ARNOLD ROTHSTEIN WAS DEAD. Gambler. Political fixer. World Series manipulator. Bootlegger. Fencer of stolen jewels. Fencer of stolen bonds. Protector of bucket shops. Garment district racketeer. Bookmaker. Racetrack owner. Casino operator. Real estate baron. Bail bondsman. Loan shark.
The public thought it knew everything about the Big Bankroll.
It didn't. It knew nothing about his biggest operation, which cost millions to fund, netted millions more in profits, was international in scope-and ruined thousands of lives in the process.
Meet Arnold Rothstein: founder and mastermind of the modern American drug trade.
It was nothing to be proud of, nothing to advertise. Gambling was a gentleman's pastime. One boasted of one's winnings and losses. Bootlegging? That was nothing to be embarrassed about. Everyone wanted booze. The only people excited about rum-running were hicks and politicians, who drank anyway. But drugs-and the people who trafficked in them-were dirty. As A. R. took pains to conceal his gambling background from Carolyn Rothstein or Inez Norton on making their acquaintance, he masked any and all hint of sympathy for the drug trade. "I know that Arnold's personal reaction to the narcotic drug habit was one of repugnance," his widow would write. "One day he caught one of his closest associates smoking an opium pipe, and he became quite angry. `Come on, get out of here,' he exclaimed. "If you're going to do that you'll have to move.' "
Carolyn had it all wrong. The Manhattan of Arnold's youth was rife with drug use. Opium. Cocaine. Morphine. Heroin. Opium dens, many in the narrow streets and back alleys of Chinatown and the Bowery, were commonplace. Stephen Crane observed in rather understated fashion how "splendid `joints' were not uncommon then in New York," estimating there were 25,000 opium users in the city. Many of A. R.'s associates had drug problems. Sidney Stajer was an addict as well as a peddler. Dago Frank Cirofici was high on opium when he was arrested for murdering Beansy Rosenthal. Cirofici's accomplice, Whitey Lewis, shared his addiction, as did Wilson Mizner. Bridgie Webber operated an opium parlor down on Pell Street. Waxey Gordon sold drugs before-and after-moving into booze, as did Lucky Luciano.
Arnold and Gordon pioneered the rum-running trade, earning big, quick profits. But almost immediately Rothstein abandoned the direct end of the business. The alcohol trade was just too complicatedeven for the Great Brain. The problem wasn't that it required tying up huge amounts of capital-A. R. was used to that. But bootlegging required warehouses and tankers and speedboats and convoys of trucks and bribes paid out-not just to cops but to custom agents, coastguardsmen, state police. Arnold was used to making or losing fortunes with nothing larger than a deck of cards, a pair of dice, or a wad of bills. How much easier to leave bootlegging's dirty work to the Lanskys and Schultzes. How much easier to profit from men's vices-not by importing a shipload of Scotch but a mere steamer trunk packed with opium, cocaine, or heroin, worth literally one million dollars on the street.
National prohibition of drugs preceded national prohibition of alcohol. In 1914 the Harrison Narcotics Act (named for its sponsor, Tammany-backed Congressman Francis Burton Harrison), banned the domestic drug trade, but obtaining narcotics abroad remained as easy as obtaining British Scotch or Canadian whiskey. Merely contact the big drug manufacturers in France, Germany, or Belgium, and you could obtain all the heroin or morphine you wanted. Stateside, particularly in New York, plenty of customers remained from when the stuff was legal-supplemented by new addicts accidentally hooked on prescription painkillers, primarily morphine.
And-oh yes-there was too much competition in selling booze, too much fighting over territory, too many killings. No one paid much attention to drug dealing-and that's how A. R. wanted it.
Rum-running provided Rothstein with experience in importing lucrative illicit substances, and thus A. R.'s first agent in bootlegging, exiled bucketeer Harry Mather, became his first agent in importing drugs. Soon, others-Dapper Don Collins, an old bootlegging associate, and Legs Diamond among them-traveled Europe in search of narcotics for their boss. But the primary source of drugs was China. There, A. R. dispatched henchmen Sidney Stajer; Jacob "Yasha" Katzenberg (like Mather, originally a booze buyer in Europe); and George Uffner, a veteran drug dealer and Rothstein flunky (who would be arrested with Fats Walsh and Lucky Luciano on trumpedup robbery charges, but in actuality for questioning regarding their boss's murder, just following A. R.'s death).
