In the 1920s and early 1930s, organized crime had its fingers in all sorts of rackets — infiltrating unions, running gambling rings, shaking down restaurant owners, and much more. The most effective, determined, and ruthless gangsters controlled business empires. They wielded power equal to almost any politician’s and amassed fortunes that rivaled those of legitimate capitalists. Some gangsters became so famous they were known by their nicknames. There was ‘Scarface Al Capone, Charles Lucky Luciano, Waxey Gordon, Benjamin Bugsy Siegel — and of course, Dutch Schultz.

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His real name was Arthur Flegenheimer, but he called himself Dutch Schultz because it fit better into newspaper headlines. A cold-blooded killer with a hair-trigger temper, Schultz was running his own bootlegging organization by the mid-1920s. Before long he controlled nearly all the illegal beer distribution in the Bronx, earning at least half a million dollars annually from this activity alone.

Schultz’s criminal activities eventually led to a federal indictment for tax evasion. The Dutchman managed to beat the rap in 1935, but New York state’s special prosecutor, Thomas E. Dewey, refused to let him off the hook. Publicly, the Dutchman expressed little concern. If the feds couldn’t get me, Schultz said, I guess this fellow Dewey can’t do much. In private, however, it was a different story. Dewey’s gotta go, he screamed to an associate. He has gotta be hit in the head.

Prohibition created opportunities for the criminal underworld, but after it ended in 1933 mobsters merely expanded into other arenas, often with the help and protection of political and law enforcement leaders. In New York City, for instance, James Hines of the city’s Tammany political machine was one of many officials who ran interference for gangsters. This Hines was a district leader who controlled other district leaders and was so powerful he could order judges and police officials around, commented Dutch Schultz’s lawyer, J. Richard Dixie Davis. More than once I sat late with Hines and Dutch Schultz in a mob night club as we plotted ways by which, with the Dutchman’s mob and money, Hines might extend his power over still other districts and seize absolute control of Tammany and the whole city government.

By the early 1930s, several courageous prosecutors and government agents around the country had begun to chip away at the mobsters’ criminal empires. Among the most prominent was New York City’s Thomas E. Dewey. Born in Michigan in 1902, Dewey started his career as a Wall Street lawyer but soon gave it up to work as chief assistant to U.S. Attorney George Z. Medalie. Short in stature, dapper, with a dark moustache, irregular front teeth, and intense dark eyes, Dewey earned a reputation as a tireless investigator with an astonishing grasp of detail. One of Dewey’s landmark cases was the prosecution of bootlegger Irving Wexler, a.k.a. Waxey Gordon. Getting the indictment required two and a half years examining 1,000 witnesses, 200 bank accounts, and several thousand hours of grand jury examination, and tracing of the toll slips of more than 100,000 telephone calls, Dewey recounted in his autobiography. The hard work paid off. In 1933 Gordon was sentenced to 10 years in a federal penitentiary. By then Medalie had retired, and Dewey was named his successor. He was only 31, the youngest U.S. attorney ever. But it was a temporary appointment, and once President Franklin Roosevelt, a Democrat, named his own choice to the position in 1934, the Republican Dewey returned to private life.

He did not remain there long. The following year New York’s Governor Herbert Lehman appointed Dewey as a special prosecutor charged with breaking the hold racketeers had on Manhattan’s civic life. Doing business with mobs was costing New York City residents half a billion dollars a year, and something had to be done to end the extortion. Some mob-friendly politicians used their positions to stall any real investigation of the rackets, but Dewey was zealous, honest, and ambitious. We are not to waste time on the small fry, he told his subordinates. It’s important people in the underworld who will be the objects of the investigation.

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