"All I ever did was to sell beer and whisky to our best people."
--AL CAPONE, 1930
"I never did anything to deserve that reputation (Public Enemy No. 1),
unless it was to supply good beer to people who wanted it."
--DUTCH SCHULTZ, 1935
CHAPTER XVI
HEAT, WASHINGTON-STYLE
THE RISE AND FALL OF ALPHONSE CAPONE IS TOO WELL KNOWN to be retold here, but two of its more engaging aspects bear repeating in any biography of Arthur Flegenheimer; he had quite the same experience.
When John Torrio left Chicago in 1925 because some other delinquent types were firing bullets at him (and worse, hitting him), Capone built the nation's flagship racket empire into a $105-million-a-year operation fed by beer and bathtub gin, gambling holes, dog tracks, brothels, dance halls--name it. But while the streets were strewn with bodies in the process, Scarface Al enjoyed a splendid immunity from any serious prosecution. He did take a year in a Philadelphia jail on a contrived gun charge when enemy artillery was being rolled into place for him back home after the St. Valentine's Day Massacre. And he did stand an occasional bust by the Windy City cops which sometimes took as much as an hour or two out of a busy day. Otherwise, like Dutch Schultz running his beer monopoly and later his policy "business" in New York, Capone wasn't bothered much.
But then something happened in Washington--and we shall see, revealed here in all its glorious detail for the first time, that the same kind of bad luck would in time befall the Dutchman.
In Capone's case, the long journey down from the heights was set in motion in the spring of 1929 when Walter A. Strong, publisher of the Chicago Daily News, led a delegation of troubled fellow citizens into the presence of Herbert Hoover in the White House and begged for some relief from the seat of government.
The President, moved by the hair-raising tales his visitors had brought, summoned Andrew Mellon, Secretary of the Treasury, and asked if perchance the T-men might have the necessary weapons to break the Capone stranglehold on Chicago. Mellon turned the assignment over to Elmer L. Irey, chief of his Enforcement Bureau. Come winter, with nothing more impressive in the record than a tax case against the wrong Capone, Al's brother Ralph, called Bottles by his intimates, the Secretary called Irey in again.
"Mr. Irey," Mellon said, "do you know about President Hoover's medicine-ball cabinet?"
Irey said yes, he had heard about it, and Mellon went on:
"Well, when the exercising starts, Mr. Hoover says, 'Have you got that fellow Capone yet?' And when exercise is done and everybody is leaving, the last thing Mr. Hoover always says is, 'Remember, now, I want that man Capone in jail.'"
And so that man Capone went to jail.
This brings us to Arthur Flegenheimer again. Bear in mind that the first tax indictment against him was handed down in January 1933, and that a goodly portion of his long travail as a "fugitive" after that was spent in the friendly haven of his very own town. Now let's see what prompted the Dutchman---almost two years later--to give himself up and stand trial.
To begin with, you can throw out all of 1933 because New
York was still in the hands of Tammany Hall. It was rotten through and through, from the top down. It had a Police Commissioner, Jim Bolan, remember, who years later would swear under oath that while he had "heard" about Dutch Schultz he didn't know that the man was a big gangster except for some "newspaper talk" about him.
Now with the dawn of 1934 the flaming torch of reform, held firmly aloft in the grip of Fiorello LaGuardia, threw its cleansing light over the sin-drenched metropolis. The word went out to the furthest precincts: "Muss 'em up." The streets weren't going to be safe for the bad boys after that; on the newspapers, we were so carried away that overnight Sodom and Gomorrah-on-the-Hudson began to take on the look of a sleepy Amish village in Pennsylvania.
The rackets, of course, continued to thrive.
And Arthur Flegenheimer was still loose in the streets, surely passing a police precinct here or there on his rounds.
As the months wore on, Franklin D. Roosevelt's Secretary of the Treasury, the dignified, patrician Henry Morgenthau Jr., a New Yorker
himself, took to brooding about the outstanding tax case against the long-time fugitive only to find his repeated inquiries all leading down the same dead-end streets. Finally, on November 1st, he picked up the telephone and made two calls. One went to Mayor LaGuardia in New York and the other to J. Edgar Hoover, right there in the capital. Here, published for the first time, is the text of both those conversations, opening when LaGuardia picked up the first call with a cheerful, "Good morning, Mr. Secretary"--
H. M. Jr: How are you?
Mayor LaG: Fine.
H. M. Jr.: Mr. Mayor, I think you and I have got a
common interest in Dutch Schultz.
Mayor LaG: Yes.
H. M. Jr.: And I think I saw last week that you made a
statement that you're anxious to get him.
Mayor LaG: Yes.
H. M. Jr.: Now I've been told and I--I mean I feel I can
talk very frankly and confidentially to you.
Mayor LaG: Yes.
