Dutch Schultz: Beer Baron of the Bronx

There seems to be several versions of Schultzs involvement in the Harlem policy rackets, or numbers as it was often called. Much of the information came from his attorney, and partner in the operations, Richard J. Dixie Davis. In his book, Twenty Against the Underworld, Dewey provides this description of Davis:

Dixie Davis was an improbable figure to be a top commander of a New York racket. He...worked his way through Syracuse Law School and was admitted to the Bar in 1927. This made him the professional contemporary of many of the men on our staff. Davis was given a clerkship in an honored law firm, but he soon went into business for himself.

Dutch and his attorney
'Dixie' Davis (right)

Policy in 1920s Harlem was seen as a harmless vice. Many reputable citizens both played policy and operated numbers banks. Rufus Schatzberg, a former New York City detective-turned-writer states, the policy operators employed reputable people to work in their banks. They reasoned that reputable people would take precautions against being arrested. If the workers were discreet and protective of their jobs, it follows that they would, in return, protect the policy operation. Teachers and unemployed wives of prominent community leaders, people who would feel a lasting shame to be arrested, worked in policy banks.

The policy game, which collected as little as a penny per bet, looked like small beans during the Prohibition years when money flowed as easily as the illegal liquor that created it. However, with the Noble Experiment in its death throes in the early 1930s, mobsters were looking at other sources of income and the Harlem numbers / policy rackets drew the attention of the Dutch Schultz gang.

As Schultz made his move on the policy operators he realized that more than just muscle alone was needed to achieve his goal. It was the political clout from James J. Jimmy Hines, the Tammany Hall West Side leader, and the Dutchmans protection payoffs to the police that would make this takeover successful. The other factor was the Black policy operators were not career criminals and violence had not been a part of their trade.

As told by Dewey, Schultzs lawyer, Dixie Davis, represented many of Harlems Black policy operators and had a strong influence over them. It was this influence, combined with Hines political protection, and the Dutchmans guns and muscle, that made Schultzs newly organized policy combination a money making force to be reckoned with.

The Schultz gang began their takeover by inviting Alexander Pompez, one of Harlems more successful policy bankers, to a meeting at the Oswasco Democratic Club, a Tammany Hall affiliate, on West 118th Street. George Weinberg and Solly Girsch told Pompez that he would need to pay them $600 a week for protection. Girsch then brought in Joseph Matthias Spasm Ison and told him the same thing. Ison immediately sought out his lawyer, Dixie Davis, who advised him that the Schultz forces were too powerful to buck.

Acting as an advisor to Ison, the two men met with George Weinberg and his brother Bo, and worked out an agreement whereby Ison would pay them $500 a week for protection. As part of the protection, Ison wanted Jose Enrique Henry Miro to stop infringing on his territory. The gang responded quickly. Davis summoned Miro to a meeting with the Dutchman. The policy banker was so shaken when he received the request that he went to the meeting still wearing his pajamas. Schultz laid a .45 automatic on the table and told Miro that he was to begin paying $500 a week for protection and was to stay out of Isons territory. Miro assured Schultz that the protection he was being offered was just what he needed.

Between Pompez, Ison and Miro, Schultz had the three largest policy operators under his control. His next target was Stephanie St. Clair. Madame Queen proved to be a tougher prospect. She balked at Schultzs overtures and went to the Harlem newspapers and took out an ad to reveal how the Dutchmans politically backed combination was trying to steal her business. She then went to the mayor and district attorney and demanded that the gunmen who were harassing her be prosecuted. The fact that she was a woman meant nothing to Schultz. After her failed attempt to get other Black policy operators to form a coalition against Schultz, the Dutchman simply forced her out of business. A few years later, when Schultz lay dying in a Newark hospital, a telegram arrived from St. Clair stating, As ye sow, so shall you reap.

The profits from Schultzs policy operation were tremendous. The odds of winning were 999 to 1, but the house only paid off at 600 to 1. It was estimated that the average daily take was $35,000 of which only 25 percent was being disbursed to the winners. Of course out of this balance came the payoff to the police and politicians for protection, but that still left Schultz with an impressive profit margin.

The Dutchman improved his earnings when he brought Otto Berman into the fold. Known as Abbadabba because he possessed a gifted mathematical mind, Berman approached Schultz in 1932 with a $10,000 proposition. The winning policy numbers were derived from horse race tracks from the betting results on the pari-mutuel boards. Berman told Schultz that he could manipulate the betting so that heavily played numbers would never win. At first Schultz turned him down because he wanted to keep the game honest. However, the following year when Schultz was embroiled in expensive tax matters, he hired Berman.

Berman would go to the designated track where the winning policy numbers would be established, usually Cincinnati (where Schultz had hidden ownership in River Downs Race Track), New Orleans, or in Florida. After the races were concluded that produced the first two numbers, he would call George Weinberg in New York who would tell him which numbers would cost them the most money for that day. Berman would then go to the pari-mutuel windows and place a bet that would influence the third digit in the gangs favor. Once when asked about the success of Bermans efforts, George Weinberg replied, pretty near everyday was a winning day. Estimates of Schultzs income from the policy rackets were from $12 to $14 million annually.