Dutch Schultz: Beer Baron of the Bronx

Dewey gained valuable experience in trial preparation and in the administration of the prosecutors office. He learned about the citys underworld structure and the relationship between gangsters and politicians.

In the early 1930s, as chief assistant United States attorney, Dewey took part in several income tax prosecution cases against policy racketeers including Henry Miro and Wilfred Brunder. Here he received his first exposure to Dixie Davis, the lawyer who later represented Schultz.

In 1931, the United States attorneys office began a tedious investigation into the bootlegging operations of both Schultz and Irving Wexler, better known as Waxey Gordon. The case against Gordon went to trial in November 1933. With Dewey personally handling the prosecution, Gordon was convicted in December and received a ten-year prison sentence and a $50,000 fine.

On November 1, 1933, Medalie resigned as United States attorney and returned to private law practice. Dewey, a Republican, was appointed to fill the vacancy until President Franklin D. Roosevelt, a Democrat, named a replacement. The president named Martin T. Conboy to the position on November 25, and Dewey returned to private practice by years end.

Meanwhile, Schultz, who had been indicted on January 25, 1933, decided that instead of going to trial and losing like Gordon, it was better to go on the lam. Schultz had not filed tax returns for 1929, 1930 and 1931 and the government claimed he owed them $92,000. In addition, he was facing up to forty-three years in prison and a fine of over $100,000.

Schultz needed time and money. Prohibition was in its last year and all his income from the Noble Experiment would soon dry up. The money was needed not just for his defense fund, but also to help Jimmy Hines make sure their man got into office in the upcoming election for Manhattan District Attorney. Schultz would remain in hiding for the next twenty-two months. The New York City Police Department distributed 50,000 wanted posters worldwide for him. However, Schultz never left the greater New York area.

Madam Polly Adler

All of 1933 passed without law enforcement finding Schultz who was operating freely right under their noses. Paul Sann attributes this to the fact that the mayors office was still in control of Tammany Hall. Things were about to change. New Yorkers elected reform candidate Fiorello LaGuardia mayor in 1934. The Little Flower was soon putting the squeeze on the citys underworld.

Henry Morgenthau Jr.

On November 28, 1934, Schultz appeared before the United States Commissioner in Albany, New York Im Arthur Flegenheimer. I am under indictment in the Southern District of New York. I wish to surrender. With that short statement twenty-two months as a fugitive came to an end as the Dutchman gave himself up.

Bail was set at $50,000 and then doubled. This would be the longest period of time Schultz spent behind bars since his teenage years. Dixie Davis got the bail reduced to $75,000, but it took several weeks before the Dutchman was released. It was at this point, while Schultz awaited trial, that he murdered Julie Martin. Despite that incident, Schultz kept himself busy by trying to improve his public image. Just before the trial got underway, the Dutchman held a press conference. With Davis at his side he answered many questions about his life and business activities. One of the questions regarded his wardrobe. The underworld leaders appearance was sometimes ridiculed in the press. One reporter referred to him as an ill-dressed vagrant, and stated that Schultz had a special talent for looking like a perfect example of the unsuccessful man. Paul Sann wrote:

Schultz, for that matter, made no secret of the frugality that governed his wardrobe. He said he never spent more than $35 or so for a suit or more than $2 for a shirt. You take silk shirts now, he told the assembled press in the big Syracuse session, I think only queers wear silk shirts. I never bought one in my life. Only a sucker will pay $15 or $20 for a silk shirt.

Schultzs frugality was also apparent to Lucky Luciano who declared:
Schultz was one of the cheapest guys I ever knew, practically a miser. Here was a guy with a couple of million bucks and he dressed like a pig. He used to brag that he never spent more than thirty-five bucks for a suit, and it hadda have two pairs of pants. His big deal was buyin a newspaper for two cents so he could read all about himself.

Before leaving the press conference, Schultz received a set of rosary beads from one citizen while another wished him Good Luck, in Yiddish.

The tax trial began on April 16, 1935. John H. McEvers, a member of the team that successfully convicted Al Capone, handled the prosecution. Many of the early witnesses McEvers put on the stand were bankers who were used to detail the Dutchmans bootlegging income. The government also had subpoenaed twenty witnesses, many of whom were reluctant to speak. Some of the witnesses that were subpoenaed went into hiding. One witness, scheduled to testify during an afternoon session, went for a morning walk and kept on walking. Bo Weinberg and several other Schultz associates developed amnesia on the stand, or pleaded the Fifth Amendment, even while being threatened with contempt charges by Federal Judge Frederick H. Bryant. New York Police Detectives Salke and DiRosa, who had arrested Schultz the morning Danny Iamascia was shot, were asked to testify. The governments thinking here was that if Schultz had $100,000 to bribe the two officers, surely he had money to pay his taxes.

Schultzs defense lasted an entire three hours. Calling just three witnesses, the Dutchmans defense was that he had been given expert legal advice that he did not need to pay taxes on his illegal income. When this advice turned out to be erroneous, Schultz made a concerted effort to pay his debt only to be rebuffed by the government. Outside the courtroom Schultz explained to reporters:

I offered $100,000 when the government was broke and people were talking revolution and they turned me down cold. You can see how that at least I was willing to pay. Everybody knows that I am being persecuted in this case. I want to pay. They were taking it from everybody else, but they wouldnt take it from me. I tried to do my duty as a citizen...

