IT MIGHT BE SAID, IN ONE OF HISTORY'S MORE MARVELOUS ironies, that the man who put Dutch Schultz in the policy business was the same man who drove Jimmy Walker out of New York's City Hall into exile in Europe and set the stage for reform--Samuel Seabury. This is not as fanciful as it sounds, for one of the by-products of the Judge's three muckraking investigation's into official corruption, starting early in 1930, was a disruption of the numbers game that opened the door for the Dutchman's takeover.

What happened was this:

Poking around the Magistrates Courts because everybody knew that the lower bench was a resort where you could fix everything from a traffic ticket to a felony and there was a swinging door for gambling and vice arrests, the white-haired Seabury called in one of his top aides, Irving Ben Cooper, and said he would like to have a look at the policy racket. How big was it?

Well, the Harlem game simply reeked with prosperity--an oasis of plenty in the city's most depressed area. Everybody played it, even the masses on home relief, because you could bet a single penny and win $6. That had a sweet sound but in truth it was the worst bet in the world. You put up your penny--or nickel or dime or quarter or half-dollar--on any three-digit number up to 999. That made the odds 999 to 1 but the game paid off at the rate of 600 to 1, as prohibitive a house percentage as the greediest gamblers in all the ages of the wheel ever coveted. So the profits had to be staggering. The gross play in the major Harlem banks in 1931 was estimated at $35,000 a day and the rule-of-thumb figure for what the lucky players were getting back was $7,700, or about 25 percent. Hell, that other outlandish gyp of the time, the slot machine, or one-armed bandit, paid out closer to 66 percent.

Did anybody give a damn about a game like policy emptying the pockets of the poor? No. The numbers banks had run virtually unmolested, except for regular shakedowns by the police, much of the time since a white man named Al Adams introduced it to New York back in 1832. In Dutch Schultz's time just a century later, when the occasional honest cop hauled the small-fry runners and controllers into court some Magistrate invariably turned them loose for lack of evidence.

Irving Ben Cooper dropped a line into this rich stream and then decided to have a talk with two of the most prosperous Harlem bankers--Wilfred Adolphus Brunder and Jose Enrique Miro, known to his intimates as just plain Henry. This was quite a pair. Brunder was a West Indian who had abandoned a humdrum career as a shirt-waist maker to go into policy in 1923. He started with a day's play of $7.13--he liked to remember that figure--and ran it all the way up to $11,000 a day by 1930. Once, in 1927, he was busted and sent off to prison for four months, a sentence hardly calculated to disrupt his operation. When Cooper had him in, early in 1931, he happened to be burdened with bank books showing deposits of $1,753,342.33 between January 1, 1925, and December 31, 1930. Rather than see this vulgar display of wealth hashed over in public hearings before Judge Seabury and face a pending income tax rap as well, Brunder elected to withdraw to the sun-splashed beaches of Bermuda. On the way out, he turned his policy bank over to his top man, Joseph Matthias Ison, also known as Big Joe and Spasm (because his face did all kinds of tricks in Harlem's high-stakes poker games).

Miro, a Puerto Rican who was a common laborer before he discovered policy in 1926, suffered an embarrassment almost equivalent to Brunder's. The six bank books he admitted owning showed deposits of $1,111,730.08 between July 7, 1927, and December 12, 1930, with some pocket money turned up by the nosy Cooper pushing the total up to a tidier $1,215,556.29. Miro did testify before the relentless Seabury but there were so many contradictions in his recital that he found himself taxed with a charge of perjury. Fight or run? Miro decided to follow the example set by Wilfred Brunder, his biggest competitor. He selected the soothing climate of his native San Juan but first, like Brunder, he asked the same Big Joe Ison to mind his policy store while he was away.

This is where Dutch Schultz comes in, courtesy of Mr. Ison.

Big Joe, a West Indian, had toiled as an elevator operator and shipyard worker before breaking into policy as a collector in 1923. Now, eight years later, he had the best of all possible policy worlds--Brunder's and Miro's, that is--in his hands, but he ran into trouble in no time at all and found himself in business with the Dutchman.

There are, of course, two versions of what happened.

