Playboy's History of Organized Crime Part VI: The Heat's On

Part VI: The Heat's On

By the Early Thirties, it seemed that nothing could halt the spread of underworld power. Most of the country's major cities and many of the smaller ones were, in important ways, controlled by criminals. Politicians and police took money and orders from the racketeers; businessmen facing bankruptcy during the Depression had no-where else to turn for cash, and so feel under their control; unions sought their services and became their servants. There were times when the entire nation seemed at the mercy of the Mob.

But the specter of government by gangsters also inspired the first major reform efforts by Federal, state and local authorities. The Federal effort was led by Elmer Irey and his associates at the Internal Revenue Service. When all other tactics seemed unavailing, there was still the possibility of sending gangsters to jail for income-tax evasion. In New York, long-ignored civic corruption was suddenly in the spotlight of the Seabury commission. And a little later, the city itself would join the drive against the underworld when a new mayor, Fiorello "Little Flower" La Guardia, and his reformist fusion administration came to power.

Under the spur of President Herbert Hoover and Treasury Secretary Andrew Mellon, Irey had kicked off the Federal drive in Chicago in 1927. He had collected enough financial evidence to send Ralph and Al Capone, Jake Guzik, Frank Nitti and others to prison. In Kansas City, his agents had brought about the disgrace, if not the total collapse, of the Pendergast machine. And in New York, the multi-millionaire bootleggers and racketeers were being put under the tax microscope. The initial target was Waxey Gordon.

There was little affection for Gordon in the fledgling national crime Syndicate. His control of illegal distilleries in Philadelphia, New Jersey, New York and elsewhere, and his hold on foreign sources of supply, had given him a degree of independence and power that forced almost everyone to come to him. Moreover, requests for deals with Gordon usually resulted in his demanding a partnership, and his tough, arrogant manner further alienated his business associates. In Philadelphia, he had feuded long and bitterly even with his allies, men such as Nig Rosen and Boo-Boo Hoff. Perhaps more serious, the enmity between him and Meyer Lansky had deepened over the years. By the end of the Twenties, they would rarely speak to each other or sit down together in the same room. Lucky Luciano, Joe Adonis, Longy Zwillman and his partner Willie Moretti, Tommy Lucchese, even Lansky's oldest friend and longtime partner, Bugsy Siegel, all of whom had tried to work with both, found it increasingly difficult to keep the peace between the two seemingly indispensable men. They wanted no showdown, but if one were to come, they would side with Lansky. The "Little Man," as the 5'4" Lansky was often called, had brains and ability, kept his ambitions to himself and preferred to stay in the background as a man who would not challenge the power of anyone else. Even more than Frank Costello, Lansky seemed content to guide obliquely by suggestion and subtle persuasion. So Gordon's vitriol against Lansky won him no points in the organization. And he lost points in the early Thirties when he made himself another powerful enemy in Dutch Schultz, as each began invading the other's brewing domains in anticipation of legal beer.

Gordon, with his wealth, power and ostentation, was as natural a target for Irey's tax-men in the East as Capone had been in the Midwest, and, according to some underworld sources, the Irey investigation was secretly abetted by Gordon's multitude of enemies. Through Lansky's brother Jake and others, the taxmen were quietly fed information and leads about Gordon's sources of income. In a number of private underworld meetings, the decision was made not to deal with Gordon by the old, violent methods, though some, especially Schultz, favored such action. To kill Gordon, the wiser counsel went, would only result in more bad publicity at a time when too many bodies were already littering the landscape, so the undoing of Waxey Gordon would be left to the Government.

But Schultz could not resist taking one last blast at Gordon, and in April 1933, he sent a crew of killers after the bootlegger. As they went in the door of Gordon's room at the Carteret Hotel in Elizabeth, New Jersey, Gordon escaped. Not so lucky were two of his aides, who were both gunned down.

Schultz's failure to get Gordon was his last chance. The Government's tax case had by then been fully developed and put in the hands of a young United States Attorney in New York. He was a small man with a mustache, an immense ego and outsized political ambitions, a small-town Michigan Republican who had become a Wall Street lawyer before entering public service. His name was Thomas E. Dewey. As a prosecutor of businessmen, financiers and industrialists indicted for financial peculations, Dewey was something less than brilliant; he seemed unable to convict prominent citizens. With gangsters, however, it was different. He seemed then a vengeful tiger with an instinct for the jugular. Within five months of his appointment as an Assistant U.S. Attorney in 1931, he did what prosecutors had been trying to do for years: convict Legs Diamond. Unfortunately, Diamond never served a day; while free on bond pending his appeal, he was murdered in an Albany, New York, rooming nouse, probably by the Schultz mob.

In 1933, Dewey was named interim U.S. Attorney and personally took charge of the tax-evasion case against Gordon. His presentation was masterful, replete with histrionics, self-righteousness and scorn. Gordon, he told the jury, had a real income in excess of $2,000,000 a year, was spending more than $6000 a year in rent, owned vast amounts of property, including several homes with lavish furnishings, spent money on innumerable luxuries and then had the gall to file income-tax returns declaring a net income of only $8125 a year. The jury was convinced. Gordon was convicted in December 1933, fined $80,000 and sent to prison for ten years. That was the end of Waxey Gordon as a major underworld figure. (Released just in time for World War Two, Gordon immediately got into the black market and ended up back in prison. When next on the streets, he returned to an occupation of his youth, pushing drugs, and by the late Fifties was back in prison once more.)

