-Caveat Lector-
an excerpt from:
The Big Bankroll
Leo Katcher�1958,1959
Harper & Brothers
New York, NY
LCCCN 58-12452
369pps � First edition � Out-of-print
Reprint available - Amazon.com
Publisher: Da Capo Press 1994;
Trade Paperback x, 369
ISBN: 0306805650
--[2]--
Chapter 21
The Juice of the Poppy
Wah Kee, a slender Chinese with a stringy goatee, arrived in New York from
San Francisco in 1868 and opened a shop at 13 Pell Street. He sold Oriental
curios, bean sprouts, other vegetables used in Chinese cooking, candied
ginger and sweets. In a flat over his shop he sold opium pellets and provided
pipes for smoking them.
This was the beginning of commercialized use of narcotics in New York City.
Soon others opened "opium dens." The places attracted the attention of the
police, not because of the use of narcotics but because they became gathering
places for thieves, footpads and gangsters. The opium dens were regarded as
in a class with saloons and, for many years, were no more illegal.
When Arnold Rothstein was growing up he occasionally visited these dens.
Joseph Lilly, in a series of articles in the New York Telegram, reported that
Rothstein had been an occasional opium smoker. He might have been; a great
many of his contemporaries were. But if he smoked opium as a youth he had
long since foregone the pleasure by the time of his death.
By that time his interest was in the smuggling and sale of drugs, not in
their personal use. There was big money in dope and Rothstein was always
interested in big money, never more so than in the last few years of his life.
To Arnold Rothstein the dope traffic had no moral connotations. It was a
question of trying to "beat the government," just as in the importation and
sale of liquor. And hardly as bad, for there was a constitutional amendment
against the importation and sale of liquor and only a hazy law, more hazily
enforced, against traffic in narcotics.
When Rothstein was growing up, the use of narcotics was wide spread. It was
encouraged by some of the best�and richest-people. Harry J. Anslinger, United
States Commissioner of Narcotics, has stated that one out of every four
hundred Americans was a narcotic addict in 1900!
George E. Pettey wrote, in The Narcotic Drug Diseases and Allied Ailments, tha
t "At the turn of the century, patent medicines containing opiates in some
form were sold in every drugstore in the country. They were offered for
relief of headaches, general aches, various pains, the 'misery and that
'tired feeling.' School children could go to a local soda fountain and buy a
medicated drink containing cocaine."
When heroin came into use in 1898, the medical profession hailed it as a
great advance in healing and enthusiastically endorsed it for virtually every
use. One advertisement, in Ainslee's magazine, called it "the greatest boon
to mankind since the discovery of morphine in 1803," and offered it for sale
to the general public in various forms.
It was not until some years later that its addictive properties became known.
And then another type of advertisement appeared in the magazines.
In 1910 the St. James Society of New York advertised it would send any one
addicted to Morphine, or other drug habits, a trial treatment sufficient for
ten days, free of charge, of the most remarkable remedy for this purpose ever
discovered ... dissimilar in every respect from any other known treatment.
Our remedy . . . leaves the patient with health entirely recovered, and free
from all desires formerly possessing them."
But there was still no law against importation, manufacture or sale of
narcotics.
By that time narcotics had been in use some seven thousand years. It was the
Sumerians, who occupied the lower part of Mesopotamia, now called Iraq, who
discovered the euphoric properties of the poppy. They extracted its juice and
gave the resultant nectar the name "gil," which meant "joyous" or
"rejoicing." Narcotics are still called by this name in the Middle East.
Not until the tenth century A.D. did the poppy, with its joys, its illusions
and its noxiousness reach the Far East. Arabian traders then introduced it
into China. Barbosa, the Portuguese explorer, reported in 1511 that he saw
much of the "opium which Moors and Indians eat."
At about that time Western Europe became acquainted with opium and its
doctors wrote, in words that were forerunners of the advertisements of four
centuries later, that the drug was useful in treating "poison, deafness,
asthma, colic, coughing, jaundice, fever, leprosy, female troubles and
melancholy."
Opium became a trade weapon and later an instrument of diplomacy. A war was
fought because of it, the "Opium War" between England and China, fought to
prevent China's banning the importation of opium. The British East India
Company was bringing it to China from India by the shipload and it
represented the difference between a favorable and an unfavorable balance of
trade for the British.
That war resulted in British victory and, ultimately, in the "Open Door"
policy.
The Yankee traders of Boston were not without guilt in this instance. Russell
and Company and Augustine Heard and Company, both of Boston, were fighting
side by side with the East India Company, and profiting, though hardly as
greatly.