One came from Dixie Davis, who was the Babe Ruth of the policy lawyers at the time and numbered Big Joe among his clients. Davis said that Big Joe called on him one day, sort of upset, and complained that some gangsters, jealous of his unbounded prosperity, were trying to shake him down. Davis said he thereupon arranged for the distraught numbers banker to meet George and Bo Weinberg so that some orderly system of protection might be set up, say for $500 a week or so, and keep the creepier elements away from his door.

The other version, more graphic and a good deal more revealing, issued from Big Joe himself. He said he was standing on a Harlem corner one day when a car pulled up and an impressive-looking white man got out and said, rather firmly, "We're cops, get inna car." In the course of a ten-block ride up toward the Polo Grounds, home of John McGraw's Giants, Big Joe learned that his captor was a Mr. Bo Weinberg, built like a football linebacker but without the college-bred manner, and that his chauffeur was a Mr. Abe Landau, also a paleface. One of the things that impressed Big Joe about the earnestness of this pair was that Mr. Weinberg held a gun against his side all during the brief ride along St. Nicholas Avenue.

"There were threats made, telling me they were a couple of the boys, they knew I took over Brunder's business, and they are in it for their cuts out of the business," Big Joe said. "I told them I just started the business, I had no money and I couldn't consider what they were talking about. After the conversation they threw me out of the car and said, 'You go ahead and don't let us hear any more of this shit. We will give you a week to decide on this matter, and you will meet us on 145th Street and St. Nicholas Avenue at the Golden Grill.'" Big Joe said that was the incident which had sent him scurrying to his silver-tongued counselor. He said that Davis confided to him that Dutch Schultz was about to bring his vast organizational talents to the policy industry and "it would be wise if you would do the things I will suggest to you." He said that Davis then, quick like a fox, introduced him to George Weinberg, Bo's infinitely gentler brother, and that George proved to be just the man to see. George, bless him, could arrange all the protection Big Joe needed, and without any of that rough stuff--for $600 a week.

Mark it paid.

It was only a down payment, of course.

Abe Landau and the Weinbergs were Schultz men and Big Joe Ison, without quite understanding the enormity of it, was about to see his game converted into the pilot bank for the biggest operation of the Dutchman's career.

Within just a few months, the 40-year-old West Indian, coal-black and brawny, would be privileged to meet the new Caucasian master himself.

It seems that Henry Miro, refreshed by his self-exile in the Caribbean and no longer fretting over that Seabury thing, had come back and settled his tax problems with some ready cash and the kind of soft prison term the underworld calls a "meat- ball rap," or something so short a man can do it standing on his head. Out in the chill gray streets of Harlem again and a subscriber to the John D. Rockefeller Sr. maxim that the Devil makes work for idle hands, Miro called Big Joe and said he would like to have his bank back, please. Big Joe conveyed this dismaying intelligence to his attorney, Mr. Davis, who wasn't too thrilled by it himself.

The counselor said he would ask the brothers Weinberg to arrange a speedy powwow where all the principals could sit down with Mr. Schultz, whom he himself had never had the pleasure of meeting, and so it happened. The summit was convened in the East 98th Street apartment of Davis's plump brunette fiancee, Martha Delaney, later his wife until the arrival of the staggeringly beautiful Hope Dare, who was the former Rosie Lutzinger, out of the Ziegfeld Follies via a broken home somewhere in Iowa. Davis described the session this way when he elected, years later, to treat the readers of Colliers to his real true-life story:

It needs to be noted here that Arthur had taken no chances on any foolhardly show of resistance from his new business associates on that fateful night. Bo Weinberg, who did not have to lug his artillery very far because he had a penthouse in that same building, was on hand, taking up an awful lot of room, when the Harlem principals arrived. And when the Dutchman came in he was flanked by two other gunbearers, Lulu Rosenkrantz and the devoted Larry Carney.

Big Joe's own account of the session, recited from the witness stand in the trial of Jimmy Hines for "licensing" the policy racket and perhaps more instructive than Davis's ghosted effort in Colliers, included this quote from the Dutchman: "I am eventually going to take control of all the business." This is useful to the historian because it was happening during Schultz's shooting war with Vincent Coll. The Beer Baron had been quoted as saying, in the summer of 1931, that ''as soon as he gets the Mick off his back and gets rid of him, he wants to step into the numbers business and look to take it over," but here he was taking it over while the Mick was very much in evidence, big as life, armed to the teeth, and gunning for his old pal Arthur Flegenheimer. Thus it is apparent that when the Dutchman said he was "eventually" going to take over policy he was already satisfied that his own search-and-destroy parties in the Manhattan jungle would catch up with the Mick in due course and dispose of that particular nuisance.

