thereafter, asked for $7500 for his services for Playboy. Morton replied that he could see no reason to pay Berger, as Playboy had already given Berger expense money, but he would discuss it with his associates. In May 1961, Playboy paid the defendant $5,000 (R. 84).

Shortly after this payment, Berger renewed his contact with Morton and told him he had the liquor Chairman "all smoothed out" and that "the number one man in New York, Judson Morhouse," wanted to see Morton (R. 86). Morton met Morhouse, head of the State Republican Party, in New York, with the defendant early in May, 1961 (R. 86-7). Before the actual meeting with Morhouse, Berger told Morton "the $50,000 deal with Commissioner Epstein is on" and that Playboy would have to "make [its] own deal" with Morhouse (R. 87-8).

At this meeting, Morton told Morhouse the problem Playboy had regarding the type of license for which it should apply, and that Epstein was "very upset" about the Playboy "method of operation" and its mailings. Morhouse told Morton, "Well, I think I can work—we can work these things out" (R. 90). Morhouse also mentioned he could conceivably appoint the next liquor Chairman as Epstein was "a very old man" and also discussed the possibility of changing some of the archaic liquor laws through legislation. Morhouse agreed that Playboy should apply for an "RL" type license (R. 90-1).

13

Morhouse then asked Morton for a $100,000 stock option, a $20,000 per year retainer, and requested a franchise to operate a string of gift shops within the clubs (R. 91). Morton said he would have to discuss it with the principals of his company (R. 92, R. 111).

Subsequently, Morton, accompanied by Victor Lownes, returned to visit Morhouse. Morhouse again discussed the stock option, the $20,000 per year retainer, and the gift shops. Morton and Lownes agreed to the $20,000 yearly retainer, but said they could not give Morhouse the gift shops nor the stock options (R. 94-5).

Morhouse thereafter met with Morton, Lownes, Hefner, and Preuss at the Playboy offices in Chicago where again there was discussion of the stock options, gift shops and the $20,000 yearly retainer. Morhouse specified he wanted the retainer paid by the Playboy Magazine and not the Playboy Club (R. 98-9).

After meeting with Morhouse a second time, Morton and Preuss met with Berger, who asked for the first installment of $25,000 in cash for Epstein (R. 99-100). Playboy insisted on paying by check and Berger was given two $12,500 checks, one drawn to Lee Berco Co. Inc. and the other to Harry Steinman, both payees having been designated by Berger (R. 101-3). Berger told Morton he intended to cash the two checks, pay the taxes owing on them, and deliver the balance to Chairman Epstein (R. 103).

Two weeks after Morton and Lownes met with him, Morhouse came to Chicago and conferred with the four

14

Playboy officers (R. 95). Morhouse was again told he could not have the stock options or gift shops, and Morhouse suggested an attorney named Jerome Marrus to file for the liquor license (R. 98-9).

In July or August, 1961, the defendant asked Morton for additional money for himself, "because the tax bite was going to be so large, there wasn't going to be anything left for his services" (R. 103-4). Morton said, “we had a deal Ralph [Berger] and you were going to get your money out of the $50,000." The defendant answered, "the Commissioner was keeping the entire amount and that the tax bite was larger than they expected and there was nothing left for himself" (R. 104).

It was thereafter agreed that the defendant would be given an additional $15,000 for his services (R. 105). During the remainder of 1961, the defendant on several occasions relayed to Morton that Commissioner Epstein was very upset at Playboy's continuing direct mailing of membership solicitations into the New York area (id.). In the summer of 1962, Judson Morhouse also told Morton of Epstein's annoyance at the Playboy mailings and arranged for Morton to visit Epstein in the latter's hospital room (R. 106-7).

After the district attorney's investigation into the State Liquor Authority had been mentioned in the newspapers, in late November or early December, 1962, Morhouse sent for Morton and told him he wanted it clearly understood he represented Playboy Magazine and not the Clubs (R. 108).

15

In December of 1962, the Playboy Club received its liquor license, but had to agree not to exclude any members of the public who did not have keys (R. 109-10).

Morton also testified that before Playboy opened in New York, it paid $775,000 for the building, encountered architectural costs of over $300,000 (R. 81) and eventually spent approximately $3,800,000 on the building. Also, before the building opened, Playboy had obtained $1,500,000 of the public's money from the advance sale of keys through its mail solicitations (R. 463).

Morton further testified that he believed unless Playboy paid as demanded, they would lose their investment in New York. He also felt they were forced to make the payments. Morton did not think he conspired to bribe a public official; he and his colleagues felt they were the victims of corruption (R. 461-6).

However, Arnold Morton also testified that no one ever threatened him that unless there was a payoff, Playboy would not get its license (R. 467). He explained that his definition of bribery was "to pay for something you are not entitled to" (R. 468). But he affirmed that he had truly testified before the grand jury that he appreciated that "the whole thing was illegal and a conspiracy to pay off a public officer" (R. 457).

Robert Preuss testified he was Vice-President in charge of finance and the business manager of the Playboy Clubs and Playboy Magazine (R. 114). He first met the defendant when Morton brought him into his office early in May,

16

1961, to discuss reimbursement for his expenses in travelling to New York on behalf of Playboy (R. 118-19). When Preuss questioned giving Berger any more than the $5,000 already paid, the defendant replied that, while that sum was for his services, he had also spent other money for which he wanted reimbursement (R. 119). Berger asked for a figure in excess of $5,000, but Preuss told him to submit a bill "outlining" his expenses to amount to approximately, but not exactly, $1,500, and Playboy would pay the bill (R. 120).

At this same meeting, the defendant told Preuss he had brought Morton to see Morhouse who would guarantee that Playboy got its liquor license (R. 134). When Morton had reported back to Hefner, Lownes and Preuss, and told them that Morhouse wanted $20,000 yearly for five years, Preuss asked, "On top of Epstein?" Morton answered, "yes." Preuss also testified that when Morton related his conversation with Morhouse, Hefner inquired "how high up does this go?" Victor Lownes interjected, "I think we ought to blow the whistle on this whole affair," to which Hefner countered, "but who do we go to?" (R. 135-6). Morton asked Lownes to go back with him to see Morhouse and verify what he had said (R. 137).

After the second trip to Morhouse, Morton told Preuss that the defendant said it was time to pay Epstein part of his money (R. 138). On June 27th, 1961, Preuss delivered to Berger two checks for $12,500, as the defendant had asked that the $25,000 be split and paid to different parties to help him in his tax situation (R. 126, R. 129-30). Berger gave Preuss a voucher for the one check