With Gordon out of the way, the next target for the IRS and Dewey was Schultz. This upset the Dutchman and gave rise later to his plaint that the cops were after him, that he was notorious only because his name fit the headlines; better he should have remained Arthur Flegenheimer. For by this time, Schultz was, indeed, a household name, constantly in the headlines as the Seabury investigation and others dug deeply into his racketeering and his relationship with politicians. But worse for Schultz, though he didn't know it yet, was the fact that he had also become a target for his sometime partner in the underworld.

The Dutchman had an unpopular penchant for trouble and violence. He had fought Gordon for control of the beer business in New York and New Jersey, while almost simultaneously warring with "Mad Dog" Coll, the young Irish killer and beer runner who had left Schultz in the late Twenties to form a rival gang. The struggle lasted about a year and filled the streets, alleys and rivers with bodies from both sides--nobody was ever sure how many, since the Castel-lammarese war was going on about that time and there were other internecine battles as well.

For a short time in the middle of the Schultz-Coll war, there was a truce, but only because Coll was out of commission. A car filled with his gunmen had roared through east Harlem prepared for a shoot-out with some of Schultz's troops in residence at a social club. Coll's men sprayed the area with bullets, hitting several nearby children and killing a five-year-old boy. That outrage finally compelled the police to intervene. Coll was picked up and charged with murder. His trial was something of a farce. Coll's lawyer, Samuel Leibowitz (who would win the reputation as the nation's most vindictive hanging judge when he sat on the county-court bench in Brooklyn), riddled and ridiculed the state's case and Coll won a directed verdict of acquittal.

But this was Coll's last hurrah. No sooner was he back in circulation than Schultz was after him. Coll's older brother, Peter, had already been gunned down on a Harlem street. Coll replied by shooting several Schultz hirelings. Schultz stepped up the attack and Coll went into hiding but was tracked down to a rooming house in Manhattan's Chelsea district. On February 8, 1932, he left his room to make a telephone call at the corner drugstore. Schultz's killers waited until he closed the door of the phone booth, then riddled it, and its helpless occupant, with submachine-gun bullets.

The Dutchman's victory was something of a disappointment to his underworld friends Luciano, Lansky, Costello and Louis "Lepke" Buchalter. For them, Schultz had become an object of concern and envy. His successes in battle and in capturing the Harlem policy racket made many fear that he would soon be casting eyes on their domains. Furthermore, they themselves were coveting the Schultz empire and would not have objected if Coll had eliminated the main obstacle to their taking it over.

When Coll failed, the next hope was the Federal Government. In the waning days of his Presidency, Hoover, pleased with the early successes of his Treasury agents, began to pressure them to go after Schultz as well as Gordon; and in January 1933, Dewey presented enough evidence to a Federal grand jury in New York to indict the Dutchman for failing to file tax returns for 1929, 1930 and 1931. In those years, the Government charged, his provable taxable income from bootlegging alone amounted to $481,637.35, and he was thus in arrears for $92,103.34, plus interest. It appeared to be an airtight case; the Government could not lose.

But Schultz was a different breed from Capone, Gordon and the rest. Where they had readily surrendered to authorities upon indictment and gone to trial, Schultz had new interests in policy, in restaurant protection and in breweries that needed his personal attention. That attention could best be given while he was a free man, so he went into hiding, at least officially. With the overt and covert assistance of bribed police and politicians, he managed to remain at large, even travel about, despite more than 50,000 wanted posters prominently displayed all over New York. He lived openly at a number of apartments around the city, receiving friends, associates and those public servants on his payroll, and he did not abandon his night-clubbing nor his regular visits to Polly Adler's brothel.

By mid-1934, nearly a year and a half after the indictments had been handed down (and by which time Republican Dewey was out of the U.S. Attorney's office and temporarily practicing law on Wall Street), Schultz's flouting of the law had become too blatant to ignore. Franklin Roosevelt's Secretary of the Treasury, Henry Morgenthau, put the heat on Federal and local officials. FBI director J. Edgar Hoover ordered his agents to bring in Schultz without delay, and New York's new reform mayor, La Guardia, who had ridden into office on the promise to "throw the bums out," directed his new police commissioner, Lewis J. Valentine, to get his men off their asses and after the Dutchman.

Schultz turned to his supposed friends for help, not suspecting the kind of help they really wanted to give him. At that moment, though, they helped him hide out and he offered to cough up $100,000 as a settlement if the Government would withdraw the indictments. Like his predecessor in the Hoover Administration, who had turned down a much more generous $400,000 offer from Capone, Morgenthau refused. "We don't do business with criminals," he said.

The search for Schultz intensified, and with the then-trigger-happy FBI involved, Schultz decided to avoid any confrontation. On a cold November day in 1934, he walked into the Albany office of United States Commissioner Lester T. Hubbard and said, "I'm Arthur Flegenheimer. I am under indictment in the Southern District of New York. I wish to surrender."

In the following months, Schultz, free on $75,000 bail, toiled at preparing his defense. The last thing his battery of lawyers wanted was a trial in New York City, where Schultz was notorious. La Guardia's campaign against the underworld and the continuing Seabury revelations had finally caused citizens to withdraw some of their tolerance toward glamorous gangsters. A change of venue was requested and eventually granted.

