by Tim Newark
Rothstein directly invested in the enterprises of leading bootleggers such as Jack “Legs” Diamond, Dutch Schultz, and “Waxey” Gordon and made sure they were protected from prosecution. He established good relations with European distilleries to bring in high-quality liquor and when he foresaw that Prohibition would come to an end, he promoted international networks importing narcotics. Any up-and-coming mobster sought his favors and this included Johnny Torrio in Chicago and Lower East Side newcomers Charlie Lucania, Meyer Lansky, and Frank Costello. Above all, Rothstein liked to keep out of the limelight and that was the very best advice he could give to any aspiring crime boss.
Although he moved in rarefied circles in the 1920s, Rothstein came from the Lower East Side like so many other mobsters on the make. Born in 1882 to a native New Yorker, it was his father, Abraham, himself the son of a Bessarabian Jewish immigrant, who had made the leap from poverty to wealth—but he had done it the law-abiding way, through sheer hard work and business enterprise. So Arnold had a comfortable middle-class upbringing. At school, he excelled at numbers but when he should have been going to Hebrew studies he was out on the streets winning pennies from other kids.
“I always gambled,” said Rothstein in a rare newspaper interview in 1921. “I can’t remember when I didn’t. Maybe I gambled just to show my father he couldn’t tell me what to do, but I don’t think so. I think I gambled because I loved the excitement. When I gambled, nothing else mattered. I could play for hours and not know how much time had passed.”
When his father tried to get him into the family textile business, Arnold just played pool with his father’s employees. He preferred studying people to studying books and believed he could analyze the motives of other men at a glance and get the best of them. He got odd jobs in poolrooms, so named because they were places where lottery tickets were sold and the prize money paid out of the “pool.” Billiards tables were installed to keep lottery customers occupied and the game was adapted for quicker play, resulting in what is now known as “pool.” Rothstein had a talent for the new game and represented the house, sharing the profits with the poolroom owner who always bet on him. As a teenage gambler, he also played dice and poker, using his winnings to buy friendships with bigger, tougher boys. He had a slim build, was no hard man, and sought out muscle for protection.
As Rothstein’s bankroll grew bigger, he peeled off bills to lend to other gamblers. When they didn’t pay up, he employed Monk Eastman, a street-brawling gang leader, to collect for him. Eastman also delivered votes for the Democrats at Tammany Hall at election time. Thus, Rothstein learned the connection between crime and politics—a relationship he would develop to an extraordinary degree.
Rothstein generated more money by organizing places to gamble. When regular gambling houses were shut down, Rothstein invented the “floating game” that moved from secret location to location. His bankroll just kept on growing. Flashing his hundred-dollar bills earned him respect in what were called “sporting circles,” in which gamblers bet on all kinds of sports from prizefights to baseball and horse racing.
As his personal wealth grew, he moved among more sophisticated New Yorkers and had the conversational skills to match. He was articulate and well informed. The only flashy thing about him was his ever-present bankroll; otherwise he dressed expensively but quietly. He never wore jewelry. He rarely drank, never smoked, didn’t play around with women. “Rothstein rarely exhibited anger,” said a contemporary report. “He might burn with indignation, but he never let it show. The heavy lids of his eyes might narrow a trifle, his pale, heavy face flush ever so slightly, but he kept his tongue under control. He shunned quarrels and if a disagreement arose he would depend on his ability to talk himself out of a tight corner”—or his ability to hire a mobster to do the dirty work for him.
In 1919, Rothstein broke his cardinal rule of criminal discretion when he hit newspaper headlines for the first time. In January of that year, two New York detectives broke into an apartment on West Fifty-seventh Street where Rothstein was playing a high-rolling game with some associates. They’d knocked on the door but the gamblers refused to open up. Suspecting they were holdup gunmen, the gamblers drew their pistols and fired through the door. The detectives were wounded in the hail of fire and Rothstein was charged with assault. He was released on $5,000 bail—a sum he paid out of the bankroll he carried on him—and a judge later dismissed the case, saying that it was a waste of time and public money with not a word of evidence produced to show that Rothstein had committed an assault on anyone. It set the pattern for Rothstein’s future relations with the law.
