Whatever his thoughts on the court case, Ness kept them largely to himself; his memoir of the Capone investigation skips over the trial in a single sentence. And this silence speaks volumes for a man who, though often generous with giving credit to others, usually avoided criticizing anyone.
Relations between the Intelligence Unit and the Prohibition Bureau had long been strained, poisoned by years of mutual suspicion and jealousy.
“An intense bitterness developed between the two branches of the Treasury Department,” wrote Assistant Attorney General Mabel Walker Willebrandt in 1929, “and it was not an uncommon thing for agents of the Intelligence Unit . . . to be ‘shadowed’ by agents of the Prohibition Unit and their friends.”
After the dry force became part of the Justice Department, the Treasury men increasingly took offense at news coverage of their colleagues. Even before Ness’s name made headlines, the tax men working the Capone case feared losing credit for their work to the Prohibition Bureau.
“By the way,” wrote G. A. Youngquist to Attorney General William Mitchell even before the Untouchables began raiding, “some of the Special Agents of the Bureau of Internal Revenue who have been doing very effective work in Chicago are resentful over the appearance of newspaper statements to the effect that the work has been done by Special Agents of the Department of Justice. I told Mr. Irey that I was sure no such statement had been made by you and that it was merely an inference of the reporters.”
The sudden fame of the Untouchables can only have added to this resentment, but Ness always made sure to give credit where credit was due. Although his team worked independently of the Intelligence Unit, both groups stayed in contact, and Ness knew Frank Wilson well enough to list him as a character reference on a future job application. The two men enjoyed a cordial relationship for years, as Ness praised Wilson’s work while often downplaying his own.
A decade after the trial, Ness described Wilson as “the brains behind the successful drive on the Capone gang,” while the former tax investigator complimented the Untouchable on his own “excellent” work, adding that it deserved its nationwide publicity.
Only later, after Ness became famous as a television icon, would Wilson claim the Untouchables had contributed nothing worthwhile to the Capone investigation.
Al Capone strongly discouraged his wife, sister, and mother from attending the trial. They sneaked in a few times anyway, sitting in back and slipping out fast at the end of sessions.
Mae abandoned Palm Island for Prairie Avenue, with Sonny along, though the boy would miss the start of school. They intended to make Chicago their home through any appeals and, if Al was convicted, see where he’d serve his sentence—if nearer Chicago than Florida, Sonny would go to school in the former, otherwise mother and son would return to the latter, making prison visits from Miami.
On October 14, a surprise visitor appeared in court: film star Edward G. Robinson, who lately made his living playing Capone clones onscreen. According to the Herald and Examiner, Robinson had come “to give Snorky a few pointers on how a gangster acts.” He’d arrived on the first day of Capone’s defense, as courtroom observers awaited whatever strategy Ahern and Fink had cooked up.
Earlier in the trial, the press intimated Capone’s lawyers would demonstrate the government had targeted their client unfairly, while allowing other “well-known Chicagoans” to avoid prosecution by settling their tax debts.
“This argument,” wrote the Herald and Examiner, “is based on the contention it is not the general practice of the Department of Internal Revenue to prosecute tax delinquents when there is a possibility of settlement without court action.”
That, of course, had always been Elmer Irey’s policy; the Bureau of Internal Revenue gave many wealthy tax cheats the opportunity to settle without being prosecuted. When Capone sought the same treatment, Ahern and Fink planned to show, this “statute was used virtually to effect an entrapment when his offers were rejected.”
Yet for reasons that remain unclear, the defense chose not to pursue this shrewd strategy. Nor did they attack the prosecution’s predominantly circumstantial evidence.
Instead, Ahern and Fink based their entire approach on claiming Capone lost most of his money gambling. This made little sense; gambling losses were only deductible from winnings—and only in states where gambling was legal. Capone, it seemed, could be taxed on income from other people’s illicit bets, but couldn’t claim deductions from any illicit bets he happened to make himself.
To have any chance of success, the defense team needed to produce betting slips or other concrete proof of each loss—evidence they did not have. So they relied instead on an array of witnesses, mainly bookies, to give ballpark estimates of how much Capone had lost over the years. As the testimony dragged on, Damon Runyon happily ceded his own blue ribbon for “world’s worst horse player to Mr. Alphonse Capone.”
The Mattingly letter asserted Capone earned no more than $3,900 in 1924, but bookie Milton Held estimated Al lost $8,000 to $10,000 to him that year alone. Another bookie put Al’s losses at no less than $14,000 during that time. Subsequent years reported by various shady witnesses were all over the map, adding up to more than $200,000 all told.
Asked if he ran an Outfit club, a North Side bookmaker responded, “I am running the club for ‘Bugs’ Moran and his associates.”
“Who,” asked the prosecution, “are the associates?”
“I don’t know,” said the witness. “I guess they’re all dead!”
A flurry of laughter, and defense objections, followed.
Coprosecutor Dwight Green wondered if these bookies had been called to the Lexington of late, to discuss their testimony with Capone and his legal team. Yes, they had. But that didn’t mean they could keep their stories straight. These men functioned outside the law, betting slips destroyed, account books nonexistent. Their testimony was so much air—not even hot air, just foul.