Narcotics were in use by physicians and surgeons in the United States from
the beginning of the Republic. Each new discovery was adopted and accepted by
the practitioners of medicine. A flourishing trade developed in proprietary
medicines which contained narcotic drugs of all kinds. There was big money in
peddling narcotics and it was part of big business.
Mark Sullivan, in Volume 11 of Our Times, wrote:
"Along with the rest went the adulteration of drugs; the . . . use without
restrictions, in patent medicines, of opium, morphine, cocaine, laudanum, and
alcohol; the preposterously false and cruelly misleading curative qualities
claimed. These patent medicines were sold in every drugstore . . . in the
land. . . . It was an immense traffic. In 1900, the total volume of business
was $59,611,355. The patent medicine manufacturers comprised, at that time,
the largest single [national] user of advertising space in newspapers."
It was the magazines, not the newspapers, which took up the fight against
promiscuous sale of narcotics. Edward W. Bok instituted the campaign in 1904
in the Ladies' Home Journal. Shortly afterward Samuel Hopkins Adams wrote the
first of a series of articles to appear in Collier's Weekly.
Adams revealed the formulas of the "opium-containing soothing syrups, which
stunt or kill helpless infants; the consumption cures, perhaps the most
devilish of all, in that they destroy hope where hope is struggling against
bitter odds for existence; the headache powders which enslave so insidiously
the victim is ignorant of his own fate; the catarrh powders which breed
cocaine slaves."
But there was no widespread condemnation of narcotics, of their manufacturers
or sellers. The newspapers remained discreetly silent. And the drug
manufacturers, employing the biggest lobby then in existence, were able to
prevent any legislation which materially affected them.
When the Pure Food and Drug Law was enacted in 1906, it touched the narcotics
problem only lightly. The restraints which it imposed were picayune. An act
to control the narcotics traffic was finally passed in 1916, the Harrison
Act, but it was primarily a revenue measure and the questions of morality and
health were almost ignored in its drafting.
None of this is an apology for Rothstein's entrance into the illegal traffic
in narcotics. It is intended to show that his attitude toward drugs was the
attitude of a businessman. He regarded himself as in competition with the
drug manufacturers. He could beat them to the market by finding an "edge" for
himself in the form of drugs on which no taxes were paid. He would have a
further edge in that the legal obstructions to sales, imposed on the drug
manufacturers, would not affect him.
There was no big, general market for illicit drugs until 1921. By that time
the Harrison Act had been carried to the Supreme Court, where it was held
constitutional. Teeth had been inserted in it which prevented physicians'
writing unlimited prescriptions for drugs. That meant legitimate drug outlets
were drying up.
But the demand was not. There were thousands of addicts-made addicts by
soothing syrup, by cough medicines, by paregoric, as well as by dope
pushers-who wanted something to alleviate their craving
Most of these were poor. Many of them were Italians and Levantines. Some were
Orientals.
The first illicit drug traffic began among these groups. Charles Lucania, who
was to become Lucky Luciano, started his criminal career by becoming a runner
for a dope peddler. Luciano was still in short pants; his lids did not yet
droop from a razor's cut.
When, a number of years later, Luciano joined the Legs Diamond mob and became
acquainted with Rothstein, he suggested to Rothstein that there was money,
big money, in dope. It was as a result of this suggestion that Rothstein
entered the traffic when he started to import whisky.
Waxey Gordon, too, saw the potentialities in dope before Rothstein did.
However, in those early days he did not have the capital to finance the
racket on any large scale.
Gordon, even more than Luciano, was responsible for Rothstein's making a
continually larger investment in dope.
By 1925 Rothstein was up to his nostrils in the traffic. He had hundreds of
thousands of dollars tied up in drugs throughout the world. He would extend,
rather than lessen, this investment in the next few years.
However, it was not Luciano's glowing words about the money to be made in
dope or Waxey Gordon's evidence that this was so that pushed Rothstein into
the dope business. It was his own vanity.
For many years Rothstein had been the most important man in the underworld.
His had, for long, been the fattest bankroll. Now he saw others rising to
challenge him. Big Bill Dwyer, grown rich in rumrunning. Frank Costello, who
had come to Rothstein for loans only a short time before and was now
preparing to take over Dwyer's empire. Phil Kastel, who had been bankrolled
so often in petty larceny con games and in bucket shops, but who now
bankrolled others.
True, none of these had yet challenged Rothstein in his most important field.