On April 27, the case went to the jury. For a day and a half Schultz walked the courts corridors nervously chain-smoking cigarettes. Perhaps it was nervousness, but while Schultz waited he spent much of his time making statements to the press on a variety of topics from his own life to Al Capone and Alcatraz. He had become a media celebrity and was seemingly enjoying the publicity he was receiving.

Despite all of the governments evidence the jury was hopelessly deadlocked. After the first day the vote stood at six to six. The second day it was seven to five for conviction. The judge discharged them at three oclock on the afternoon of April 29.

A second trial was scheduled for Malone, New York, a tiny community located ten miles south of the Canadian border. In what Paul Sann called a social rampage, Schultz arrived in town a week ahead of the trial to show the towns folk that he was a regular guy. He picked up tabs in bars and restaurants, and attended a local baseball game with the mayor and two of Malones prominent businessmen, all in the hope of softening up the town. After one of Malones clergymen rebuked his congregation for fawning over the gangster, Judge Bryant revoked Schultzs bail.

Dutch waiting for jury

Judge Bryant was furious and he banged his gavel to quiet the joyous outburst in the courtroom. He then admonished the jurors:
You have labored long and no doubt have given careful consideration to this case. Before I discharge you I will have to say that your verdict is such that it shakes the confidence of law-abiding people in integrity and truth. It will be apparent to all who have followed the evidence in this case that you have reached a verdict based not on the evidence but on some other reason. You will have to go home with the satisfaction, if it is a satisfaction, that you have rendered a blow against law enforcement and given aid and encouragement to the people who would flout the law. In all probability, they will commend you. I cannot.

Also disappointed at the trials outcome was Mayor LaGuardia who told reporters, He wont be a resident of New York City. There is no place for him here. To which Schultz replied to the press, Tell LaGuardia I will be home tomorrow.

In reality, the acquittal was a surprise to Schultz and his defense team, not to mention his gangland peers in New York City. However, law enforcement was not giving up on Dutch Schultz and his time was running out.

Schultz did not return to New York City. Not even to Queens where his wife Frances had given birth to a son. Instead he took up residence at the Stratfield Hotel in Bridgeport, Connecticut and later at the Barnum Hotel there. Schultz was still considered a fugitive because of an outstanding federal warrant for him on tax counts that were separate from the ones he was tried on in Syracuse and Malone.

In Connecticut, Schultz and his bodyguard, Lulu Rosenkrantz found themselves the darlings of the social set and were invited to several activities. One socialite reported to a New York Sun reporter:
My dear Arthur was the answer to a hostesss prayer. When it became known that he had been invited to your party, you had nothing to worry about. Everyone came...And, really, he was charming. It was hard to believe all those horrid stories.

While hobnobbing in Connecticut, Schultz held meetings with his lawyers and Jimmy Hines. Schultz told Hines that due to his legal expenses the Tammany boss would have to take a fifty-percent wage cut until the Dutchmans problems were cleared up. On September 24, 1935, one month before his death, Schultz checked out of Bridgeport and headed to New Jersey. In Perth, Amboy, Schultz was arrested and booked on suspicion of being a fugitive. Bail was eventually set at $50,000 and on October 1, Schultz was released. He went to Newark where he took a suite at the Robert Treat Hotel and began working on his public relations image again. Schultz held court at the Palace Chop House, located around the corner from the hotel. Rosenkrantz and Abe Landau were present to keep undesirables away. The following is a sampling of comments Schultz made to one reporter who interviewed him from the Newark Star Ledger:

Q. What about the governments latest charges?

A. Theyre after me now because some puny individuals in the government cant stand up and take a licking like a man. By licking I mean they cant swallow that I was acquitted once and another jury disagreed on exactly the same charges theyve got against me now. The only difference between the charges now and then is that they slapped a different name on them... Now right here Im going to tell you something, and I wouldnt give you a bum steer. Perjured witnesses were used against me in both trials and the government knew it.

Q. What about the Public Enemy No. 1 label?

A. I never did anything to deserve that reputation, unless it was to supply good beer to people who wanted it and a lot of them did.

Q. What about the future?

A. I want to settle down and be a plain citizen and be given a chance to earn a living. I want to be plain Arthur Flegenheimer and forget there ever was a Dutch Schultz. That bird has had too much trouble.

Back in June of 1935, New York Governor Herbert H. Lehman appointed Thomas Dewey to the position of Special Prosecutor. Dewey later pointed out that the District Attorney of New York County, Tammany man William Copeland Dodge, held a news conference to announce Deweys appointment. (The appointment of a Special Prosecutor had been the demand of the grand jury, which was disgusted with, and refused to work with, Dodge and his staff.) At the press conference, Dodge stated that Dewey had the complete support of his office. Dewey claimed this was an outright lie, that he had no support at all, and that he was given the title of Deputy Assistant District Attorney the lowest title in the prosecutors office, by Dodge. Dewey joked that he was appointed to clean up New York with no staff, no office, no police, no budget appropriation and, ... no sense whatever.

However, Tom Dewey and Dutch Schultz were now on a collision course.