This is the way Big Joe described the financial arrangements arrived at on that big night in Martha Delaney's place, after noting that the presiding officer had deposited a revolver on the kitchen table before calling the meeting to order:

"The Dutchman said that the business that Ison has from Henry Miro he will return it back to Henry Miro and that Henry Miro will establish his independent bank or his own bank, and that Ison should finance the bank for Henry Miro and he would draw a salary from that bank, and the end of a period of time, if there was any money made, he will get back a certain percentage from that bank."

Q. (by Sol Gelb, one of Dewey's assistants) What was your interest in the bank?
A. I was supposed to get a third out of it.
Q. What did Miro say?
A. He agreed to that.
Q. And you did too?
A. I did.

So now Big Joe had one-third of the Miro bank instead of all of it--and he was about to find out what it might be like to have one-third of his very own bank instead of a magnificent three-thirds, shrunken only by that trivial $600-a-week bite for protection. He was about to find it out because the worst Thanksgiving in all the festive seasons of the policy bankers of Harlem was just around the crooked corner.

Number 527 (five + two equals Lucky Seven, get it?), a long-time superstition play traditionally bet very heavily in the month of November (the eleventh month, so make it Seven-Eleven and a new pair of shoes for Baby), came in on Thanksgiving Eve. The Ison bank was hit for every cent bet into it on that day--and $18,000 on top of that. Ison happened to have that much on hand but thought it might be a good time to get the Dutchman to ante up some cash for a change. So he called J. Richard Davis and told him about that horrid 527 coming in and said he couldn't raise more than $7,000 toward the $18,000 shy, what with the high cost of overhead nowadays, and who would play in his game if he welched?

Well, J. Richard had told him to call anytime he had the shorts and, presto, in no time at all Big Joe found himself once again in Miss Delaney's manse down Central Park way, and Bo and George were there and after a while Mr. Schultz, in person, came through the portal.

Q. (by Sol Gelb, again in the Hines trial) What did Schultz do when he came in?
A. When he came in he took off his coat and sat down.
Q. Did he do anything else?
A. Rested his gun on the table.
Q. Yes?
A. And sat down. Then Davis said to him that "Ison has been heavily hit and he is negotiating a loan." And Schultz answered and said "Has he any securities?" and I replied and said "No, I had no securities." He says, "Well, I will loan the money that he requires on one condition, that I will take charge of the business and become a partner with him in the business and he will get one-third from the business in the future."
Q. What did you say to that proposition?
A. I told him I didn't think it was a fair proposition. That I thought fifty-fifty was about the best proposition of business, and he says, "That is all it is going to be," and I can't do any better with him.

The merger was concluded without further quibbling. The Chairman of the Board, Davis and the Weinbergs withdrew to another room and came back in a few minutes and advised Big Joe, now beginning to look more like Small Joe, that Mr. Schultz was prepared to advance him $11,000 toward that claimed $18,000 deficit of his, to be delivered by George Weinberg on a Harlem corner the very next morning. And that wasn't all. Counselor Davis found his voice and spoke as follows: "Well, Ison has been heavily hit. Now he is broke, and naturally we will have to see to it that he gets a salary from the business." And the Dutchman, the very model of the open-handed partner and employer in a moment when labor and management were at each other's throats all over the deeply troubled American landscape, readily agreed.

>From now on, Harlem's biggest policy banker was not only going to get one-third of the profits of his own policy bank (when the directorate deemed it to be making a profit, that is) but also a $200-a-week paycheck on the side. Big Joe was learning about class. Mr. Schultz had never even waved that heater at him.

Alas, a hitch quickly developed. While George Weinberg was on hand to supervise things with the help of another dependable Schultz hand, the beefy Big Harry (Harry the Horse) Schoenhaus, the Ison bank somehow failed to show any surplus available for profit-sharing. Weinberg and Schoenhaus were handling the cash, of course, and the emerging policy conglomerate had something of a bulging payroll in its other corporate ventures.