The trial was scheduled for April 1935, in Syracuse. The Government's case, built with diligence by Dewey and his staff before they returned to private practice, was handled by John H. McEvers, special assistant to Attorney General Homer Cummings. McEvers paraded witness after witness before the jury to lay out the details of Schultz's bootleg empire and the amounts of cash that flowed into it. There seemed little possibility that the Government would lose, particularly (continued on page 164) The Heat's on (continued from page 136) when Schultz entered no denials. His defense took only three hours to present. There was the startling admission that the Government was, if anything, understating his bootleg income. But, the defense contended, Schultz had not filed tax returns because his lawyers had told him he didn't have to, that income from illegal sources could not be declared for tax purposes. When this advice was proved wrong, Schultz claimed, he had made his offer to come across with $100,000. As he explained it outside court (and the jury was not unaware of the remarks), "I offered $100,000 when the Government was broke and people were talking revolution and they turned me down cold.... Everybody knows I am being persecuted in this case. I wanted to pay. They were taking it from everybody else, but they wouldn't take it from me. I tried to do my duty as a citizen--maybe I'm not a citizen?"

The jury debated for two days before coming back to court to inform the judge that it was hopelessly deadlocked, seven to five for conviction.

But the Government was not ready to give up. A second trial was called for July in the isolated Upstate town of Malone, near the Canadian border. Schultz arrived in town a week before the trial. At home, he was a miser. In Malone, he became a gregarious and extroverted spendthrift. He toured the bars and taverns every night, standing all the customers to free drinks. He made lavish contributions to local charities and went to major social events with the mayor, other politicians and prominent businessmen. An outraged local clergy, ranting about his corrupting influence, managed to get his bail revoked and he was lodged in the local jail, but he had made a deep impression on Malone and, according to rumors, had enriched a number of its influential citizens.

So a climate had been established. The trial was almost a replay of the one in Syracuse, and Schultz's attorneys informed the jury that he intended to "do my duty as an American citizen" and pay over the $100,000 he had offered, no matter the outcome. Again, the jury debated two days, returning to court to announce that it had reached a unanimous verdict. Schultz was not guilty. Federal Judge Frederick H. Bryant was horrified. "Your verdict," he told the jury, "is such that it shakes the confidence of law-abiding people in integrity and truth. It will be apparent to all who followed the evidence in this case that you have reached a verdict based not on the evidence but on some other reason. You will go home with the satisfaction, if it is a satisfaction, that you have rendered a blow against law enforcement and given aid and encouragement to the people who would flout the law. In all probability, they will commend you. I cannot."

The Schultz case was one of few failures that Government had or would have in prosecuting racketeers for tax evasion. Even the quiet man, Johnny Torrio, behind the scenes, fell victim to the charge in 1939 and wound up in Leavenworth. But Schultz, as in so many ways, was the exception.

News of the acquittal was received with considerable shock back in New York City, and not just by city officials. Schultz's underworld associates were also shaken. During the time since his surrender, they had been operating on the assumption that Schultz was finished and had begun cutting up his empire among themselves, with help from inside the Dutchman's kingdom. As Schultz's tax troubles and future prospects worsened, his senior lieutenant, Abraham "Bo" Weinberg, the man who kept the books and who knew intimately every business secret, had become increasingly restive. Schultz was drawing off large sums from his policy, protection and the other rackets to pay for his defense, and this did not make Weinberg happy. What particularly worried him was his own future once Schultz departed for good and his empire became spoils for the rest of the underworld.

He took his problem to his old and good friend Zwillman. To Zwillman he offered to open the books on all the operations and turn over the organization intact, thereby avoiding a war that would almost certainly shatter the empire he had worked so hard to build. In return, he wanted a percentage of the take and a job as overseer of the business, doing what he had done so long.

As a member of the national Syndicate and as a friend and partner of most of the other underworld leaders, Zwillman could not very well take over by himself. He took the Weinberg package to his compatriots and they grabbed it eagerly but still insisted on splitting it up: Zwillman got all the New Jersey interests; Costello and Lansky took the restaurants and protection; and Luciano, as de facto chairman of the board, was cut in for a piece of everything. As for Weinberg, he worked for the whole Syndicate, coordinating the Schultz operations, with Zwillman his contact man for the group.

It was all fine as long as Schultz was away and preoccupied with staying out of jail. But after his acquittal and return to New York, he was less than appreciative of the way his interests had been protected by his erstwhile friends. Initially, there was little he could do in the way of reprisal. Some of what had been seized was returned with the explanation that his friends had merely been managing it in his absence. Schultz had to buy this; he was still under constant harassment by La Guardia and Valentine and could hardly make a move without being picked up for questioning. So he began spending more and more time in New Jersey, cultivating his interests there. In New Jersey, he found himself potentially embroiled with Zwillman, who had become a major political and underworld power in the state, and again Schultz bit the bullet. The two had been longtime friends and business partners and Schultz still had hopes of moving into some new ventures in partnership with Zwillman.

But Weinberg was another matter. Schultz knew that his operations could not have been so quickly gobbled up and so efficiently run without the help of Weinberg. And Weinberg was not high in underworld circles, was not protected. One warm September evening in 1935, Weinberg left his office after a day's work, possibly to meet Zwillman. In any case, he was never seen again. The story goes that Schultz himself was waiting, put a bullet in Weinberg's head, his feet in concrete, his body in the Hudson River.

While the dispatch of Weinberg must have been personally satisfying to Schultz, it did not solve his problems. Nor did it permit him to reconstruct his sundered empire. He was now the prey of many and the traps were being set.