None had moved into his place as the "man to see," "the man uptown." They had
political connections, but these connections still went through him. In this
field he was still top man.
But he had always believed that a man was only as important as his bankroll.
The law of relativity applied to that as much as it did to the world of
science. And he knew his bankroll was growing relatively smaller all the
time, even if it grew greater absolutely.
He bad, of course, a number of lucrative enterprises. But, while these
yielded a large and steady income, they were not the gold mine that
prohibition was proving to others. And some of his more rewarding activities
had been either curtailed or liquidated.
The bucket shops were gone, wrecked by publicity and more stringent laws.
The stolen bond racket had fizzled out.
He had retired from rumrunning.
He no longer operated gambling houses.
His one big source of income was bookmaking and, even here, he was beginning
to feel the squeeze of competition.
No wonder the dope traffic intrigued him. Here was a chance to make big, big
money. It was virtually an untapped field and one that he could develop and
profit from.
The traffic was unorganized. There was little competition on the level where
he would enter it. What competition there was came from small-lot smuggling,
from unethical doctors.
Rothstein saw an opportunity to put the dope traffic on an international
basis, to regulate supply and demand. He would deal in lots too big for
anyone else to enter the market against him. And the risks involved did not
seem too great. Not in view of the potential profit.
A kilogram of heroin (2.2 pounds) could be purchased in 1923 for $2,000. When
finally sold it could bring in more than $300,000!
One kilo could be used to make some 15,500 pure one-grain capsules, but no
addict ever would get a pure heroin capsule. By the time it reached him the
narcotic would have been cut so that the capsule for which he paid $10 or $15
contained only five per cent pure heroin. The rest would be lactose, quinine,
anything that was white and powder soft.
Dope-running called for a large and effective organization. The source of
supply was a long way from New York. Rothstein realized he would need
"buyers" overseas to obtain supplies for him. And purchasers in the United
States to take those supplies off his hands. He was interested solely in the
wholesaling, not the retailing, of narcotics.
He found there was a ready market for drugs. Luciano and Gordon wanted as
much as they could get. The Torrio-Capone organization in Chicago was in the
market. So was "King" Solomon in Boston. And "Nig" Rosen in Philadelphia.
Customers were waiting avidly in Kansas City, in St. Louis, and in Atlantic
City, New Jersey.
Rothstein began his operations on a modest scale. Harry Mather did the first
buying. Later he was joined in Europe by Dapper Dan Collins. And in 1926
Jacob ("Yasha") Katzenberg added the purchase of drugs to his activities as a
buyer of liquor. (Ten years later Katzenberg would be described at a meeting
of the League of Nations Committee to Control Narcotics as "an international
menace, involved for years in the operation of a narcotic ring.")
Nat Ferber, so instrumental in revealing the bucket-shop ring, wrote that his
investigations revealed that "Rothstein established himself as the financial
clearing house for the foreign dope traffic. . . . He was the only man in the
United States who could, and did, establish a credit standing with the
foreign interests sending drugs into this country."
Ferber reported that his investigations showed many transactions between the
bucketeers and foreign bankers. Evidence in the case of Dillon and Company,
owned by Phil Kastel, showed more than $300,000 of such transactions.
But Rothstein's connection with the dope traffic does not rest on such
tenuous threads. There is far more solid evidence.
Until 1925 Rothstein limited his drug purchases to European sources. Late
that year he tamed to Asiatic sources and sent Sid Stajer, a narcotics addict
himself, to Asia. Stajer visited China, Formosa and Hong Kong. He was able to
make "buys" in all three places.
The next year Rothstein sent George Uffner to Asia. Uffner was to continue to
act as a buyer long after Rothstein was killed. He would work for Buchalter,
for Luciano and for others who needed supplies. He would become a favorite of
such as Frank Costello and Frank Erickson.
Building his dope racket, Rothstein enlarged his 'legitimate" interests.
There was an old, well-established importing house in New York City called
"Vantine's." It had long been engaged in importing from China and the Orient.
Rothstein bought the business.
Customs officials had long known Vantine's, known it as a legitimate
enterprise. When shipments arrived for Vantine's they were given only a
cursory inspection. Beginning in 1925, that type of inspection made it
possible for pounds of pure dope to be smuggled into the country. Vantine's
was a perfect front.
Rothstein had other such fronts. He operated a number of art galleries and
antique shops.
Rothstein was not content with his illegal profits from these businesses. As
long as they were his he wanted to make them selfsupporting. He was fearful
of the other fellow's game and sought to protect himself in his buying and
selling of art objects and pictures. To that end, he employed an art expert,
Jons McGurk.
