by Alix Kirsta
Insiders dismissed all this as self-important bluster. It was also a charade. When newspapers speculated on the identity of the political leader likely to be the power behind the gangs that ran the jail, Dodge responded disingenuously: “When I receive evidence that any politician has been behind the prison scandal, I don’t care who he is, I will act immediately to bring him to justice. I intend to prosecute whoever was involved, regardless of his position or station in life.” No one really believed him. Although the newspapers used only the carefully coded reference “prominent uptown politician” when mentioning who was allegedly behind the prison scandal, insiders knew full well that the politician in question was Dodge’s own mentor, Tammany leader Jimmy Hines. Although it was also common knowledge that Hines was Dutch Schultz’s as well as Joe Rao’s protector, no-one seriously expected Dodge to prosecute his own backer, financier and campaign organiser. The sabre-rattling continued. When Commissioner MacCormick assured Dodge he would eventually co-operate with the D.A’s office, despite Dodge’s “political label”, Dodge responded indignantly. “The mere fact that I happen to be a democrat gives no one the right to say that I am lacking courage to do my duty. There is no influence from any source that will stop me doing my duty.”
Soon, Austin MacCormick hit back. Speaking at Columbia University, he admitted: “There has been discussion of the raid on Welfare Island, and I am not going to dodge the issue. It was a carefully prepared, planned attack on something that seemed to call for that sort of treatment.” Revealing that he and David Marcus had planned the entire raid in advance, he delivered a clear riposte to the district attorney. “It has been said that we planned it just as a grand-stand stunt. I don’t care – it worked. If I am given a pail of garbage to empty I don’t take a teaspoon and empty it one spoonful at a time. I grab hold of the pail and dump it. I see by the morning papers that some people didn’t like my method. After all, some prisoners over there didn’t like it either. And this is just one step of a lot of spade work that needs to be done. The prison is still a potential volcano.”
The volcano continued to spew out hidden secrets. As mopping up operations continued on the island, David Marcus discovered evidence of more scams. These included a steady trade in visitors’ passes to the gangsters’ cronies, financial loans to inmates at an interest rate of upwards of 50%. And, with gambling an almost daily pastime, Rao’s and Cleary’s chief enforcers were found to have controlled all the games, creaming off 10% from the takings, a proportion of which was delivered to their protectors in Manhattan.
Meanwhile, searches of the island’s terrain turned up more stashes of hidden drugs, proving how easy it had been for outsiders to drop these from Queensborough Bridge overhead, or for prison visitors smuggling in supplies to hide them in an agreed spot. Marcus found that there had been strong police backing for the gangs’ activities, backing which allowed Rao and Cleary to take control of the prison from within, demote the keepers and run it themselves. It became obvious that since by far the major crime committed on the island was drugs trafficking, the case would come before a Federal, rather than a State grand jury: the case might even be dealt with by both authorities. Lack of confidence in D.A Dodge led for calls by some city officials to Governor Lehman to refer the case to the office of the Federal Attorney and to supplant Dodge with a special prosecutor to take on this case.
The issue of prisoners buying early parole raised its head again. It emerged that a 1932 special survey of prison conditions at Welfare Island, carried out by the Society for the Prevention of Crime, contained sworn statements from two former prisoners originally given sentences of several years but who served astonishingly short terms. The men admitted having bought their paroles and were prepared to name names.
In signed affidavits, Raymond Norman and William Green claimed that even in 1932, there was a brisk business on the island in early paroles. “When I first went inside, new inmates were approached by trusties and told that getting a parole can be done by going to see a gentleman named Jimmy Hines who lives at 292 Manhattan Avenue,” said Raymond Norman. His friend William Green, who served only three months of a three year prison sentence, confirmed this: “I was told by the tier men that I could get time taken off my term of imprisonment. That it could be arranged through outside friends with Jimmy Hines,” he said. The society’s investigation heard confirmation of Green and Raymond’s story from many other paroled prisoners all of whom refused to sign sworn statements for fear they might be re-arrested and taken back to prison.
The men’s statements did not surprise David Marcus, who had long suspected Hines was the power figure behind the island scandal. He also realised that Rao, for all his power and privilege on the island, was ultimately a puppet whose strings were pulled by Hines to ensure his own enrichment. Eager to get Joe Rao to shed more light on his dealings with Hines, Marcus discovered that Rao had sunk into a deep depression and refused to talk to anybody. He was placed on suicide watch under constant guard. When the medical director Dr Louis Berg visited him, Rao, convulsed by tears, managed only to say, between sobs: “What have I got to live for?” and threatened to go on hunger strike. Rao however was more useful alive than dead. His belt was taken from him, and Berg warned staff that he was a serious suicide risk. Rao’s wife, who used to have a special pass allowing her to see her husband as often as she wished, was now denied access.
On February 1st, Rao was summoned to appear in court in Manhattan as a character witness for an inmate who had been charged with committing a prison murder the previous year. Heavily guarded and shackled to a warden to prevent him fleeing or attempting to kill himself, Rao’s voice, from the witness box, was so weak and indistinct that his answers had to be repeated several times for the court stenographer. He appeared pale and nervous, his black hair slicked back, his slight moustache and sideburns carefully groomed. He also gave some insight into his status at Welfare Island, admitting that the keepers habitually sought his help in trying to keep troublesome prisoners quiet.
Throughout the following weeks and months, New Yorkers waited eagerly for news of prosecutions, wondering who would be brought to trial. Although dozens of prison staff were promptly sacked or suspended, publicity chiefly surrounded four men held primarily responsible for neglecting their duties and disobeying prison rules. They were Head Warden Joseph McCann, his deputy Daniel Sheehan, the prison’s medical director Dr Abraham Norman and the head keeper, Louis Rehberg, who had allowed gambling and drinking among inmates while on his regular night shifts. All these officials had been suspended, and now faced secret departmental trials. Dr Norman and Louis Rehberg resigned, but deputy Daniel Sheehan died unexpectedly from a stroke on February 18th, while awaiting the verdict of his trial. His superior, Joseph McCann, was later indicted on criminal charges and put on trial: an eventual guilty verdict however was overturned on appeal, when prosecutors failed to prove that McCann had committed criminal acts as opposed to breaching prison rules and regulations. Ultimately, the most damning outcome of the grand jury hearing into the events at Welfare Island was when their report blasted the prison structure’s “antiquated structures, some of which are firetraps and all of them inadequate for the prison’s 1,700 inmates.” The real criminals, the report concluded, were the people in charge of the city of New York. “Were it possible for us to do so, we would bring in an indictment for gross negligence against the city for continuing the penitentiary in the face of defects in the physical condition of the buildings known to the governing officials of the city for upward of fifty years.” The grand jury demanded of Mayor La Guardia to increase the number of wardens from 100 to 150, and for his administration to “see that the deplorable conditions…. will be remedied as speedily as possible.”
La Guardia needed no persuasion. Backed by the mayor, Commissioner Austin MacCormick put pressure on developers currently building a brand new prison complex, with modern facilities on Rikers Island upstream from Welfare Island. This new complex, which remains New York
’s principal prison to this day, was hailed as a shining new 20th Century model, and soon opened for the transferral of prisoners from Welfare Island and elsewhere. In addition to its high levels of security, strict safety, hygiene and healthcare standards, the new prison was to be run according to MacCormick’s reformist principles. From now on, minor offenders would be incarcerated separately from hardened and violent criminals, drug addicted and sick prisoners were to be segregated and specially cared for, and a new priority was meeting the needs of young offenders who were to be rehabilitated and prepared for their return to the outside world. The days of Welfare Island were numbered. Fifty remaining inmates were transferred to Rikers Island by early 1936: thereafter, the 110 year-old building was demolished.
Despite District Attorney Dodge’s assurances that he would prosecute “senior figures” behind the Welfare Island scandal, no such prosecutions occurred, and the public image of District Leader Jimmy Hines remained unblemished. However, other authorities were newly motivated to hunt down Hines’s associate, Dutch Schultz, currently on the run from Federal charges of tax evasion. At the beginning of 1934, the FBI’s J. Edgar Hoover declared Dutch Schultz “public enemy number one”, and New York’s new deputy police commissioner Chief Inspector Lewis Valentine, a blunt speaking tough-on-crime crusader, ordered his most experienced plainclothes detectives to concentrate on locating Schultz. Under the pro-Tammany regime, these detectives had been demoted and transferred to low crime areas because of their reputation for hounding members of Schultz’s mob. Now back in plain clothes, these policemen were promised “special recognition” if they arrested the mob leader.