Now that might explain the streamlined bookkeeping to an outsider, but it left Big Joe somewhat bewildered when his entire share of the operation added up to the $200-a-week stipend his attorney had so thoughtfully suggested. Big Joe couldn't understand all this for a pretty good reason: his own trained eyes showed a profit of no less than $75,000 on hand (or somewhere in any event) for the first year in which he was in business with Mr. Schultz. His third should have added up to around $25,000. Where was it? He never saw anything like that.

In due course, Wilfred Brunder ran into this same depressing problem.

Quickly tiring of Bermuda (what do you do after you ride the bike down there, anyway?), this retired policy mogul slipped back into town late in 1931, staked the government to $44,784 in back taxes and penalties compounded by a mere 90 days behind bars, and then called up his old pal Joe Ison. Just like Henry Miro, he said he would like to have his bank back--and he heard some most disquieting news. "The game is controlled by one man now," Ison told him, "and that is a Combination headed by the Dutchman."

The dapper Brunder, an intelligent sort in his mid-thirties, still suave and nicely plump despite his brief ordeal with jailhouse food, didn't need too much elaboration. His next question was, well, couldn't he get something, any little something, out of the operation? Big Joe asked what he needed for walking-around money and the price agreed upon proved to be $100 a week, which is what Ison himself had been reduced to by then. Even this minimal arrangement collapsed within the month. Big Joe stopped paying and said he was sorry but henceforth Wilfred would have to do some work for his money. Wilfred wanted to know what kind of friendship that was and Joe said he ought to go and meet some of the new faces in the bank and see for himself.

The proud Brunder spurned that suggestion and shortly had a visit at his home from J. Richard Davis, whom he knew from the old days, along with Ison and one of the new faces--George Weinberg. Davis laid it right on the line. He told Brunder that if he wanted to get any loot out of policy he was going to get it only if he opened his own bank--under the Combination's auspices, of course. And if he opened it he would get a nifty one-third of the profits, just like Big Joe and Henry Miro. And he would get that fat $100 a week on the side. So Brunder, the man who had the know-how to salt away an admitted million and three-quarters in policy profits before Arthur Flegenheimer got interested in that business, joined the Combination in October 1932 and he was still waiting for his first touch of profit-sharing a year later. In this extremity, Brunder called Big Joe again and Big Joe took him down to Dixie Davis's plush law office at 1450 Broadway.

"Brunder is here in regards to his third, his money," said Big Joe.

"What money?" said the now-fleshy counselor.

Brunder made the long journey from Harlem down to that full-floor legal factory no less than nine times after that and the answer, with variations, continued to be, "What money?" Davis, however, did seek to reassure him. "All you have to have is a little patience," he said, always adding that he would see Dutch Schultz and find out what could be done. After a while, Brunder caught on and walked away from policy. The game simply wasn't what it used to be--for the bankers, that is.

It was no great loss. The Combination by this time had picked up a few other recruits in its branch operations, among them the Cuban delegate in policy, Alexander Pompez. A lawyer's son, Pompez came to New York as a stripling of 20 in 1910 and went to work as a cigar maker for $20 a week. In no time at all, he had his own business in stogies--and his own numbers bank. He got off the ground with a play of $600 a day, out of his cigar store, and ran it all the way up to a respectable $8,000 or $9,000. On the side, the handsome quadroon operated the Cuban Stars semi-professional base- ball team, dabbled in restaurants, night clubs and bars, and enjoyed a reputation as an elegant, suave and stylish member of the Harlem community. He was called El Cubano and he had everything going for him--until that Black Wednesday of 1931, the day in Harlem infamy which cost the assembled bankers something in the neighborhood of a quarter of a million dollars.

The Thanksgiving Eve play on the magic Number 527 in the Pompez bank was so extraordinary that he got hit for no less than $68,000. Burdened with his high standing in the community, Pompez undertook to meet his obligations down to the last dime. Short of some $8,000 or $9,000, he had it all paid and he wasn't looking for any co-makers when he found himself summoned one night to a basement rendezvous in the Cayuga Democratic Club in Harlem. Big Joe Ison was there but the hombre who did the talking was Solly Girsch, a thug of some note and a spokesman on this occasion for Arthur Flegenheimer.