The next year, Rothstein made far bigger headlines—as the man who tried to fix the 1919 World Series. The Chicago White Sox was one of the great baseball teams in America at the time. They looked like easy favorites to win the World Series. With millions of baseball fans betting on them, the odds were stacking up against the Cincinnati Reds, but a group of sporting gamblers saw an opportunity. If they could raise $100,000, they could pay off ten Chicago team players to throw the game. Exfeatherweight boxing champion Abe Attell acted as a go-between and approached the Big Bankroll for the money. Did he finance the deal or not? The White Sox threw the end-of-series game and when rumors of the fix got out, a grand jury trial was called in September 1920. There was little evidence to prove that Rothstein was involved. He testified against the leading conspirators and the jury exonerated him of any involvement in the scandalous action of the “Black Sox” intentionally losing the game. What probably did happen was that once Rothstein heard of the conspiracy, he made sure not to be involved, but that didn’t stop him from placing $60,000 on Cincinnati and winning $270,000. That was clever and typical of Rothstein’s ingenuity. For him, intelligence could be as effective as criminal action.
Even though Rothstein was cleared of any wrongdoing, his brilliance in making money out of the notorious baseball fix added to his aura of invincibility and attracted young criminal acolytes. “Rothstein had the most remarkable brain,” said Meyer Lansky. “He understood business instinctively and I’m sure if he had been a legitimate financier he would have been just as rich as he became with his gambling and the other rackets he ran. He could go right to the heart of any financial problem and resolve it unerringly. I tried to keep up with Rothstein in reducing every business or financial operation to its basics—I asked his advice, asked questions.”
Charlie Lucania was equally impressed by his discretion. “You gotta stay out of the papers,” he later said, “you gotta pay people good to stick their necks out while you stay in the background. Arnold did that, Frank [Costello] did that, Johnny Torrio did, all the smart ones stayed out of the papers. Even Joe the Boss moved into a place on Central Park West and called himself an importer—and he was a greasy old cafoni [peasant].” In accordance with this lesson, Lucania disliked socializing with the more flamboyant gangsters, such as Al Capone, whenever he came to New York in his armor-plated Cadillac. He drew too much attention.
Lucania even aped the Big Bankroll’s personal style. Rothstein gave him advice on how to dress with conservative good taste, how to behave in sophisticated restaurants, and how to act around a lady—“If Arnold had lived a little longer, he could’ve made me pretty elegant,” he joked. It was supposedly Rothstein who gave him a taste for silk shirts, ties, and pajamas purchased from France.
Embarrassed by being forced into the spotlight by the World Series scandal, Rothstein announced his retirement as “Gambling King” in September 1921. “It is not pleasant to be, what some call, a ‘social outcast,’” he told the New York Mail. “For the sake of my family and friends, I am glad that chapter of my life is over.” Having made a fortune estimated between $3 and $4 million, he explained that he intended to devote his future life to his real estate business and his racing stables. In reality, he concentrated on extending his control over New York’s underworld.
Rothstein got into the business of Prohibition-busting through his criminal frie
nds. When they got arrested for supplying illicit liquor, he posted bail for them. From that, he took a little piece of all their enterprises. His massive bankroll enabled him to fund bootleggers and rumrunners. Jack Diamond started out as his bodyguard. When Rothstein acquired the trucks to shift the booze, Diamond took over this business for him. So widespread were his contacts that Rothstein could take care of every aspect of the bootleg business, and that included bribing the necessary politicians and police—even the Coast Guard.
Irving Wexler, known as “Waxey” Gordon, wanted to borrow $175,000 for Rothstein to increase his importation of whiskey from Canada. Rothstein countered by investing more money into the venture by extending the business to importing high-quality liquor directly from Europe. Rothstein was, in effect, merchant banker to the underworld. It was a small step to extending his reach to include the smuggling of narcotics and diamonds into the country.