McGurk was a specialist in Renaissance art and Rothstein insisted that McGurk
show him how to tell the genuine from the fake. For months on end, McGurk
spent Sunday afternoons at the Rothstein home, teaching the gambler how to
judge pictures.
Rothstein was an apt pupil, but not a conceited one. He never made a purchase
or put a picture on sale without McGurk's advice. After all, if a Morgan
could employ a Duveen, a Rothstein could employ a McGurk.
Because he was smuggling narcotics, Rothstein became a connoisseur of objets
d'art, old paintings and Oriental rugs.
Rothstein saw in dope the opportunity to make unlimited profits. He pressed
his luck, parlaying his profits. Instead of cashing in, he put his profits
back into the business. At the time of his death he had at least
$2,000,000�and possibly double that amount-tied up in drugs that were
scattered all over the world.
As overlord of the racket, Rothstein bad to care for even the meanest of his
subjects. That was why, in the last years of his life, so much of his bail
bond business involved dope pushers, dope peddlers and dope addicts.
Jack Diamond and Max Gross were arrested on drug charges in 1926, released on
bail. The bail bonds were issued by the Detroit Fidelity and Surety Company
and were guaranteed by Rothstein.
Charles Webber and William Vachuda, arrested on July 14, 1926, charged with
Harrison Act violations, were freed "twenty minutes after their arrest,"
according to Assistant United States Attorney Blake, on bond posted by the
same company and, again, guaranteed by Rothstein. Short time, indeed, for
bonds of $25,000 each.
Irving Sobel, an employee of Rothstein, Inc., an investment firm headed by
Arnold Rothstein, was arrested in June, 1926, on charges of wholesale
peddling of heroin. Rothstein posted bail for him. He got this bond back two
months later when Sobel pleaded guilty to the charge.
Jack Solomon, arrested in 1927 on a narcotics charge, was freed on bail
posted by Rothstein.
In 1928 Sid Stajer was arrested on charges of violating the Federal Narcotics
Act. Rothstein posted his bail and Stajer was free on this bail when
Rothstein was killed.
Those last years�from 1926 to 1928�more and more of Rothstein's time was
taken up by attention to his dope empire. Yet not until after his death did
this facet of his life and career get any public attention.
It was a routine request, made by United States Attorney Charles H. Tuttle,
which resulted in exposure of Rothstein's activities.
A few days after Rothstein died Tuttle asked for, and received, permission to
examine some of Rothstein's records. Tuttle specifically requested papers
dealing with the Rothmere Corporation, one of many Rothstein enterprises. He
did not reveal the reason for his interest.
This was made public on December 8, four days more than a month after
Rothstein died. On that date federal agents raided a hotel on West
Forty-second Street in New York. In a room for which a "J. Klein" had
registered, they discovered a cache of dope on which they placed a value of
$2,000,000.
That same night other federal agents boarded the Twentieth Century Limited at
Buffalo and removed Joseph Unger from his berth. Searching him, they found
baggage checks for two trunks. When these trunks were opened, they were found
filled with dope, wrapped in red and green ribbons like Christmas packages.
At retail prices this dope would have brought between two and three million
dollars.
In Chicago, on the night of December 8, a third group of federal agents
raided the North Sheridan Hotel. They arrested Mrs. June Boyd and confiscated
drugs which they also valued "in the milions."
Figures released by federal agents are nearly always inflated, and these
were. However, the drugs which they seized bad a value of at least a half
million dollars and possibly twice as much.
After the seizures Tuttle announced that the drugs were part of Rothstein's
"estate."
Tuttle then added that his office and the office of the Federal Bureau of
Narcotics had been investigating Rothstein's connection with the dope traffic
for more than a year. "It became obvious to us in 1927," he said, "that the
dope traffic in the United States was being directed from one source. More
and more, our information, convinced us that Arnold Rothstein was that
source."
Tuttle revealed that the seizures and arrests bad resulted from his
examination of the Rothmere Corporation records. "Among those papers," he
said, "we found the evidence which led us to Unger and to the seizure of the
drugs. These same records also revealed to us the headquarters of the
Rothstein organization in a number of foreign countries, among them France,
Belgium and Holland.
"We are requesting the State Department to arrange for assistance in breaking
up these foreign outlets of the Rothstein ring.
"Other papers in the Rothmere records revealed Rothstein's close connections
with drug peddlers and distributors, for whom he provided bail and lawyers
after their arrest by local or Federal authorities."