Girsch, who had been known to carry a gun in certain delicate situations, suggested that for the future health of his operation Mr. Pompez really should buy himself some insurance, just like Ison. The Cuban was given two weeks to think it over. Even with all that time, he failed to think it over adequately, and so he had a visit from Solly Girsch and another rather intent Americano, and when nothing happened Bo Weinberg and Lulu Rosenkrantz dropped into his cigar store.

"The Dutchman wants to see you," the visitors said, suggesting that Mr. Pompez should sit down with Mr. Schultz at the earliest, like the following Sabbath, and just so there wouldn't be any mistake they dropped in on him that Saturday and drove him down to the home of J. Richard Davis's very own mother on West End Avenue. Presently, the Chairman of the Board arrived, with Lulu Rosenkrantz and Larry Carney to give some weight to his side of the table.

What's the matter you don't want to come in with me?" Schultz inquired in his soft-spoken, gracious way. "You think you are going to find a man with horns in his head?"

The answer proved unsatisfactory, so the Dutchman took off his coat, exposing the dependable old bargaining weapon in his waistband (.45 caliber), and got down to business.

"I hate a liar," he said, "and you are going to be the first nigger that I am going to make an example in Harlem, because I don't like nobody telling me lies. You promised to turn in your business and you has not done it [this is Pompez quoting Schultz], and we have been waiting for your business regardless. I don't care if you make a statement from here to the Battery to the Police Department. It ain't do you no good."

While Pompez could not quite remember the dishonored promise that had made him the first Negro candidate for the spot marked X, he was impressed nonetheless. Beyond that, he knew that he couldn't go squealing to the law. He too had employed J. Richard Davis as his barrister in happier days, so he knew that the law wasn't much of a factor in the town. And now Davis was in that very room and there was nothing coming from that quarter about the legal rights of Alexander Pompez in his present dilemma.

There was some further discussion nevertheless, and finally a dispute arose over something Pompez was supposed to have said to Henry Miro about fighting off the Combination and going back to the way things used to be in the good old days. El Cubano denied that he had ever said such a bad thing and a mobile unit was dispatched forthwith to bring in the Puerto Rican. Routed out of the sheets in the middle of the night and delivered to the scene with nothing under his Chesterfield but his rumpled silk pajamas, Miro had to stand for a dressing down in front of the whole company. The Dutchman, who didn't like him from an earlier script and often referred to him as "nothing but a smart Spick," called Miro some very bad names for reporting Mr. Pompez's position so carelessly.

And so in due course, like 5:00 A.M., everything was settled happily. That is, when Alexander Pompez headed back to Harlem he was a 40 percent shareholder in the new policy bank of Alexander Pompez with a salary of $250 a week on the side. And that wasn't all, no, sir; his new 60 percent partner henceforth would stand any and all losses in the business as they might, perish the thought, occur. The old class again, escalating.

Of course, there will always be people you can't do enough for, and the cigar-and-numbers impresario proved to be one of them. He simply neglected to turn in any of the proceeds of the new Schultz-Pompez bank and had to have a visit from Bo and Lulu, followed by a second meeting with his senior partner. It is even possible that somewhere along the way El Cubano was the beneficiary of some corrective treatment, like any wayward son, although he always denied that any- body had ever laid a glove on him in anger. In any case, Pompez found once again that he was dealing with some very high-type people. When he said that he had no receipts to pass along to the Combination because he was still scratching together the $8,000 or $9,000 shy from that bad Thanksgiving, the Dutchman arranged for George Weinberg to cover the shortage the very next morning so that everybody could start out clean.

George did that, of course, and while he was there he picked up the keys to the Pompez bank. There would now be a full-time resident manager on the premises from the front office, watching the small change roll in, and there would be no further trouble. Schultz was pleased the way things flourished off such a rocky start. "I wore Pompez out," he said.

There were a few strays left to be worn out at the time.

With the help of the "smart Spick" Henry Miro and a little side-of-the-mouth talk, another substantial operator named Marcial Flores, a West Indian, was brought into the fold, and then there was some prolonged bargaining with the only two Irishmen in policy. Edwin and Elmer Maloney had built up a snug little $5,000-a-day bank, snow-white down to the runners, and they weren't interested in protection or partners or anything. Stubborn types, they shook off the Schultz emissaries and when the tough talk started they put in a call to another Irishman, Jimmy Hines, who knew the people to deal with to get them a little breathing time. The Maloneys had to come into the Combination anyway, towards April 1932, although they did manage to extract a better deal from the Dutchman than any of the other bankers. The split was fifty-fifty and Elmer Maloney, the boss, always known thereafter as "Lucky Elmer" because he had held the Schultz legions at arm's length for more than a year and never even had to have his nose fixed, drew a salary of $300 a week (so did equal partner Schultz, naturally).