H. M. Jr.: That there's been a feeling between the New
York Police Department--
Mayor LaG: Yes.
H. M. Jr.: --and J. Edgar Hoover. And on account of that
there's been a crossing of wires. I don't know
whether it is true or not.
Mayor LaG: I don't think so--not on the top it may be down
below.
H. M. Jr .: Yes.
Mayor LaG: Because I talked to my Commissioner about
that and you see Edgar and I are very good
friends.
H. M. Jr.: I see.
Mayor LaG: And we worked together many years when I
was a member of Congress, so that the feeling
up on top is alright if there is any sabotizing
down below.
H. M. Jr.: Yes. Well now the point is the Treasury wants
this fellow.
Mayor LaG: Yes.
H. M. Jr.: And he's the last of the big gangsters that are
out.
Mayor LaG: Yes.
H. M. Jr.: And if there is anything we can do to work with
you I want to let you know that.
Mayor LaG: Why absolutely and and-
H. M. Jr.: But it's the Treasury that wants him you see.
Mayor LaG: --anything we can do to cooperate with
Department of Justice we'll do.
H. M. Jr.: Yes, yes. Well it's our own people--Elmer Irey
has been out for him now for about a year.
Mayor LaG: Yes.
H. M. Jr.: You know Elmer Irey?
Mayor LaG: Yes.
H. M. Jr.: And so if there is anything that the Police
Commissioner has or there is anything we can
do if you tell him that Elmer Irey is ready and
anxious to cooperate.
Mayor LaG: Well as long as you tell me I wish that either
Hoover or Irey would tell me frankly if there's
been any lack of cooperation in any way--
H. M. Jr.: Yes.
Mayor LaG: --so that I can straighten that out immediately.
H. M. Jr.: I see.
Mayor LaG: You see? Because I think it's a defiance not
only to the city but to the whole government
that this fellow is at large.
H. M. Jr.: No question about it.
Mayor LaG: But my hunch is that he is not very far from
this city.
H. M. Jr.: Yes. Well I'll ask Irey--I mean I can't ask
Hoover because he doesn't work for me but I'll ask Irey if he does feel there is any and if there is I'll call you again myself.
Mayor LaG: Will you please?
H. M. Jr.: Yes.
Mayor LaG: And you can tell me very frankly because
at the top it's alright. If there's any feeling then
it's down below and then I would suspect that
it isn't one of irritation or jealousy but one of
rather protecting this particular person.
H. M. Jr.: I see.
Mayor LaG: And I want to get right to it.
H. M. Jr.: I knew you would.
Mayor LaG: So don't hesitate to let me know.
H. M. Jr.: Thank you.
Mayor LaG: And is it alright if I talk to Hoover and tell him
that we've had this little talk?
H. M. Jr.: Well you could use your own judgment on that.
Mayor LaG: Yes because I want to get any little snag
eliminated and as I say some of these things
that I've observed I think that this gentleman
has very strong connections.
H. M. Jr.: Yes.
Mayor LaG: I want to break that down And if--anything
that Irey wants to talk to me, tell him to come
right in.
H. M. Jr.: I don't think it would serve any particular
purpose for the moment if you did talk to
Hoover but you--
Mayor LaG: Alright.
H. M. Jr.: --but you can use your own judgment.
Mayor LaG: Alright. I-I won't because this thing is
very very important.
H. M. Jr.: Yes.
Mayor LaG: And just let me know if there is anything you
want the whole--any part of the Department to
do and it will be done at once.
H. M. Jr.: Thank you.
Mayor LaG: Alright, Mr. Secretary.
H. M. Jr.: Good-by.
The next call went to J. Edgar Hoover.
Hello.
Hello, this is Hoover talking, Mr. Secretary.
H. M. Jr.: Yes, how are you?
Hoover: Fine, thank you, hope you're the same.
H. M. Jr.: Mr. Hoover, I think I can take a chance on
the telephone.
Hoover: Yes, this is the through wire--confidential wire.
H. M. Jr.: Oh. We're particularly interested in Dutch
Schultz.
Hoover: Yes.
H. M. Jr.: And I was just talking to Mayor LaGuardia and
told him that the [word missing] was that the
New York police really weren't very keen about
it, see?
Hoover: Yes. I've heard that same story.
H. M. Jr.: And he said whether I could substantiate it and
I said I doubted it.
Hoover: Yes.
H. M. Jr.: And he said that--well I've heard about some
jealousies between yourself and down there. I
don't know whether it is true or not.
Hoover: Yes.
H. M. Jr.: But just purely gossip.
Hoover: Yes.
H. M. Jr.: But--so he said anything that we could do or
he could do to let us know but I just wanted
to tell you personally as far as the Treasury is
concerned that that's the last of the big
income tax gangsters who are out and I am particularly interested in it myself.