Tuttle then went on: "As a result of our efforts here, in Buffalo and in
Chicago, enough dope has been taken to create crime enough to fill Sing Sing
and to create mental disorders sufficient to fill all our state hospitals for
the mentally defective."
Hardly had this series of raids been completed when federal agents made
another seizure, this one at the French Line pier in New York. A dozen
packing cases, marked "scrubbing brushes," were found to be filled with dope.
The official valuation set on this shipment was $4,000,000. Again it was
stated that the information leading to the seizure had come from "the
Rothstein papers."
Tuttle, in a fresh statement, said, "This seizure is the second development
in the plans which this office, in conjunction with the narcotics bureau, has
made to destroy the traffic in illegal drugs in this city at the source.
"This seizure is a very large fraction of the drug supply of the biggest drug
ring in the United States, and the papers we have seized, and the evidence we
have in our possession indicate that Arnold Rothstein had to do with
arranging the financing of this ring."
There followed some more arrests and some raids. Among those arrested were
Samuel ("Crying Sammy") Lowe, with a long record for violations of the
narcotic laws, and Mrs. Esther Meyers, identified as a friend of Unger.
The December Federal Grand Jury called a number of witnesses, among them
Stajer, Abraham Stein, Lowe and Unger. Assistant United States Attorney Blake
questioned Mrs. Rothstein, asking her for "any information she could provide
on any of Mr. Rothstein's transactions that might interest the government."
Afterward Blake said his questioning had convinced him "Mr. Rothstein had no
knowledge of any acts in which we might be interested. We are grateful for
her co-operation."
Unger was arraigned on December 21. Before the arraignment Tuttle said he
expected that evidence would be forthcoming at Unger's trial that would
"definitely show the relationship of Arnold Rothstein to the international
drug traffic."
Unger, however, pleaded guilty at his arraignment. That meant there would be
no trial and no evidence.
Tuttle and Blake, however, continued their search of the Rothstein papers. On
January 2, 1929, Blake announced: "Startling evi. dence, involving important
figures in New York public and political life, and disclosing more fully
Arnold Rothstein's overlordship of the narcotics rings of the United States,
will be presented to the new Federal Grand Jury next week.
We will have both witnesses and documents to take before the Grand Jury to
show how sinister were Arnold Rothstein's operations in the drug traffic. The
evidence we expect to produce is more startling than anything so far
disclosed."
Neither Blake nor Tuttle would say anything further. Neither would they
identify any of the "important figures." However, they did point out that
they had done all their investigating without any co-operation with local
authorities. "We felt, under the circumstances, that this was best."
The January Grand Jury heard the testimony. Nothing new developed.
Months passed and still there was no "startling disclosure." After a time the
whole investigation appeared to have been pigeonholed.
Even after his death the power of Rothstein was strong enough to stifle yet
another attempt to reveal his secrets. Tuttle undoubtedly was sincere. And
his efforts were equally sincere. But he could not get witnesses to talk. And
when be sought fresh access to Rothstein's papers many of the papers could
not be found.
He had told the truth when he said that Rothstein was the financier of the
drug traffic in the United States. He had, temporarily, disrupted the
operations of the drug ring when he made his raids and arrests. But that was
all. In a few short months that traffic had been resumed, was continuing on
the foundation, and with the organization, which Rothstein had created.
Luciano and Lepke were the new overlords. They made Katzenberg their
principal "buyer" in Europe. After repeal, Katzenberg was sent to Asia.
"Curly" Holtz, a thug who had operated in the garment district, first as a
lieutenant of Little Augie and later as a strong-arm man for Lepke, replaced
Unger as roving contact with various sources of supply.
Rothstein had pioneered, developed a new, great source of illicit revenue. He
had taken a disorganized, hit-or-miss operation and turned it into a
businesslike machine. His heirs took up where he had left off. They collected
the millions that Rothstein had hoped for and for which he had so carefully
planned.
Of all Rothstein's enterprises, this had been most carefully developed. He
had given it time, effort and all his intelligence. Yet, it was the most
costly business that ever occupied his time, his interest and his money.
He never made a dollar from it. That is, a cash dollar. He had great paper
profits, but these were not worth the paper on which be figured them. In
addition, he had made actual cash investment in the drug traffic that ran
into the millions. Why not? He was like a gambler who knew that he had a pot
cinched.
But a bullet ended the game before he had a chance to turn over his hole card.
There was no way for him to collect. Death had closed the books.
Just as it had closed them on so many other ventures in which he was involved
in these, his last, days.
pps. 287-299
-----
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
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