There weren't many worlds left to conquer after that, because the Combination now began to encounter Negro bankers who would rather fight than switch. Stephanie St. Clair, the one who sent that drop-dead wire to Schultz when he was expiring in Newark, furnished the most outstanding example of the resistance. In policy since 1923, Madam Queen happened to be anything but a shrinking violet. Back in 1930, she had protested bitterly to Samuel Seabury that she had paid out $7,100 in ice to the Sixth Division and kept on getting busted just the same; a lieutenant and 13 plainclothesmen were suspended over that breach of police etiquette. Now in 1932 the enemy for Madam Queen was no longer the dishonorable cops but the interloper from The Bronx, and she wasn't about to hold still for that kind of shake. Once she went before a Magistrate and demanded a bench warrant for the Dutchman and some of his helpers.

"It's Schultz's life or mine," said the lady from Marseilles. "Dutch's men know I am the only one in Harlem who can take back from their boss the racket he stole from my colored friends and they know I'm going into action. That's why he wants me knifed."

Nothing came of that, of course, and presently Madam Queen took her fight right down to City Hall itself. The interim Mayor, Joseph v. McKee, sitting in pending the election of a successor to the self-exiled Jimmy Walker, a victim of Judge Seabury's probings, had his police aide, Lieutenant James Harten, entertain the fiery visitor. Madam Queen submitted that the Dutchman planned to put her on the spot and what did the city of New York propose to do about it? Lieutenant Harten said he would alert the police of Harlem to see that no harm befell her at the hands of Mr. Schultz or any other ne'er-do-well.

Around the same period, the New York Age, a Harlem weekly, addressed itself to the white takeover of policy with something less than a violent show of anger. While deploring the loss of Negro control of the game and observing that not enough of the take was staying in Harlem, the Age paid a left-handed compliment to the new, centralized policy operation:

"This arrangement is said to have one good feature, however, and that is that it insures the players of getting paid off when they hit. Formerly, when the bankers were too hard hit on anyone day or succeeding days they either had to welch on payment of the hits or else go out of business. Now, it is said, with Schultz money behind the game the players are assured of payment."

One had to wonder less about this mild endorsement from a Harlem newspaper than about the New York Police Department. Did anything happen after the Age openly discussed the Dutchman's move into the policy racket? No.

Now let's see how well the business was doing.

The one who kept track of the incoming pennies of the Combination for Dutch Schultz was Big Harry Schoenhaus, no strong-arm type but perhaps the most educated man in the mob and therefore qualified for the post of Dutch Schultz's Secretary of the Treasury. A product of the Lower East Side, Schoenhaus had a whole year at Stuyvesant High School under his belt and some square employment after that. He put in 13-1/2 years as a Post Office clerk before his retirement in 1927 (he was a mere 33 then but there was $50 in his locker that belonged in one of the cash trays). Then he started dealing poker in cigar store games and playing the horses for a living, an item a probation report would deal with in years to come, as follows: "It provided an emotional release from the stifling and confining influence of the drab and impoverished existence of his childhood and held forth the possibility of quickly and easily acquired funds which might enable him to escape from that existence." Got it? Then we shall go on with this adventure in delinquency.

After a while, Harry the Horse evidently despaired of "the possibility of quickly and easily acquired funds" in the sport of kings and went into a little policy operation with a friend--George Weinberg, of all people--before the man from The Bronx turned his acute talents to the field. Big Harry was put in charge of the Combination's books because he had demonstrated a good head for figures in the Schoenhaus-Weinberg operation, even though he hadn't been able to make it come out ahead.

What follows is his daily rundown on the One-Penny Gold Rush in the assorted banks come the winter of 1932 when the Vincent Coll trouble was just a memory (London Chemists, phone booth, lead poisoning, DOA, February 9, 1932) and the business had the Dutchman's virtually undivided attention: