“Positively,” Dwyer answered, with a smile.
The judge didn’t hide his own feelings either, saying that in all his years on the bench he had never seen such a clear-cut case of guilt.
“The facts cry out to heaven for wholesale violation of the law in every way,” said Mack. “There is no shadow of doubt of the existence of the conspiracy alleged.”
Mack decided to sentence Dwyer and Corson immediately. He wouldn’t even let the defendants have the weekend to spend with their families. For being found guilty of the one count, Dwyer got two years in prison, a relative bargain. Outside the courtroom, Dwyer’s attorney called the verdict “asinine” and vowed to appeal and asked that his client be given bail as soon as possible.
Even if he didn’t get to go home, Dwyer spent the night after he was convicted in the McAlpin Hotel in the custody of two U.S. marshals. The next morning, he was picked up in style at the hotel with a limousine furnished by a friend and rode with the marshals downtown to the Tombs, the prison on Chambers Street. Ever the friend of the press, Dwyer said he had the limousine circle the block around the Tombs so that no reporter would miss his arrival.
Yet, the question remained about who was the big leader of the conspiracy. Was it Dwyer, as Buckner insisted? Or was it Frank Costello, the man for so long in the shadows who had the real connections, money, and power in the underworld? Round two might give the world the answer.
CHAPTER EIGHT
“PERSONALLY, I GOT DRUNK”
THE ORIGINAL THEORY OF THE PROSECUTION in the Costello-Dwyer conspiracy was that the defendants represented a combination of two groups working together closely. Dwyer led the one cabal while Costello and his brother Edward, along with the Kelly brothers (also named Ed and Frank) were in charge of a group of liquor purchasers. It was Frank Kelly who had chartered a ship that he moored off Long Island and first met Frank Costello in 1925 during a meeting in Montauk. When Kelly, Costello, and another man named Philip Coffey worked on a shipment of liquor from Kelly’s schooner, payments for the service were arranged at Costello’s Lexington Avenue offices. Costello was the consummate payoff artist, also helping to bribe government agents and officials, as well as police officers.
“Frank knew that many of the facts and witnesses the government would present against Dwyer actually had to do with him,” his attorney George Wolf recalled later.
While Dwyer and Corson were convicted, the government saw from the acquittals of the other six defendants that their case had some big problems. So, with another big trial looming, against Costello, the Manhattan U.S. Attorney’s office decided to simplify things. On December 3, 1926, prosecutors filed a request that charges against many of the other defendants indicted in 1925 be dropped. Top prosecutor Buckner wrote, “I do not believe that there is sufficient evidence to secure a conviction” against twenty-three men, including Costello’s brother-in-law Jerome Geigerman and C. Paul Chartier, the Canadian man who was Costello’s contact for liquor. Buckner didn’t spell out the reasons why the charges should be dumped but it is likely that he sensed the anti-government feelings fomented by Bielaski’s undercover tactics which welled up in the Dwyer trial and decided to cut his losses.
The trial of Frank and Edward Costello and sixteen others went off on January 3, 1927, before Judge Francis A. Winslow, a jurist who would have his own share of controversies. From the very start, it was clear that Costello was going to bring up the issue of Bruce Bielaski and his undercover tactics. Costello’s attorney asked each prospective juror if they knew Bielaski or if they had any connections to the Anti-Saloon League or other groups promoting what he called “a national drought.” That was an obvious tactic to weed out jurors who would be biased against bootlegging or hated the notion of consumption of alcohol.
Edward Costello, older than Frank by about ten years, was not the more sophisticated of the brothers. While Frank liked to be the businessman and hang around nightclubs and speakeasies, Edward was more blue-collar. He had started a trucking company in Astoria with his father and promptly got into trouble during Prohibition. At a private garage on Shore Boulevard in Astoria, Edward kept barrels of alcohol that had come from Dwyer’s operation. It wasn’t the most serious of cases but in October 1926, just before going on trial with his brother, Edward had to go before a judge to explain how he wound up with the three barrels. Edward at first said that the alcohol was really ginger and peppermint, which his son had contracted to haul. Okay, said the judge, bring your son to court so we can hear it from him. Hearing that, Edward decided then to plead guilty and paid a $50 fine.