Former Federal prosecutor Dewey was setting one of them, as part of the cleanup drive that had been begun some years earlier with the formation of the Seabury commission. That panel's revelations had driven Jimmy Walker to exile in Europe, had created enough public disenchantment to propel La Guardia into the mayor's chair. But though La Guardia was mayor and his police commissioner, Valentine, was telling the cops, "I'll promote the men who kick these gorillas around and bring them in. And I'll demote any policemen who are friendly with gangsters," it took longer for the spirit of reform to infest the district attorney's office. To avoid any such contagion, Jimmy Hines had put up a candidate for D.A. named William Copeland Dodge--"stupid, respectable and my man," Hines said of him--and Dodge won narrowly. However, once in office, Dodge proved himself equally responsive to the demands of La Guardia, the press and the reformers and empaneled a special grand jury to investigate corruption, graft, policy and other evils. Then, of course, he refused to do anything about the evidence it uncovered. The grand jury gave up, but it wired Governor Herbert H. Lehman and demanded a special prosecutor, asserting that it was hopeless to work with Dodge. Lehman came up with a list of four prominent Republicans. One after another, the four declined. A fifth Republican lawyer, Tom Dewey, was suggested and he accepted with alacrity.

(continued on page 230)The Heat's on (continued from page 164)

Reactivated prosecutor Dewey moved into special quarters early in 1935. Working slowly and carefully with a staff of bright young attorneys and investigators, he began accumulating evidence. Schultz was of no special interest initially, because the Federal Government had him. But once he was acquitted in Malone, Dewey publicly announced that Schultz was his prime target. The rumor spread that Dewey was set to indict Schultz in connection with the restaurant rackets and that this case would be unbeatable. But there was another rumor, as well. Dewey, it was whispered, was gathering evidence that would put Schultz in the Sing Sing electric chair for the 1935 murder of one Jules Modgilewsky, sometimes called Jules Martin or Modgilewsky the Commissar, one of Schultz's restaurant enforcers with whom he had had a falling out. (A few years later, Schultz's sometime lawyer, close advisor and confidant, J. Richard "Dixie" Davis, then on trial for crimes growing out of the association, told the full story of that snowy March evening near Albany, how Schultz, with Davis watching, had pulled a gun in a hotel room and killed Modgilewsky on the spot.)

As the rumors spread, Schultz's underworld friends worried considerably. If Schultz were convicted and confronted with a long stretch in the penitentiary, would he take some of his friends with him in trade for a reduced sentence? Or would he, if acquitted again, declare total war to recover his empire? Either way, a living, breathing Schultz was a danger to everyone.

To make things worse, Schultz also was spouting the need to kill Dewey, proclaiming with nearsighted logic that Dewey's demise would solve his immediate problems and the future problems of others. Schultz even had a plan for the assassination and he turned to Albert Anastasia for help, asking Anastasia to stake out Dewey's Fifth Avenue apartment to see how easy it would be to get to him. Anastasia obediently did just that, but he did more. Concerned about the reaction of his friends at the top of the organization, he discussed the Schultz proposal with such rising young aides as Carlo Gambino, who did not take kindly to the idea of a hit on a prosecutor and convinced Anastasia to carry word of the Schultz plot to Luciano and the other leaders of the Combination. Such news was upsetting, indeed, coming so soon after the Syndicate had established firm rules against the killing of public officials and newspapermen. There was only one recourse. Schultz had to go, and the contract was given to the Lepke-Anastasia enforcement arm of the Syndicate. One of the top killers in the outfit, Charlie "The Bug" Workman, a longtime Garment District enforcer, was given personal responsibility for the job.

On October 23, 1935, Schultz went to a favorite hangout, the Palace Chop House and Tavern, in Newark. With him in a back room were two bodyguards, Abe Landau and Bernard "Lulu" Rosenkrantz, and the wizard of the numbers, Otto "Abbadabba" Berman. Late in the evening, Schultz left the table to go to the men's room. As he closed the door behind him, the front door of the Palace opened and Workman and another killer entered. On their way to the back room, one of them opened the men's-room door and shot the man at the urinal while the other fired at the men in the back room. A quick survey identified Landau, Rosenkrantz and Berman, but no Schultz. Then the killers went back to the toilet. There was the Dutchman--the first man they'd shot, simply as a precaution against an attack from behind.

Schultz lingered until the next day, received the last rites of the Catholic Church and issued a long and delirious soliloquy with such admonitions as, "Mother is the best bet and don't let Satan draw you too fast." Then he was gone. Six years later, Workman was arrested and tried for the murder. In the middle of the trial, he suddenly pleaded guilty and was sentenced to life in prison. (In 1964, he was paroled and returned to New York, a shy, quiet man. When last heard of, he had become a notion salesman in the Garment District he had terrorized so many years before.)

Upon the Dutchman's death, the detailed records he had kept in his miserly concern over every penny spent fell into the hands of the authorities. Dewey would use them and other evidence to prosecute the underworld's political allies. In the next four years, he managed to snare Davis, and then used him as a witness to land the biggest Tammany tiger of them all, Jimmy Hines, who ended up in Sing Sing for four years.