It was through Jack Diamond that Rothstein exerted his grip over the gangs of New York. In 1919, at the age of twentythree, Diamond started working for Rothstein as a thug hired to settle labor disputes. Strikes had blighted the Lower East Side ever since Lucania and his family first arrived there. To combat the strikebreakers hired by employers, the unions turned to gangsters to help them out—for a fee—and as a result mobsters became closely involved with union officials, eventually putting themselves forward for fixed elections as union leaders.
When the garment district was rocked by a major series of strikes, Rothstein stepped in and many of his key henchmen, including Diamond, got involved in the street battles. At a September 1920 meeting of New York Central Trades and Labor delegates at the Central Opera House on East Sixty-seventh Street, a riot broke out between strikers. “Men ran about, punching each other in the face indiscriminately,” said a reporter. “In the rear of the hall there appeared to be in progress a free-for-all fight. Several delegates rushed up and declared that one man already had been killed and others were being unmercifully beaten.”
By the mid-1920s Louis “Lepke” Buchalter had usurped the chief union racketeering role from Rothstein. When garmentmaking factories hit hard times and took loans from the Mob, gangsters ended up becoming employers and derived an income from that, too.
From hired thug, Jack Diamond graduated to becoming Rothstein’s personal bodyguard, paid $1,000 a week to protect him from sore losers and ensure that losing “sports” paid up. On the side, Diamond, with his brother Eddie, established their own bootlegging business, often hijacking consignments that had not paid “insurance” to Rothstein. Diamond was a psychopathically violent man who thrived on the adrenaline rush of an armed robbery. One of the top recruits to his gang was Charlie Lucania.
Lucania had already proved himself as an ice-cool hit man for Joe “the Boss” Masseria and been rewarded by promotion within his Mafia organization. He ran Masseria’s downtown gambling rackets as well as continuing his involvement in narcotics dealing and neighborhood protection. On December 15, 1921, he was arrested in Jersey City, New Jersey, for carrying a concealed weapon, but the charge was dropped.
Like most mobsters, Lucania exploited the gold rush provided by Prohibition. He did this in several ways. One was to provide the means by which local residents could brew their own liquor. Nick Gentile was an influential Sicilian-born mafioso, and he recalls how this worked for him. He started by opening a wholesale grocery store.
“The commodities that I sold most were sugar, tin cans and yeast which the bootleggers needed for the distillation of alcohol,” he said. “In a few months, I succeeded in bringing 75% of the bootleggers to my store. In this manner, I succeeded in earning about $2000 a month.”
Lucania and his associates were alert to this and quick to provide similar supplies. Joe Biondo, Lucania’s old friend from the days when they shared an apartment in East Fourteenth Street, devised a method of mixing a liquid with denatured spirits—not prohibited by law—that once distilled became pure spirits. Another scam was to obtain the pure alcohol used in the manufacturing of perfumes. Showcase bottles of perfume were kept by barbers, but the rest of the alcohol they bought from federal storehouses was sold to bootleggers at $15 per gallon, rather than the usual $5 per gallon. Lucania worked alongside Willie Moretti and others to open their own distilleries throughout New York State.
Sometimes this work could be dangerous. Joe Bonanno started off his career as a mobster with a basement distillery that he ran with his cousins. One of them, Giovanni Romano, was working through the night distilling whiskey when the building was rocked by an explosion.
“Giovanni had apparently dozed off,” said Bonanno. “Alcohol spilled on the floor and flowed under the burner, igniting the still. A screaming Giovanni ran into the street. His clothes, flesh, and hair were on fire.” Passersby slapped him with their jackets to put out the flames, but Giovanni didn’t survive the night.
A more lucrative—and safer—line of business was providing the muscle to protect bootleggers and their illicit breweries—or rip them off. The Diamond brothers were successful at this. Connected to the Big Bankroll, they attracted some of the most vicious hoodlums in the city. Lucania had been handpicked by the Diamonds for his reputation—along with another rising gangster, Dutch Schultz.
The Diamonds liked Schultz because he was a firebrand, a man whose hair-trigger temper spread fear among other mobsters. He was the complete antithesis of Lucania and insulted the Sicilian’s taste for fine clothes. “Only queers wear silk shirts,” he told a reporter. “I never bought one in my life. A guy’s a sucker to spend $15 or $20 on a shirt. Hell, a guy can get a good one for two bucks.”