Prosecutors were certain that Edward Costello’s guilty plea in the barrel case was so incriminating that he would be convicted in the larger conspiracy trial with his brother and the Kelly brothers. The sneaky undercover agent working for Bielaski would be able to trace the load to Dwyer’s “rum-ring stock,” as the government called it. It also wasn’t the first time Edward had been compromised. About four years earlier he admitted that he did some deals with Manny Kessler, the older bootlegging king.
If the Costello brothers were the main target in the government’s case, it didn’t seem like it from the first bits of testimony from government witnesses. It would take two days for the government to present evidence against the Costellos. But in the meantime, the public got an interesting look at how the brothers operated through their co-conspirators. The first witness, William R. Newman of Freeport, Long Island, related how he was recruited by Ed Kelly in 1924 to be his agent responsible for liquor cargo on several ships operating between Canada and Long Island.
Known as a “supercargo” or agent of the owner of the cargo, Newman testified about his various adventures—as well as misadventures—plying the ocean between Canada and the U.S. In one trip, the schooner Vincent White got lost on its way to the Rum Row staging area. This was when, according to Newman, he was taken to Curtiss Field, near Mineola, and then flown out in a seaplane, eventually finding the ship and going aboard with a list of dollar bills from the “home office,” meaning Frank Costello’s suite on Lexington Avenue. This was when the smaller pickup boats coming by would show a dollar bill and if it matched the serial numbers on the list then the liquor could be off-loaded to go ashore, said Newman.
As knowledgeable and convincing a witness as Newman may have been in the beginning, he also spelled trouble for the prosecution. From his spies in the courtroom during the Dwyer case, Costello knew about the undercover operation of Bielaski and the distaste his operation caused with the public. Newman admitted he had been working for Bielaski and did so for mercenary reasons. Newman said he felt cheated by the Kelly brothers over wages and decided then and there to earn money by working undercover for Bielaski.
“How much money did you get from Bielaski for being a spy?” Costello’ s attorney Nathan Burkan asked Newman.
“I received $250 a month,” was Newman’s reply, explaining that the number dropped to $125 when Washington cut Bielaski’s appropriations.
Showing how vindictive he could be, Newman admitted that after his argument with the Kellys over wages he wrote a letter to General Lincoln C. Andrews, the Treasury Department’s chief of Prohibition Enforcement. In a major show of chutzpah, Newman said he told Andrews of his predicament and asked for a job working for the government. He was then passed on to Bielaski who hired him.
Newman was a hired hand of the Costello ring. Another witness, William R. Hughes, had been a machinist on Coast Guard vessel 126. The government boat was like a taxi service for the bootleggers, said Hughes. No. 126 ran liquor ashore from Rum Row, including from the Vincent White and helped out skippers who were off-course or lost in fog. The Coast Guardsmen took money and whiskey for their services and often got stone-cold drunk while on duty. When the former captain of vessel 126, a fellow named Nicholas Brown, was asked on the witness stand what he remembered about a case of whisky given to his crew from a smuggling ship, he was at a loss.
“I don’t know what happen
ed to the rest of the men; personally, I got drunk,” said Brown.
Costello knew that the Bielaski connection to the witnesses was a key to the defense. Hughes then added to the furor when he admitted that he pled guilty to his personal corruption in the case and had also gone over to work for the Prohibition forces, although not for Bielaski personally. But one witness who really caused an uproar was Nicholas Brown, the often-drunk captain of CG 126. Brown was arrested with the Costellos a year earlier, released on bond, and then suddenly taken back into custody by the Coast Guard. He then got a taste of brutal maritime justice.
Brown recalled being home when suddenly Bielaski’s agents seized him and took him aboard the Coast Guard vessel Seneca. Once on board, Brown said he and three other former Coast Guardsmen were placed in irons and confined to the vessel’s brig as it went out to sea for a week. The Seneca was a real rat trap for the confined men.