1934 therefore kicked off with a string of police crackdowns on organised crime, especially the illegal “numbers racket” which had turned Dutch Schultz and his protector Jimmy Hines, into multi-millionaires. There were frequent late night raids on illegal gambling venues, policy gang headquarters, private apartments and other underworld haunts in Manhattan, Queens, Brooklyn and the Bronx. The raids, often carried out by several hundreds of extra police - one notable operation involved a squad of four hundred detectives - culminated in mass round ups and arrests. Alone in the first three weeks of February 1934, this concerted drive to flush out the criminal community resulted in 898 arrests, 111 convictions, and 712 pending cases. A quarter of a million betting slips from the illegal numbers racket had been collected as evidence. Despite this, the majority of these cases, like hundreds more that followed, were eventually thrown out of court, presumably at the behest of district attorney Dodge. A memo from Mayor La Guardia’s office showed that between February 1st and September 1934, 91% of gambling cases brought by police never even came to trial and of those that did, one third ended in fines usually below $50. Although many of those arrested were part of Schultz’s organisation, the Dutchman remained at large.
Outside the murky confines of district attorney Dodge’s office however, other prosecutors were determined not to let Schultz or Jimmy Hines drift off the radar. The Federal authorities, including the Internal Revenue Services (IRS), which had successfully prosecuted Chicago gangster Al Capone for tax evasion, now turned their attention to New York gangsters like Dutch Schultz. The U.S Attorney’s office under George Medalie, and his chief assistant, Thomas Dewey, was eager to co-operate. Thomas Dewey - who had shared an office with Welfare Island crime-buster David Marcus - had been investigating organised crime for several years, and his ultimate goal was to smash Schultz’s racketeering empire, bringing down the gangster’s Tammany fixer with it. Dewey’s boss and mentor George Medalie shared Dewey’s determination and the two prosecutors set about collecting vital, major evidence of Schultz’s activities and connections.
Buoyed by his successful prosecution of numbers of racketeers for tax evasion, Dewey prepared a tax evasion case against Dutch Schultz which led to Schultz’s indictment in 1933. After the charges were filed, Schultz went on the run and, with Jimmy Hines’s help, managed to lie low. As the Federal investigation intensified, in November 1934 Schultz turned himself in in Albany in upstate New York, believing he would receive more lenient treatment outside his home town. He was tried in nearby Syracuse in April 1935: the trial resulted in a hung jury. At his second trial that July, in the small upstate town of Malone, he was acquitted. An outraged Mayor La Guardia denounced the verdict as a disgraceful miscarriage of justice, and told the press: “He won’t be a resident in New York City. There is no place for him here.” To which Schultz responded: “So there isn’t room for me in New York? Well, I’m going there. Tell La Guardia I will be home tomorrow.”
By that time, New York Governor Lehman had appointed Thomas Dewey to be New York’s Special Prosecutor whose brief was to concentrate solely on the investigation and prosecution of racketeering and other organised crime. Dewey’s newly created post had come about when a so-called “runaway grand jury” investigating gang related crime, rebelled against William Dodge’s inefficient and interfering methods, including his withholding of evidence concerning Dutch Schultz’s rackets, that should have been presented to them. The indignant grand jury members demanded the instatement of an independent prosecutor with broad powers to investigate organised crime, enabling them to do their job properly. Dewey’s new department, run separately from the D.A’s office, was granted extraordinary power and resources: his team included twenty assistant attorneys, ten investigators, and many other employees. The New York Police Department put over sixty of their officers at Dewey’s disposal. Governor Lehman authorised the creation of a special grand jury to hear Dewey’s cases and appointed Philip McCook, a close supporter of La Guardia, as judge. And so New York’s mightiest battle against modern organised crime began. Free from interference by Tammany appointed officials, Dewey continued the pioneering investigations begun by Judge Samuel Seabury several years earlier, and vowed to bring key members of the underworld to justice.