In return, Lucania derided Schultz’s meanness. “The guy had a couple of million bucks and dressed like a pig.” With such dissonant characters in the Diamond gang, it was bound to end badly—but in the short term they made themselves rich.
Inevitably, Diamond’s freelance hijacking provoked the wrath of other mobsters. By 1924, “Big Bill” Dwyer had become the biggest importer of whiskey into the United States and was fed up with his consignments being ripped off by Diamond. So, even though Diamond was Rothstein’s chosen bodyguard, Rothstein gave permission to Dwyer to deal with him.
In October 1924, as Diamond was cruising in his limousine along Fifth Avenue, a car drew up alongside and gunmen blasted him with shotguns. Pellets slammed into him but he put his foot on the accelerator and drove himself to hospital. “I don’t have an enemy in the world,” he told the police, but the fact that Rothstein had allowed this to happen sent out a message to the underworld that Diamond’s gang of all-star mobsters was at an end. From then on, it was open season on Diamond. He miraculously survived several further attempts on his life. Despite all that—and probably against the good advice of his quieter associates—Lucania kept a close relationship with Diamond, who frequently stayed at his home when the heat was on.
That Lucania still had a considerable interest in narcotics dealing was proved by an incident in June 1923. In a poolroom on East Fourteenth Street, he met a regular client he’d been supplying for a few months called John Lyons. On June 2, Lucania sold him two ounces of morphine, then two days later an ounce of heroin. On the fifth, Lucania sold him another two ounces of morphine and Lyons pulled a badge and a gun on him. A second armed figure stepped out from a nearby booth. They were undercover narcotics agents and Lucania was under arrest. This was a considerable blow to the gangster. A second arrest for drug peddling meant he faced ten years in jail.
Lucania had to think quickly. Under interrogation, he was asked to inform on his supplier. He broke the Mafia code of omerta and coughed up an address where the agents could find a considerable amount of narcotics. But the address he gave at 163 Mulberry Street directed them to his own stash of drugs with a street value of $150,000. As a result of delivering this impressive haul, the case against Lucania was dropped. So, when he was later asked if he’d become a stool pigeon for the police, he could answer “no,” because technically he was not informi
ng on anyone but himself, simply giving up his goods to stay out of a jail—a sensible deal. But the smell of “informer” clung to him after this incident and others claimed that dealers were arrested because Lucania gave names to the police. Certainly, it revealed that Lucania was willing to negotiate with the authorities. This knowledge would encourage future secret deals with the government.
It seems extraordinary that Lucania should expose himself to imprisonment for a handful of dollars. One of his earliest close associates, Frank Costello, was equally surprised. “Dope is for suckers,” he told Lucania. “Dope isn’t like booze and gambling. The best people want to drink. The best people want to place a bet. They’ll thank you for helping them drink and gamble.” The implication was that dope was for lowlifes, but Lucania knew better than that. Narcotics appealed across the social landscape and he knew that Rothstein was okay with it and was not afraid to make links with top dealers. So Lucania nodded his appreciation for the softly spoken advice of Costello, but carried on with business as usual—only paying more attention to whom he dealt with.
By the mid-1920s, the international traffic in smuggled narcotics was well organized and stretched all the way to Europe. A secret report compiled by the commanding officer of the Royal Canadian Mounted Police in Montreal, Quebec, in January 1924, revealed one avenue of drugs into New York. It focused on the activities of a notorious drug smuggler named George Howe who spoke to an undercover agent called “Dufresne.”
“Howe has told Dufresne,” said the report, “that one Rosenblatt a heavy narcotic dealer of New York City who has recently visited Montreal, has given Howe some $2000 with which to purchase narcotics in Europe.”
Howe was born in Belgium but traveled on a British passport issued in Ottawa. In 1920, he oversaw the shipment of a number of statuettes purchased in Brussels, Belgium. Nine of the statuettes contained 51 1/2 ounces of morphine sulphate and two others 5 1/2 ounces of cocaine hydrochloride. They were destined for a millinery store in Quebec, but the deal went bad when the recipient—a “Madam Howe”—was arrested.