“The place was like a mad house,” said Brown. “I was almost out of my head. We were shackled with double irons and kept in confinement for the whole week. The hatches were battened down and the air was foul. They fed us rotten meat and gave us rotten water.”
The conditions Brown described were basically torture, which is how the New York tabloids described it. He couldn’t talk to the other men and when Bielaski sent a radio message to the Seneca asking if Brown wanted to confess, he said he did.
The Seneca pulled into the Battery in lower Manhattan, where Bielaski had offices. Bielaski asked Brown if he wanted to plead guilty and of course he said he would. Suddenly, things got better for the sailor.
“You got different treatment after you left Bielaski’s place?” Burkan asked him.
“Sure, I went home to Boston after that,” Brown answered.
The tabloids had a field day with the story, blaring that Brown had been “tortured” by Bielaski and his men. Clearly, Brown had been coerced into cooperating by the rough treatment he had received in the brig of the Seneca. This testimony played right into the defense strategy of trying to undermine the government’s case by showing inhumane tactics in the effort to convict Costello and the others.
Aside from being corrupt and drunk most days while aboard ship, Brown seemed to be the conduit for payoffs between Costello’s men and some higher-ups in the Coast Guard. He testified that he received just over $1,000 from Phil Coffey, who was allegedly one of Costello’s paymasters, to bribe Samuel Briggs, one of the executive officers of the Coast Guard working out of the New London, Connecticut, office. Called to testify, Briggs admitted that he took the money but turned it over to his superior officer and Bielaski. There had also even been a more explosive allegation of bribery when Brown claimed in his testimony that General Andrews, the assistant secretary of the Treasury, was in on the scheme, taking $2,000 a week from liquor cargo carried on the schooner Athena. Contacted by journalists after the allegation was made, Andrews scoffed at the notion and said the only contact with the gang was to put them all in jail.
Through the first few days of testimony, there was clear evidence that the Costello gang had been paying off the Coast Guard to protect its rum running. Coast Guard vessels protected the smuggling ships, tipped off the smugglers about the routes of government patrols, and acted as nautical convoys that landed the booze all over Long Island. The Coast Guard may have had a flotilla of destroyers to beef up its efforts against the bootleggers but the service seemed to be riddled with corruption at the lower levels, which protected the gangs. But the main piece of evidence that had been missing in the trial was a tangible connection to Frank and Edward Costello. That all changed on January 11 when rum runner Frederick Pitts took the witness stand.
A marine engineer, Pitts admitted that he threatened to turn in Frank Costello if he didn’t get over $2,000 in back pay. Pitts said that Costello had twice employed him to run the engines on one of the smuggling ships, the California. The pay was to be $75 a week with an additional $100 for each trip Pitts made out to Rum Row. But payment became an issue and Pitts said he gave Costello a week to pay him $2,000 he was owed or that he would turn him in to authorities. The threat against Costello wasn’t the smartest thing Pitts could have done, given Frank’s connections to the Italian underworld. But Pitts justified his action by explaining that he was on the brink of going to jail because he had deserted his wife. Pitts had also been arrested earlier in the bootlegging case so he faced prison if the federal government prosecuted him. Costello apparently called Pitts’s bluff, and the engineer, in desperation, said he decided to become an informer for Bielaksi for the princely sum of $5 a day.
But Pitts also admitted he was playing both ends against each other. He said that he offered not to testify against Costello if he was paid $4,000—double what he said was owed to him in back wages.
“So,” Burkan asked on cross-examination, “you offered to sell out Bielaski for $4,800?”
“Well, if you want to put it that way, it’s true,” said Pitts.
Nevertheless, the evidence presented by the government showed how extensive the criminal operation had been and how brazenly Costello and the others had used payoffs to assure that millions of dollars in bootlegged liquor reached American shores.