Chapter Seven - The Net Closes In
Dewey went on to win convictions and long prison sentences for loan sharks, illegal gamblers, and racketeers in the restaurant business and the waiters’ union. His successful 1937 prosecution of “Lucky” Luciano on charges of running a prostitution ring, made him a national hero and he was elected Manhattan District Attorney at the end of that year. However, while putting Dutch Schultz behind bars remained Dewey’s biggest dream, events soon forced him to redirect his efforts elsewhere. When Schultz returned to Manhattan in August 1935, news of Dewey’s probes into racketeering, including his own ventures, began to infuriate him. Afraid the net could come down on his gambling empire, the paranoid mobster started brooding obsessively about Dewey. Soon Schultz was planning vengeance against the man responsible for bringing tax evasion charges against him, and now digging into his business affairs. Recognising Dewey as his nemesis, he decided the prosecutor must be removed, and concocted an elaborate assassination plan: ordering his men to shadow Dewey night and day and note his daily routine, a suitable time and venue for the murder was eventually decided upon.
Before putting the plan into action, Schultz called a meeting with the six leaders of the “National Crime Commission”, the mafia syndicate, anticipating their support. Instead, the commission voted against Schultz’s plan, deciding that however much they feared and loathed Dewey, his murder would only shine a greater light on their activities, causing more problems than it would solve. Enraged, Schultz shouted: “I still say Dewey should be hit, and I’m going to do it myself.” Hearing him brag that he would murder Dewey within the next forty-eight hours, the alarmed syndicate leaders realised that he was out of control, and mentally unstable enough to carry out the threat. The top brass decided he had to be stopped. On the evening of October 23rd 1935, a car carrying several members of Murder Inc., the national crime syndicate’s assassination division, pulled up at the Palace Chophouse in Newark, New Jersey, where Schultz was holding a meeting with his lieutenants. The hit man strolled into the restaurant and swiftly gunned down Otto ‘Abadaba’ Berman, Abe Landau, a
nd Lulu Rosenkranz, finishing off Dutch Schultz as he came out of the men’s room. Schultz, who lingered on in a coma, died in hospital three days later, without naming his assassin.
In the eighteen months following Schultz’s murder, Thomas Dewey went on to indict surviving key members of his gambling racket, which was now being run by Richard “Dixie” Davis, Schultz’s lawyer who was also a close associate of Jimmy Hines. Davis was tried and convicted of running a racket in 1937, and, having been disbarred, agreed to co-operate with prosecutors in return for a relatively lenient sentence. Eventually the stage was set for what the press hailed as New York’s “trial of the century”. Waiting to appear on the witness stand was a cast of underworld characters led by Jimmy Hines, who in May 1938 was arrested and indicted, with eight other defendants, on thirteen counts of conspiracy to run and promote Schultz’s numbers racket. Hines’s eight co-defendants included George Weinberg, Schultz’s business manager and brother of the gang’s chief hit man Bo, whose disappearance Schultz had engineered several years earlier. An eerie presence hovered, like Banquo’s ghost, throughout the proceedings: it was Dutch Schultz.
Dewey and his team had built an impressively solid case against Jimmy Hines, who was by then aged 62 and an unlikely looking villain with his white hair and genial yet unassuming manner. George Weinberg, the principal go-between for the Schultz organisation and Hines, told the court he had first met Hines in 1932 when he was ordered one night to pick up the politician and take him to a conference in Schultz’s apartment. There Schultz told Hines he wanted protection, in particular an assurance there would be no arrests of the top men in his policy operations and a guarantee that any cases involving his men would be dismissed if they reached the magistrates’ courts. When Hines assured Schultz he would take care of all that, the gangster handed $1000 to Hines, and then instructed Weinberg to pay Hines $500 a week and “any other reasonable amounts up $1000.” These weekly payments continued from 1932 until the end of 1935 and were recorded on the policy’s payroll as expenses, entered either under “J.H”, “Pop” or “the old man”.