Moving against Hines and the political hacks of Tammany Hall was only one facet of the Dewey campaign that would put him in the district attorney's office, the governor's mansion and, twice, on the campaign trail for the White House. Once Schultz was gone, the next target of the special prosecutor was the chairman of the national crime Syndicate, Charlie Lucky. For years, Luciano had followed the examples of Torrio, Lansky and Costello and had lived quietly according to the principle out of sight, out of mind. Most of his troubles with the law had come early in his career. Twice he was deeply involved in narcotics, and that stigma would remain with him the rest of his life. In 1916, he had been arrested as a runner and sent to a prison farm. In 1923, he was arrested again by Federal narcotics agents, who trapped him with heroin in his pocket. He maneuvered his way out of trouble that time by directing the agents, in exchange for dismissal of charges, to a large cache of heroin in a trunk hidden in a basement closet on Mulberry Street in Little Italy. But from that time on, he remained clean, or as clean as a rising underworld overlord could ever be, his record dotted with arrests only for traffic violations, concealed weapons and bootleg counts, all of which were dismissed or nulled with small fines.

Even after the murders of Giuseppe Masseria and Salvatore Maranzano made him the most powerful underworld leader in the nation, Luciano remained a shadowy and slightly sinister figure about whom much was whispered and little was known. He was seen with beautiful showgirls, most often with the dancer Gay Orlova, making the rounds of the best midtown speak-easies. He enjoyed the best seats at major sporting events. Unlike most of his underworld associates, he never married, opting instead for a nomadic existence in the best hotels, from the Barbizon Plaza to the Waldorf Towers. His reputation was that of a sportsman, gambler, bootlegger, whose private clients inhabited society's upper strata and who often invited him to their golf clubs and parties.

Luciano had a growing reputation as one of the major underworld powers, but the true extent of his influence was little realized until he was singled out by La Guardia. As soon as he took office, La Guardia denounced Luciano as the city's leading hoodlum and ordered his arrest. He was, in fact, picked up by friendly cops but promptly released, because there were no charges on which he could be held. If nothing else, the arrest caused the kind of publicity La Guardia craved and Luciano detested.

After La Guardia's attack, Luciano became for New Yorkers something more than just another mobster, and after the murder of Schultz, he found himself in the middle of the spotlight. Dewey promoted him to the top of the list of those he was determined to send away. But it was no simple matter for the boy prosecutor to nail the underworld's board chairman. Unlike Schultz, Luciano was no maverick, running wild and on his own; instead, he was the complete organization man, a model corporate executive. The Italian underworld, the Unione Siciliana or the Mafia, for want of a better name, had been restructured under his command--for though theoretically he ruled but a single family, it was to him that all the families looked for guidance. By the mid-Thirties, there were many strata of managers between Luciano and the actual commission of crimes. Maybe Luciano gave the orders from his headquarters at the Waldorf Towers, in the Claridge Hotel, in a small midtown office on Broadway, in the back rooms of a dozen inconspicuous restaurants--but, like the dictates of any corporate executive, they filtered down through the chain of command before they were executed. To tie Luciano directly to any racket or crime seemed almost impossible.

The deeper Dewey's staff dug into the various rackets, from protection to numbers and all the rest in which they knew Luciano to be involved, the more hopeless the task seemed. Charlie Lucky had covered himself well.

As one promising investigation after another collapsed, a sense of frustration filled the special prosecutor's office. But late in 1935, one area began to show promise. Assistant District Attorney Eunice Carter had been given the thankless job by District Attorney Dodge of prosecuting the endless parade of whores picked up in the brothels and on the streets of Manhattan. Though she won few convictions--the magistrates' courts, where such trials were held, were perhaps the most corrupt in the city--Mrs. Carter observed some rather striking coincidences. On the witness stand, most of the prostitutes told almost identical stories, how they were poor working girls from out of town who just happened to be visiting a friend when arrested; they were all represented by the same law firms; if they were fined, the same bondsmen appeared with the money; and hovering in the background was always the same disbarred lawyer, Abe Karp, who was known to have close contacts in the underworld. Soon Mrs. Carter decided she was dealing not with free-lance purveyors of joyless sex but with a huge and tightly controlled organization. She took her suspicions to Dodge, who ridiculed them. But down the street at Dewey's office, she found a receptive audience. Dewey hired her away from Dodge and put her to work with two of his brightest young attorneys, Sol Gelb and Murray Gurfein (now a United States District Judge in New York), who soon confirmed that the whores were, indeed, organized. Wherever they looked, the same names kept reappearing: Ralph "The Pimp" Liguori, a smalltime punk who controlled scores of prostitutes and wielded more power than his reputation indicated; Benny Spiller, a loan shark who supplied money for defense and fines; Tommy "The Bull" Pennochio, a man with a reputation for at least some financial acumen, to whom much of the prostitution money appeared to flow; and a middle-level organization hoodlum named David "Little Davie" Betillo. For Dewey, Betillo was the key; he was known to be a member of the Luciano organization, though exactly how high up nobody was certain.

More and more Dewey staff members were assigned to the investigation. There seemed no doubt that a vast prostitution ring had been uncovered--Dewey would later estimate that it controlled 200 brothels throughout the city, employed 1000 prostitutes and grossed more than $12,000,000 annually. What the investigators were determined to prove was that the ring did not stop with Betillo but reached to the very highest echelons of organized crime and even to Luciano himself. As yet, there was no evidence of this and some doubt that it could be developed, for it seemed unlikely that anyone of Luciano's stature would deal directly with prostitutes, madams and pimps, any more than he would deal directly with underlings in any other racket.

But by early 1936, enough evidence had been developed to make an overt move. On February first, in coordination with Commissioner Valentine's special squads of police, Dewey's staff raided brothels all across the city, picking up more than 100 prostitutes, pimps and madams, and rounding up, too, Liguori, Pennochio, Betillo and others.

Once these low-level workers had been arrested, Dewey's investigators installed them in rented offices and hotel suites and began round-the-clock grillings. To those under questioning, it soon became apparent that they were of no concern to Dewey; he was after much bigger game--namely, Luciano. As potential witnesses, they were made some promises in exchange for a little testimony. If they would talk about the ring and about Charlie Lucky, all charges against them would be dropped, immunity would be granted and, once Luciano was locked away, they would find that their lives would take a sudden change for the better.

At first, Luciano himself displayed little concern over the stories that Dewey was out to get him or over the roundup of men like Betillo, Pennochio and Liguori, who had worked for him in a variety of enterprises. That they might be involved in prostitution did not seem unlikely. The combination of the Depression and the end of Prohibition had sent scores of middle- and low-level hoodlums scrounging for new sources of income. Some had gone into narcotics, others into prostitution and a dozen other illegal activities. But Luciano was certain that nobody could link him with these more-or-less-independent enterprises, for, he strenuously maintained, no such link existed--especially with prostitution.

So Luciano was less concerned over what Dewey's investigators might uncover concerning prostitution than with what they might come up with in other areas--or manufacture for the purpose of prosecuting him. Early in March 1936, these suspicions were confirmed when informers revealed to Luciano that some unspecified charges were about to be lodged against him. Luciano decided not to wait around to find out what kind of charges and, one step ahead of the detectives, he beat a hasty retreat to Hot Springs, Arkansas, an underworld sanctuary where he could relax, gamble and wait for things to cool off. Owney Madden and his paid-off politicians and police were supposed to see to that.

On April second, Luciano learned exactly what Dewey had in mind for him. A blue-ribbon grand jury in Manhattan indicted 12 persons for running the prostitution racket. Betillo, Pennochio and Spiller were, of course, among them. So was one Charles Lucania, as the indictment incorrectly read, charged with 90 (later reduced to 62) counts of compulsory prostitution. Dewey immediately announced that Luciano was Public Enemy Number One in New York and demanded his arrest on sight.

But Luciano was nowhere to be found. A Bronx detective in Hot Springs on another case was strolling along the Bath House Promenade when he came upon Luciano in friendly conversation with Herbert Akers, the resort community's chief of detectives. Word was flashed back to Dewey, who publicly demanded that Hot Springs and the state of Arkansas arrest Luciano and return him to New York for trial. Luciano was, indeed, arrested, but then released on $5000 bail put up by two of Madden's better casinos, the Southern and the Belvedere clubs. It was obvious he enjoyed the protection and the sanctuary of the city.

Dewey was incensed. "I can't understand how any judge could release this man on bail," he said. "Luciano is regarded as the most important racketeer in New York, if not in the country. And the case involves one of the largest rackets, and one of the most loathsome types of crimes." Embarrassed by the outcry, Arkansas governor J. Marion Futrell ordered Luciano's arrest. Once again, the racketeer was lodged in the Hot Springs jail, but there he was given complete freedom of movement, use of the telephone and rooms for private conferences with his corps of legal advisors, headed by a former Assistant United States Attorney named Moses Polakoff (who would provide legal counsel for a host of other top racketeers, including Lansky, in the years ahead). They decided to fight extradition and to counter Dewey's public pronouncements with some of their own. "Back of this action is politics," declared Luciano to reporters at a press conference. "I may not be the most moral and upright man alive, but I have not, at any time, stooped to aiding prostitution. I have never been involved in anything so messy."

There was a stalemate. As long as Luciano remained in Hot Springs, there was little chance of extraditing him, and he showed no inclination to leave. Dewey continued to press the governor and state attorney general Carl E. Bailey and Arkansas became the object of considerable national scorn. Eventually, Bailey ordered Luciano brought to Little Rock for an extradition hearing before Governor Futrell. The Hot Springs sheriff refused to honor the order. Finally, Bailey dispatched a troop of Arkansas Rangers with orders to storm the jail if the sheriff: wouldn't hand over the racketeer. The sheriff capitulated.

In Little Rock, Luciano tried another ploy to block extradition. One of his underlings offered Bailey $50,000 to permit Luciano to remain in Arkansas. It was a bad move. At the hearing before the governor, Bailey stormed, "Arkansas cannot be made an asylum for criminals. Officers of Hot Springs seem to have issued an invitation to criminals to come to that city, where they are told not to worry, that they will be given protection and that they will not be compelled to return to answer for crimes committed elsewhere. The money these criminals pay for protection is blood money, from their murdered victims and from women. We are trying to make it impossible for that class to spend its filthy money in Arkansas."

And so Luciano, handcuffed, was shipped back to New York, where he soon posted $350,000 bond and began planning for the trial. His battery of lawyers included Polakoff, George Morton Levy, one of the country's most respected trial lawyers, and Francis W. H. Adams, who had succeeded Dewey as United States Attorney in New York and who two decades later would become New York City's police commissioner. The trial, which lasted more than three weeks, began in New York Supreme Court in Manhattan on May 13, 1936. In the jury box were 12 substantial New Yorkers. On the bench was a socially prominent jurist and symbol of moral rectitude, Justice Philip J. McCook. Dewey, ever eager to enhance his own reputation, handled the prosecution himself.

The line Dewey would follow was set in his opening statement. "The vice industry," he asserted, "since Luciano took over, is highly organized and operates with businesslike precision. It will be proved that Lucky Luciano sat way up at the top, in his apartment at the Waldorf, as the czar of organized crime in this city. Never did Lucky or any codefendant actually see or collect from the women. Luciano, though, was always in touch with the general details of the business. We will show you his function as the man whose word, whose suggestion, whose very statement 'Do this' was sufficient; and all the others in this case are his servants."

And how was Dewey to prove this? During the three weeks devoted to the prosecution's case, he paraded 68 witnesses before the court. Forty were simple laborers in the vineyards of vice who had never seen or heard directly from Luciano, though they could point to Liguori, Pennochio. Betillo and most of the others as directly involved in the business. But they set a proper stage. They described the seamy story of prostitution, of being enticed into the ring, of being held almost captive in brothels, of being forced to turn over so much of their money to madams, pimps, doctors, lawyers and bondsmen, so that they considered themselves fortunate to keep $25 a week after servicing scores of men every day. They described how they were turned on to addictive drugs, which were then given or withheld as inducement to make them perform up to prescribed standards (and all declared that thanks to Dewey and his staff, they had received treatment and were now free of addiction).

At first, nothing implicated Luciano; and he sat relaxed at the defendants' table and chatted easily with reporters outside the courtroom. But Dewey had been painstakingly creating a picture of such misery and degradation that the jury was only waiting for the first mention of Luciano to believe anything said about him. That word came, initially, from an incorrigible thief named Joe Bendix, brought down from Sing Sing, where he was serving a mandatory life sentence for a career of robbery and burglary. Luciano, he declared, had personally offered him a job as a collector for the prostitution ring, had boasted of how he controlled it.

If Bendix gained yardage for Dewey, Cokey Flo Brown scored at least one touchdown. A prostitute, madam and drug addict, she suddenly appeared in court in a shabby, ill-fitting blue dress, worn shoes, disheveled dark hair, looking like a small, lost and defenseless waif who had been ill used by society. She had met Luciano, she declared, on a number of occasions, had been at one meeting with him when he asserted, "I'm gonna organize the cat houses like the A&P," had attended another when he told the whore-house managers to use strong-arm methods to bring the madams, bookers and girls into line. "First you got to sit on them," Cokey Flo quoted Luciano, "then you got to step on them. Talking won't do no good. You got to put the screws on." He had, she said, ordered the girls threatened, beaten, forced to use narcotics. The points Cokey Flo scored mounted when she would not be shaken under cross-examination.

And more points were scored by Nancy Presser, a faded belle who had entered the profession at 13, had risen to high-priced callgirl and mistress of Gordon. Schultz, Adonis, Masseria and more, and had at last fallen into the hands of Liguori, who had lodged her as a common laborer in a two-dollar Harlem Crib. Luciano, she asserted, was an old and close friend, and he had rescued her from this low point in her life, calling her one day and summoning her to his Waldorf Towers suite for the first of many visits. "When Charlie called me over, he'd give me a hundred dollars, but we'd just talk. That's all. We never went to bed." During her hours with Luciano in his bedroom, Nancy said that she had listened in on his conversations with Betillo and others about the prostitution ring.

If all this sounded somewhat unlikely, Dewey was prepared to demonstrate that Nancy was telling the truth. He led her through a detailed description of the Luciano quarters, including the furniture and the arrangements. But during cross-examination. Nancy's eye for fine detail proved to be somewhat astigmatic and her memory more than a little muddled. Her description of the suite was at considerable variance with its true arrangement ("She's not an interior decorator" was the way Dewey dismissed that problem). And then there was her testimony that she had entered and left the Waldorf Towers late at night on all her many visits without ever seeing any employees, without ever being stopped and questioned by anyone; she had just walked in, gotten on the elevator and ridden up to the 39th floor. That was surprising, since the hotel manager testified to the Waldorf's tight security arrangements; there was always somebody on duty inside the entrance and all visitors were checked and announced before being permitted to enter. And then, not only was Nancy unable to describe the hotel or the location of the elevators, she wasn't even quite sure where the Waldorf was, except somewhere on the East Side near Park Avenue.

Did this damage Dewey's case? Not at all. The jury and the judge seemed more concerned with the personal plight of Miss Presser than with what was being done to her story.

To some observers at the time, and to many who examined the court records later, the case against Luciano--if not against Betillo and the other codefendants--was beginning to emit an offensive odor. That odor became even ranker when Dewey led witness after witness into declaring that she had been threatened if she testified against Luciano, and the court, over strenuous defense objections, let those statements go into the record and the jury's ears. And it was ranker yet when Frank Brown, an assistant manager of the Barbizon Plaza, where Luciano had lived as Charles Lane, was called as a prosecution witness. He crossed up Dewey, declaring that he had been intensely interrogated by Dewey staff members who demanded that he identify photographs of the other defendants as frequent callers on Luciano. Brown testified that when he could not do so, one of the Dewey staffers "warned me about jail if I didn't tell the truth. There were three or four in the room. They were very insistent about my identifying the pictures. When I said I couldn't do it honestly, they threatened me. They hinted that Mr. Dewey was very powerful and could do as he liked."

But the blue-ribbon jury preferred to believe the testimony presented by the prosecutor and not the holes poked in it on cross-examination or the complete denial by Luciano. Indeed, Luciano turned out to be his own worst witness, being forced by Dewey to admit a life of crime and association with almost every notorious underworld figure in the country. If the jury retained any doubts, they were dispelled by both Dewey and Justice McCook. In his seven-hour summation, Dewey accused the defense of using every trick and "all their evil means" to break down the testimony of his witnesses because "they dare not face the truth." Luciano, he declared, had committed "a shocking, disgusting display of sanctimonious perjury--at the end of which I am sure not one of you had a doubt that before you stood not a gambler, not a bookmaker, but the greatest gangster in America." McCook drove the final spike, telling the jury that it did not need to find that Luciano had ever dealt directly with the prostitutes, madams or anyone else in order to find him guilty--only that he had in some manner received some of the proceeds of prostitution. And then, to show his own feelings, he concluded, "The crimes of which these men are accused are vicious and low and those who would aid and abet such crimes are not to be met in polite society."

Within six hours, the jury's verdict was in: guilty on all counts. McCook sentenced Luciano to 30 to 50 years in state prison, the longest sentence ever handed down for prostitution.

In what can only be considered an arrogant confession, Dewey afterward crowed, "This, of course, was not a vice trial. It was a racket prosecution. The control of all organized prostitution in New York by the convicted defendants was one of their lesser rackets.... The prostitution racket was merely the vehicle by which these men were convicted."

The question of whether Dewey suborned perjury to convict Luciano has never been resolved. Luciano himself maintained to the end of his life that while he was involved in many kinds of crime, prostitution was not one of them; that he had been framed by a prosecutor who could get him no other way. Luciano's statement may be self-serving, but some persons close to Dewey in those days have privately indicated that Luciano's contention is very close to the truth. Further, there are some pieces of circumstantial evidence supporting this. The witnesses who testified damagingly against Luciano were, indeed, well rewarded. Not only were the charges against them dropped and immunity granted but when the trial ended, Cokey Flo Brown, Nancy Presser and a couple of the others were sent, at the expense of the state, for indefinite vacations to Europe, returning only with the outbreak of the war. All would, a few years after the trial, declare in depositions obtained by Luciano's lawyers, that they had lied on the stand and that they had been prepared and rehearsed in those lies by Dewey's staff. The appeals courts, however, preferred to credit their original testimony and not their retractions.

Dewey could take pleasure in the way the case enhanced his own reputation, providing him a springboard to higher and higher office. And the city could take some satisfaction in the fact that the underworld's board chairman seemed to be out of commission, locked far away in Clinton State Prison in Dannemora, New York. Yet even from his cell, Luciano continued to rule, to give orders, to maintain his power. He left behind an efficient and powerful organization and he left it in the care of some very efficient managers--Adonis, who was the link with the Italian underworld; Costello, who lived in all worlds; and Lansky, who was the link between the national Syndicate and Adonis.

Vito Genovese might have been one of the heirs, but Don Vitone, as he was often called, had too many troubles of his own. As one of Luciano's chief lieutenants and already one of the biggest narcotics dealers in the underworld, he was next on Dewey's list for prosecution.

Ironically, what really spelled trouble for Genovese was a smalltime badger game. As Joe Valachi and others have detailed, soon after his return from a honeymoon trip to his native Italy--he had fallen in love with Anna Petillo and then murdered her husband so he could marry her--Genovese had been brought a supersucker by a smalltime punk named Ferdinand "The Shadow" Boccia. The sucker, a Brooklyn merchant, was lured into a card game with Genovese and a fellow thug named Michele "Mike" Miranda, who would later rise high in the Genovese underworld family. They took their victim for $60,000, then offered him a chance to recoup: They would sell him a machine for $100,000 that manufactured real ten-dollar bills. The idiot bought it and Genovese was ahead $160,000.

Then Boccia came around, looking for the one-third cut he had been promised for setting up the deal. Genovese, who sometimes made the penny-pinching Schultz look like a spendthrift, decided on a different payoff. He hired two hoods named Willie Gallo and Ernest "The Hawk" Rupolo to kill Boccia, which they did. Then he paid Rupolo $175 to kill Gallo. Rupolo, however, was unequal to the task, managing only to wound Gallo in two tries. Understandably put out, Gallo turned Rupolo in to the cops and then gave testimony that sent him away on a nine-to-20-year sentence.

This was all quite upsetting to Genovese. Dewey was after him on a number of grounds, and now he feared that Rupolo, in the solitude of his prison cell, might consider revealing the whole Boccia murder plot. Genovese decided to take a vacation. He packed $750,000 and some clothes in a black satchel, kissed Anna goodbye and boarded a ship for Italy, where he hoped to find sanctuary with the friends he had made on an earlier trip, friends who were high in Mussolini's Fascist regime. Genovese envisioned only a short stay, but he reckoned without world events that would extend his visit to 1945 and deprive Dewey of this trophy.

But the flight of Genovese was merely an annoyance; in 1937, the ambitious prosecutor, on the strength of his Luciano conviction, was elected Manhattan district attorney. With Luciano in the clink and Genovese in exile, Dewey set his sights on the next biggest gangster in New York, Louis "Lepke" Buchalter. But what would emerge from the Lepke investigation would surprise and shock not only ordinary citizens but even the most sophisticated law-enforcement officials. And it would add a new name to the American lexicon: Murder, Incorporated.

This is the sixth in a series of articles on organized crime in the United States.