“Frank was a worried man,” George Wolf remembered later about the impact of all the testimony. “The prosecution had uncovered everything. All he had going for him was the weakness he had discovered in the government’s case. On cross-examination, each of the government witnesses was asked whether he was now—or had been—paid as an undercover agent by the Treasury Department’s Bielaski. All but one were forced to admit it was so.”
If Frank Costello was worried, the same couldn’t be said about his brother Edward. It was clear from Edward’s past dealings that he had trucked liquor and alcohol for various bootlegging operations. He had been involved. The question was how much new evidence came up at the trial to show Edward was guilty of being part of his brother’s conspiracy. The answer was not very much. Judge Winslow decided that the government had not proven Edward was involved and dropped him from the case. Out of the eighteen defendants who started the trial, four including Edward had been dropped, two others had the indictment dismissed, and another became so ill that Winslow ordered a mistrial. In total, seven defendants walked away. Things weren’t looking good for the government.
It was clear that the tactics of Bielaski had been a big problem for the government in Costello’s trial, and his defense attorneys exploited that when it came time for final summations. Defense attorney Nathan Burkan hit on Bielaski’s secret operation, calling it an insidious tactic that went against the grain of fair play and was un-American. The witnesses in the case were “rats . . . pirates, hijackers, crooks and bribe-takers,” Burkan told the jurors. Bielaski himself was a “mysterious and invisibile power,” the lawyer insisted. Of course, years later the kinds of tactics Bielaski used—paid informants, plea bargaining, even coercion to get cooperation from witnesses—became an acceptable part of law enforcement operations. But this was the Roaring Twenties and the sensibilities of the public, and many in politics, went against this kind of secret stuff.
The jury verdict was another stunner. The panel acquitted eight of the defendants who were viewed as minor players. The jury then couldn’t agree unanimously on Frank Costello, the Kelly brothers and three others, all considered to be principals in the bootlegging operation. Costello and the other main defendants received a mistrial, and angry prosecutors said they would be retried.
But based on what one juror told Burkan, the government really had to think twice about taking another shot at Costello and the others. The juror told the lawyer he would “hold out to doomsday rather than convict anyone on the testimony of such witnesses.” Years later, Costello would tell his close friend George Wolf that the jury was split 11 to 1 for conviction but that he “owned” the one holdout. But Costello was clearly lying about his reach and corrupt influence. Jurors were polled after the trial by Judge Winslow and they said they never
considered convicting any of those who were acquitted. As to Costello and the others, the first ballot had shown a vote of 9 to 6 for conviction and the final poll was evenly split at 6 to 6. Any verdict had to be unanimous, and Costello had dodged a bullet by a wide margin. Winslow reduced his bail to $10,000 from $20,000 while the Kellys’ was cut to $5,000 from $10,000. A retrial never happened, and at some point the bails were cleared.
After the verdict, the press beat up the government. The Daily News said the case had been a “Black Eye” for the government and “another black eye for Volsteadism generally,” referring to the Vold-stead Act. Bielaski got a “sock in the eye,” the paper said in its editorial.
Even The New York Times reported that the Costello case was causing murmurings in the Department of Justice about Bielaski’s undercover tactics. Out of ninety-four men indicted as major bootleggers in recent cases, there had only been two convictions—Dwyer and Corson. While prosecutors wouldn’t comment, the Times reported that the outcome was seen as a “severe blow to the Government’s methods of prosecuting liquor conspiracy cases.”
Costello was able to repair to his old haunts like the 21 Club to celebrate what really was a victory. He faced a possible retrial but as would be discovered decades later, the government’s file in his case somehow got lost and he would never have to go to court for bootlegging again. But Bielaski would soon face more problems of his own making. It had come out during the Costello and Dwyer trials that Bielaski’s office had actually set up an undercover speakeasy in Manhattan known as the Bridge Whist Club. While such clandestine operations would become standard operations decades later with police, in this era the public and politicians were aghast. One New York member of Congress, Fiorello La Guardia, was one of the most vocal critics of Bielaski and demanded that federal prosecutors investigate the club and find out how much government money had been spent.
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