Hoover: Oh, I am very glad to know that. We haven't
been making any first--what they might call
first-line drive on trying to find him because we
thought that naturally it was a matter the
Treasury would give its first attention to but, if
you would like to have us do so, I would be
very glad indeed to instruct our New York
office to just bring all pressure to bear on that.
We've heard a lot of unsavory rumors. They
may be without a scintilla of foundation. I
don't know.
H. M. Jr.: You say you have not been giving it particular
attention?
Hoover: No, that is we've only been looking for him as
we would for any other general fugitive.
H. M. Jr.: Yes.
Hoover: Because he was not one of the cases that
we've worked on and we've been looking for
some of these kidnapers primarily and have had
him more or less in what we would call the
secondary class because I assumed that the
Special Intelligence Unit were bearing down
themselves on it.
H. M. Jr.: Well they are.
Hoover: Yes.
H. M. Jr.: And--they are--but I don't--I just--and--
Hoover: Well, I-I really think, Mr. Secretary, that a
case of that size being as important we ought
to more or less pool our assets so to speak.
H. M. Jr.: That's the point.
Hoover: And everyone of us kind of just put our
shoulders to the wheel to try to find him.
H. M. Jr.: That--that's the attitude.
Hoover: And I'll be very glad indeed to see that that is
done at once. I'll see that our New York office
and we here will just put him down as kind of
Public Enemy No. 1 secretly so we can find him.
H. M. Jr.: Yes. I don't think the publicity on it will help
find him.
Hoover: Oh no, no indeed, I think the thing to do on
that case, from what I have known of it in just
a very general way, is to make certain
contacts and connections that can't be made I
think around New York because I think he is in
or around there.
H. M. Jr.: Yes.
Hoover: And do it very secretly and just out of a clear
sky if we can do so and be lucky enough to
just bring him in.
H. M. Jr.: Fine.
Hoover: And I'll be very happy to see that those orders
are issued at once here.
H. M. Jr.: Right.
Hoover: And bear down on it and see whether we can't
help out on that for you.
H. M. Jr.: Thank you.
Hoover: Be very happy to.
H. M. Jr.: Thank you.
Hoover: Thank you, Mr. Secretary.
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So now, at long last, the Mayor of New York and the all-powerful Director of the Federal Bureau of Investigation were going to put their heads and their crime-busting forces together and do something about the Beer Baron who had become overlord of the biggest policy operation in the United States, scattering some cadavers along the way. Now Fiorello LaGuardia was going to tell all his policemen that it was high time somebody brought Dutch Schultz in, and Mr. Hoover was going to risk a whole new wave of kidnappings and make the Dutchman his undercover Public Enemy No. 1 and get some of his lawyer-sleuths sniffing that trail.
It was as simple as that.
Dutch Schultz heard all about this, of course, since there are hardly any secrets in a democracy, and it prompted some brooding on two accounts: He could be bagged by the friendly New York cops and hauled before the courts and held in some outlandish bail or, maybe even worse, he could find himself staring into the popping barrels of some of those quick-shooting minions of J. Edgar Hoover. In July, the G-Men had cut down John Dillinger outside a movie house in Chicago and in August FBI guns had written the obituary for one of that miscreant's more formidable associates, Homer Van Meter. Both Dillinger and Van Meter had enjoyed the Public Enemy No. 1 designation before that swift brand of FBI justice had disposed of them.
On top of all this, the Dutchman had a subsidiary item to think about. Henry Morgenthau's evident insistence on bringing him before the bar meant that the very same man who had brought down AI Capone would now be on his tail. T-Man Elmer Irey once more had been armed with the kind of mandate that had produced such frightful results (11 years, $50,000 in fines and $30,000 in costs) in Chicago. On November 7, six days after the Morgenthau calls, Irey issued a nationwide directive on the subject of Arthur Flegenheimer. It said that the Secretary of the Treasury was most anxious for his enforcement people to bring that man in.
Always thinking, Schultz put some steam behind the idea that had come to him long before: offer the government $100,000 to buy off the case. After all, the indictment cited a tax deficiency of only $92,000 and change. An even 100 large ought to take care of that nicely if you didn't fuss over the penalties, no?
No.
The gangster's legal battery tried it on the lower echelons in New York, drew a whole series of blank stares, and then took the Congressional Special to Washington once again. That trip proved most unnecessary. The word that came down from the frosty Morgenthau, whose son Robert would later become the most effective United States Attorney in the history of New York's Southern District, was on the crisp side. "We don't do business with criminals," Morgenthau said, and somebody remembered that AI Capone, a bigger spender than Arthur Flegenheimer, had offered the Treasury $400,000 on the tax claim against him (a piddling $215,030.48) only to be turned down.
There was nothing left for Dutch Schultz to do except to come in and get it over with.
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