There was, of course, some infrastructure involved in the drug trade, the occasional front business. But that was the sort of operation A. R. relished, providing multiple opportunities for profits. Take, for example, Vantine's, an established and legitimate antiques firm. Rothstein used Vantine's primarily for narcotics smuggling, but also to actually sell a fair amount of antiques. When Fanny Brice purchased an elegant West 70s town house, A. R. displayed avid interest in her furnishings, insisting on selecting them personally-and charging her $50,000 for the service. An appraisal revealed they were actually worth between $10,000 and $13,000. Arnold was clearly still collecting interest on Nicky Arnstein's bail. Fanny paid without a whimper.
Sometimes Rothstein's drug connections were tenuous, but nonetheless intriguing. A still-unsolved murder case reveals how ubiquitous A. R.'s ties to everything crooked in the city could be. In March 1923, Ziegfeld chorus girl Dot King, known on Broadway for being regally bedecked and bejeweled by wealthy admirers, was discovered dead, chloroformed in her fifth-floor studio apartment at 144 West 57th Street. Some $30,000 in jewelry was missing, including a $15,000 ruby necklace and a diamond- and emeraldstudded wristwatch.
A. R. was her landlord. He controlled a string of upscale properties on West 57th Street, among them 144 West 57th Street. He also corresponded with the doomed Miss King and lent her money. It is not unreasonable to assume that she, a known drug courier, paid her debts by peddling narcotics for A. R.
Dot King's wealthy, married, and male friends included Philadelphia socialite John Kearsley Mitchell, son-in-law of the head of the prestigious Drexel Bank, and Draper M. Daugherty, only son of United States Attorney General Harry M. Daugherty. Mitchell was fabulously rich and the interplay between him and his embarrassedand even wealthier-in-laws fascinated the press, particularly since police found his yellow silk pajamas in the deceased's apartment.
Intriguing-but the Daugherty connection is more significant. Shortly after Dot's murder, someone (a someone young Daugherty knew but never identified) attempted to blackmail him regarding his relationship with the twenty-seven-year-old blonde. District Attorney Joab Banton and his chief assistant Ferdinand Pecora cleared Draper of any suspicion (they were good at that), and Daugherty fled to Mexico. When he returned a few weeks later, his wife had him declared an "inebriate" and committed to a Connecticut sanitarium. In June 1923, Daugherty escaped, climbed into a waiting car, and eventually found his way to Chicago.
By strange coincidence, Draper M. Daugherty, son of the Attorney General of the United States, worked for Arnold Rothstein's insurance company.
Yet another connection remained. The first name surfacing as a suspect in the case belonged not to Mitchell or Daugherty, but rather to shady former stockbroker Alberto Santos Guimares. Police wanted to question Guimares about a New Year's Eve party he and Dot attended at the West 52nd Street apartment of professional dancer and former vaudevillian Frank Barrett Carman. Also present was Mrs. Hugo A. C. Schoellkopf, wife of a wealthy Buffalo industrialist. That night Mrs. Schoellkopf would be robbed of $300,000 in jewelry, including one 201-pearl necklace, a 99-pearl necklace, and, not one-but two eight-carat diamond rings. To keep her silent, her robbers chloroformed her.
Mrs. Schoellkopf's three assailants included a former Arrow shirt model named Eugene Moran. Moran had worked with Legs and Eddie Diamond, riding shotgun on Long Island protecting A. R.'s Scotch shipments. Eventually, he became A. R.'s $1,000-a-week bodyguard. Moran and his associates disposed of the Schoellkopf loot through Broadway jeweler John W. Mahan-receiving just $35,000 for their haul. Mahan, in turn, fenced it through A. R. Eventually Moran's gang, as well as Mahan, were caught. Mahan returned much of the jewelry and no one dared implicate Arnold. Hapless authorities never connected Dot King's murder with the Schoellkopf robbery.
In July 1926, A. R.'s narcotics network suffered a major setback when federal agents raided a sixth-floor Walker Street toy-company loft and arrested two of his henchmen, longtime drug peddler Charles Webber and ex-police officer William Vachuda. Police seized $600,000 ($4 million street value) worth of heroin, morphine, and cocaine- 1,220 pounds of the stuff, packaged in five crates labeled "bowling balls and pins." The drugs originated in Germany and reached New York's Pier 57 aboard the White Star liner, Arabic. Officially they were to be transshipped to Kobe, Japan. Their real destination: the streets of New York. Rothstein quickly provided Webber and Vachuda with $25,000 bail each. When the duo stood trial in February 1927, he attended each session, and heard prosecutors allege that "from Feb. to Aug. 1, 1926, more than two tons of narcotics were introduced by this ring into the traffic of this country," figures that represented the bulk of the national drug trade.
The jury deliberated seventeen hours, while A. R. paced courtroom halls furiously. He had more at stake than bail money. The jury found Webber and Vachuda guilty. Federal Judge Isaac Meekins, a North Carolina Republican imported for the trial, threw the book at the defendants, sentencing Webber to fourteen years and Vachuda to eight, hoping to force them to implicate Rothstein. They didn't talk. Nobody ever talked.
In the drug trade, as elsewhere, Rothstein wasn't averse to betraying others to save himself. In July 1927, he dispatched Legs Diamond to suburban Mount Vernon, New York to sell a shipment of drugs. To curry favor with federal authorities on his own trail, he informed narcotics agent William Mellin of Diamond's activities. Then, to cover his tracks, A. R. provided Legs' $15,000 bail. Diamond discovered the double cross, but didn't seek revenge. Rothstein had something in mind to make Legs forget this unfortunate little incident.
In spring 1928, Rothstein obtained an unlikely but extremely valuable partner in the narcotics business, one as far removed from the Legs Diamonds and Sidney Stajers as possible. Belgian national Captain Alfred Loewenstein, "the mystery man of Europe," was the world's third-richest person, worth hundreds of millions of dollars. He owned eight villas in Biarritz alone. During the First World War, he reputedly offered to ransom Belgium from the Germans. He was rich enough to do it.
That spring Loewenstein, accompanied by a retinue of twenty, including his private pilot, a chauffeur, four secretaries, two typists, and a masseur, arrived in America. At an East 42nd Street hotel, surrounded by their respective entourages, Loewenstein, Rothstein, and Diamond hammered out what has been called "probably the biggest drug transaction in the country up to that time." Negotiations dragged on for hours, often disintegrating into heated arguments, with Diamond storming from the room and Rothstein acting as peacemaker. When Loewenstein flew to Montreal, Rothstein followed him by train. They returned together, and soon Loewenstein sailed for home aboard the Ile de France, promising a return that November.
Loewenstein's visit intrigued Nat Ferber, the New York American reporter who had uncovered Rothstein's Wall Street machinations. Ferber approached A. R., trying to bait him into divulging his secrets.
"What luck in Canada, Arnold?"
Ferber's simple question unnerved the normally cold-blooded Rothstein. "You're crazy! I wasn't in Canada. I haven't been out of New York. You're nuts."
"When weren't you out of New York?"
"Some day you'll get yours," Rothstein responded menacingly. "What are you up to now?"
Ferber drove in: "What are you and that bird Loewenstein up to? I saw you at Grand Central."
Mention of Canada increased A. R.'s unease; word of Loewenstein unhinged him. He shook as he spoke "[New York American editor Victor] Watson should feed you rat poison instead of that dope of his," he stammered.
"Can't you answer a civil question without going nuts?" retorted Ferber.
"That's not a civil question. Canada ... Loewenstein-who is Loewenstein?"
"What's not civil about my questions?"
"You never asked anything but a rat question in your life," A. R. sneered and stormed away. "Tell Watson to go to hell."
"The same to you, Arnold," Ferber shouted, "and remember me to your friend Loewenstein."
"You'll get yours."
End of conversation. But it's only where the story gets interesting.
At London's Croydon Airport at 6:00 P.M., July 4, 1928 Captain Loewenstein boarded a Fokker FVII monoplane headed for Brussels. As his luxury private airship crossed the English Channel, Loewenstein arose, placed a bookmark in his reading material, and walked to the plane's bathroom. Ten minutes later, his valet, Fred Baxter, knocked on the door. No answer. Baxter forced it open. A door leading to the outside was open, and the third-richest man in the world was ... gone.
But how? The bathroom door opened outward. Air pressure from outside the plane virtually prevented its opening. The Times described this experiment by officials at Paris's Le Bourget airport:
Two mechanics who tried to open the outside door of a [sim-
ilar] plane while the motor was running at full speed only succeeded in doing so by using their combined strength and then succeeded only in pushing it far enough open for one man to squeeze out with difficulty. They concluded that it was practically impossible to open such a door if the plane were flying at ordinary cruising speed.
So, of course, Loewenstein's death was ruled accidental.
Nat Ferber found the coincidence of Alfred Loewenstein's promise to return to New York in November 1928 and A. R.'s murder that same month highly coincidental. Ferber didn't support his theorizing with much; but, nonetheless, there remained a strong connection between the two deaths. Had Loewenstein been bankrolling a major Rothstein drug deal, and his death cut off that funding, A. R. would have had to dig deeper into already-badly-stretched resources to prevent the deal's collapse.
A. R. was smart, and most law-enforcement officials were dumbor pretended to be dumb. But by 1927, A. R.'s drug transactions were too big to ignore. Federal authorities, especially the ambitious newly appointed United States Attorney for the Southern District of New York Charles H. Tuttle, finally became aware that Rothstein was masterminding the nation's-perhaps much of the global-drug trade. "It became obvious to us in 1927 that the dope traffic in the United States was being directed from one source," he would say shortly after A. R.'s death. "More and more, our information convinced us that Arnold Rothstein was that source."
Tuttle didn't trust the men already assigned to the Narcotics Division's New York office. To nail Rothstein, he imported three topflight agents from Washington: chief narcotics agent James R. Kerrigan, Louis Kelly, and Rafael Connolly. Kerrigan trailed A. R., while Kelly and Connolly shadowed fifty-year-old Joseph Unger, a fellow twice convicted of burglary and boasting a criminal record dating back to 1893. Kelly, pretending to be a "Dr. Kelly," coincidentally kept registering at whatever New York hotel sheltered Unger and-by further happenstance-conversed obsessively with Unger about narcotics. The diminutive Connolly masqueraded as "Jimmy the newsboy" or "Jimmy the bellhop," two lads who, the more one thought about it, looked remarkably alike.
New York City police, never particularly vigilant or efficient in tracking Arnold Rothstein, were also investigating A. R.'s drug connections. In July 1928, police were poised to raid a narcotics ring operating out of the Hotel Prisament. They trailed Rothstein as he appeared headed for the establishment-and for certain arrest-but suddenly he began moving suspiciously. Three times his chauffeur circled the block as the cops initiated the raid. Only when the arrests were complete did he order his limousine to stop. But still he did not enter the hotel; he waited outside on the curb. When he saw cops escort three suspects-Samuel Stein, Abe Klein, and Harry Kleindownstairs, he returned to his car. Later that day he'd provide $6,000 bail for all three, not surprisingly since "Samuel Stein" was actually Sidney Stajer.
Just before Rothstein's death, Jim Kerrigan confronted A. R., hoping to bluff him into divulging information. Kerrigan warned Arnold of his involvement in the drug trade, listing numerous dealers he suspected A. R. of bankrolling. "Mr. Kerrigan," A. R. replied calmly, "you just tell me who is using my money for dope, and I'll cut them out."
Kerrigan didn't swallow the denial. "Some of these days," he continued, "you're going to die with your shoes on. You will if you keep this up."
"None of us knows how we are going to die," A. R. responded. "But if I'm ever knocked off that way, there'll be a terrible record left in New York."
If there was, Tuttle and Kerrigan weren't sure they would find it. In any case, their investigation had progressed sufficiently, so that when A. R. did meet his reward, they were among his more sincere mourners. Without a live Rothstein, they feared their promising case against the nation's largest drug ring would only remain promising.
Tuttle's men rummaged through the deceased A. R.'s West 57th Street offices, hoping to find something, anything of value. They found it, in the form of several neat bundles of papers. Now, hoping their discovery didn't leak out, they continued trailing and wiretapping A. R.'s surviving henchmen.
They were particularly nervous about New York City authorities and their proclivities for corruption. District Attorney Banton was at best an idiot, and, at worst, in league with every Tammany-connected crook in New York. The police weren't much better. On November 26, 1928, Assistant U. S. Attorney Alvin Sylvester phoned FBI Special Agent in Charge C. D. McKean. Sylvester wouldn't discuss anything over the phone, but revealed his concerns in person.
McKean wrote FBI Director J. Edgar Hoover:
It appears that the U.S. Attorney has had the opportunity of examining some of the papers taken from the safe deposit vault of the late Arnold Rothstein which, according to the U.S. Attorney indicate Rothstein's probable activities in the field engaged in the barter and sale of narcotics. The papers in question were taken by the District Attorney for New York County this afternoon and can, from this time on, be examined only upon court order. Assistant U. S. Attorney [John M.] Blake expressed lack of confidence at least, in the probable success of the County authorities' efforts to unearth the narcotics features of Rothstein's alleged activities, and for this reason intends to make an independent investigation on his own.
Blake already had four FBI agents directly assigned to his office working full-time on the Rothstein case, but wanted two more. Reluctant to intervene, McKean wrote Hoover:
The question of the inability of this Bureau to engage in investigations of violations of acts not specifically charged to it was called to the attention of Mr. Blake who thereupon stated that Rothstein 's activities were so universal in the criminal underworld that he had no doubt there would be unearthed in the proposed investigation evidence of violations of acts coming directly under our jurisdiction. This, however, seems to have been an afterthought when it appeared that there would be difficulty in the assignment of Agents of this office to undertake directly work involving a violation of the Narcotics Act.
Mr. Blake further stated that if Agents of this office were to work on the case he would prefer that they work independently of the New York City Police Department who, as you know from the newspaper publicity, has been devoting unusual efforts since the murder of Rothstein to the untangling of the mystery surrounding his death.
We do not possess J. Edgar Hoover's reply, but we do know that U. S. Attorney Tuttle persevered. In early December, his agents obtained confirmation of Nat Ferber's suspicions regarding the Loewenstein- Rothstein connection, unearthing documents linking the two mystery men. "The information cannot be officially released, but we have the facts," an anonymous federal official told the press. "Loewenstein and Rothstein were connected in the drug ring. Just how closely cannot be revealed now but if necessary we can prove it."
Assistant United States Attorney Blake wouldn't deny the leak: "I won't say a word on the Loewenstein phase of it now. But we have found evidence in the files showing that Rothstein was the financial agent for an international drug smuggling syndicate."
But nothing further was ever heard regarding Captain Loewenstein. The feds were after live prey Joseph Unger, now registered at East 42nd Street's Hotel Commodore as Joseph Klein (a.k.a. Joseph Meyers). On December 7, 1928, Unger left for Grand Central Terminal, boarding the Twentieth Century Limited for Chicago and checking two large steamer trunks with redcaps. From Rothstein's papers, Tuttle's men knew what they contained, what similar trunks being transported about the country contained, who sent them, and their destinations. They hurriedly hauled Unger's trunks from the baggage car, finding heroin, opium, and cocaine worth an estimated $2 million.
Rafael Connolly stayed aboard the Twentieth Century Limited, trailing Unger, but didn't dare attempt to seize his prey singlehandedly. At 11:00 P.M., as the train neared Buffalo, four heavily overcoated federal agents jumped on. Rendezvousing with Connolly, they rousted Unger from his lower berth and arrested him, seizing his notebooks and more drugs. In Chicago, federal agents raided the Hotel North Sheridan quarters of Unger's accomplice, thirty-year-old divorcee and former actress, Mrs. June Boyd, and seized another $500,000 in narcotics. From Unger's papers, feds learned of two more of A. R.'s former operatives, drug addict and dealer Samuel "Crying Sammy" Lowe and a Mrs. Esther Meyers, described by the New York Times as a twenty-year-old "lingerie manufacturer." They arrested both.
"This," pronounced Tuttle, perhaps forgetting the Webber- Vachula haul, "is the single biggest raid on a narcotic ring in the history of the country."
There was more to come. On the Jersey City docks, the feds seized $4 million in narcotics, packed in boxes labeled "scrubbing brushes."
"This seizure," said Tuttle, "is the second development in the plans which this office, in conjunction with the narcotics bureau, has made to destroy the traffic in illegal drugs in this city at the source.
"This seizure is a very large fraction of the drug supply of the biggest drug ring in the United States, and the papers we have seized, and the evidence we have in our possession indicate that Arnold Rothstein had to do with arranging the financing of this ring."
But suddenly the case lost steam-and defendants seemed to know it would. June Boyd appeared strangely unimpressed by her imprisonment. Transported from Chicago to New York's Tombs prison, she had other things on her mind. "Wait a minute, please," Mrs. Boyd implored her captors. "Where's the Woolworth Building? As long as I'm here, I might as well have something to tell the folks about."
Tuttle indicted Unger on four counts of drug trafficking and rushed the case to trial on December 21, a mere two weeks after his arrest. Had his trial proceeded, much would have been revealed about A. R.'s drug-running operations. It didn't. Joe Unger pled guilty the first day. Prosecutors thought he'd cooperate in their investigations. They were naive. "My life wouldn't be worth a nickel if I told," Unger admitted.
Then something even more puzzling happened. On December 27, 1928, chief narcotics agent Jim Kerrigan died at New York's Miseri- cordia Hospital. Official cause of death was an injury sustained raiding a Newark opium den back on September 28. Yet, the fortyone-year-old Kerrigan continued on the job until a week before his death. Surgery designed to relieve his pain revealed a condition "as if he had been kicked in the abdomen." Some said Kerrigan had been poisoned by drug dealers.
Why had the Rothstein case, once so incredibly promising, suddenly evaporated? The answer lies in the identity of a visitor from whom Washington U.S. Attorney Tuttle received just after arresting Joseph Unger: Colonel Levi G. Nutt, Chief of the entire Federal Narcotics Bureau.
If truth be told, Colonel Nutt didn't really want his men-or anyone else-rooting around in Rothstein's private papers. They contained too many embarrassing details, especially concerning Nutt's family and the Narcotics Division. A. R. had on his payroll Rolland Nutt, Colonel Nutt's son, as well as Nutt's son-in-law, L. P. Mattingly, and George W. Cunningham, federal narcotics agent in charge of the metropolitan New York district. In 1926 Rothstein had engaged both Mattingly and Rolland Nutt, each one an attorney, to represent him in tax matters involving his returns for 1919, 1920, and 1921, the last return being particularly troublesome-as it had caused an indictment for tax evasion. A. R. went so far as to provide both with power of attorney in these matters, and in 1927 the Treasury Department let Rothstein off the hook. Rothstein also lent Mattingly sums totaling $6,200. In Rothstein's practice any "loan" to a public official-or to anyone influencing public officials-meant "bribe."
That is what we know about A. R.'s relationship with Colonel Nutt and the Narcotics Bureau. We do not know what else Colonel Nutt didn't want anyone to see. But we may not be the first to pose such suspicions. In February 1930 a New York grand jury investigating local drug trafficking, publicly reported all the above informa tion about the Nutt family-as well as irregularities in the New York office of the Narcotics Division. The grand jury concluded that even though Mattingly and Rolland Nutt's actions "may have been indiscreet," it found "no evidence that the enforcement of the narcotic law was affected thereby." In Washington, others reached less sanguine conclusions. The following month, Colonel Nutt's superiors relieved him of his duties, demoting him to the Prohibition Division's Syracuse field office.
And so, a year and a half after A. R.'s death, his threatened "terrible record" had destroyed only a single crooked narcotics chief in far-off Washington. Colonel Nutt, it appeared, would be just about the only casualty resulting from the Big Bankroll's demise. George McManus was a free man. So was Hyman Biller.
District Attorney Banton conveniently ignored-and Tammany's Nathan Burkan carefully disposed of-any incriminating documents Arnold Rothstein had left behind. Banton and Burkan had made the world a safer place for the politicians, cops, and judges who had profited from acquaintance with Rothstein. At City Hall, at the Tammany Wigwam, at Police Headquarters, those whose nerves had frayed, whose brows had beaded with sweat, now slept like babes. The world would always suspect, but mercifully would never really know, the full scope of A. R.'s power. The System survived.
And then judge Albert J. Vitale gave a banquet.