“You said Capone lost between $20,000 and $30,000 in 1926,” Green asked one bookie. “Could you make it $40,000?”
“Y-e-s,” the witness said, “maybe $40,000.”
“How about $50,000?” Green asked, as if this were an auction.
“Well,” the witness said with a smile, “I guess not $50,000.”
Wilkerson couldn’t help interrupting: “Do you know what it is to remember anything?”
“I never kept no books,” the bookie replied.
None of this served to exonerate Capone. If anything, it only drove home the prosecution’s central argument—that the defendant was recklessly rich.
Midway through the morning session, the defense took a break from bookies and called Peter P. Penovich Jr., the much-mentioned Hawthorne Smoke Shop manager. He’d also been on the government’s witness list but hadn’t been called.
After Penovich was sworn in, Fink produced a handwritten document first introduced during Leslie Shumway’s testimony, probably a page from the all-important ledger. He described it as “apparently a list of the owners of this gambling house . . . with amounts set opposite their respective names, from which it can be ascertained exactly, the percentages in which they owned the business.” Penovich identified the handwriting on it as his own.
Much of the government’s case depended on proving Capone’s ownership of the Hawthorne Smoke Shop. If this list did not include Capone—and it almost certainly didn’t, since his surname appeared nowhere in the ledger—doubt might be sown about the defendant receiving any income from there.
But Fink did not read the list into evidence. Instead, he began asking Penovich about his secret testimony before the grand jury. The prosecution immediately objected, on grounds such testimony was confidential.
“Is he trying to impeach his own witness?” asked assistant prosecutor Samuel Clawson.
“I don’t know what the purpose of it is,” the judge said.
Objection sustained.
Fink tried and failed to explain himself, then turned Penovich over
for cross-examination. Clawson’s questioning immediately zeroed in on another page from the ledger—the one first catching Wilson’s eye with the tantalizing notation: “Frank paid $17,500 for Al.”
That page also included a list of names and initials next to large dollar amounts, two entries marked “Paid.” Under questioning from Clawson, Penovich admitted writing the list, but denied disbursing any of the money. Clawson pressed him on one item in particular: “J & A,” apparently the recipient of $5,720.22. Capone watched intently. Although Penovich never said what “J & A” stood for, Clawson’s inference was clear—“J” for Jack Guzik and “A” for Al Capone.
Clawson began asking questions about the Hawthorne Smoke Shop—how long it had existed, what Penovich’s duties had been, to whom did he report.
“Frankie Pope was my boss,” Penovich said, “and so was Ralph Capone.”
How did Penovich know to take orders from Pope?
“Ralph told me that there would be a different disposition of the money,” Penovich said, “and to go along, and that he would take care of me.”
How had Penovich become connected with the Smoke Shop in the first place?
Penovich explained he’d previously had a gambling joint in “a bad location,” and had gone to Ralph in search of a better arrangement.
“Why did you speak to Ralph?” Clawson asked.
“Because I understood Ralph was the boss,” Penovich said, “and he could do the fixing for me.”
Clawson made sure the jury got that: “You understood he was the boss?”
“Yes sir.”
“And he could do the fixing?”
“In Cicero.”
“Fixing with whom?”
“With the powers that might be in a position to let me go along and run without being molested.”
“What powers?”
“Political powers, the police departments, anybody that might be in a position to stop me.”
Penovich couldn’t say why, exactly, he’d had such faith in Ralph. “Well,” the witness said, “he seemed to be prosperous, and he was catered to.”
“Catered to by whom?”
“Well, every place he went he was welcomed; he was pointed out . . . theaters, cafés, places of amusement.”
Clawson asked whether “there was an organization or syndicate in control of Cicero at that time, and of its gambling activities.”
Penovich said no.
Clawson asked if Penovich had cut a deal “with Al Capone to open up at the Smoke Shop because . . . you had to make certain arrangements for a cut with the organization or gang that had control of the gambling interests out in Cicero?”
Ahern objected, and Wilkerson, after some hesitation, sustained. Clawson had strayed from the rules of cross-examination. If the government wanted to question Penovich on these matters, he should have been called as a witness.
Penovich never directly implicated Al Capone. But by pinning so much on Ralph, the Smoke Shop manager only added to the pile of circumstantial evidence showing both Capone brothers involved in a profitable criminal enterprise. One lawyer would later call Penovich “a better witness for the government than any the government put on.”
How did this help the defendant’s case again . . . ?
The next day, October 15, the defense called one last bookie, whose testimony boosted Capone’s gambling losses (and his apparent income) by at least a third. Then Fink questioned Elmer Irey, apparently trying to show Capone had attempted to pay his taxes immediately after leaving the Pennsylvania prison. But Irey said little that would help.
Finally, Fink put Dwight Green on the witness stand to demand he reveal Lawrence Mattingly’s confidential grand jury testimony—something the prosecutor could not legally do.
“That is not a proper question,” Wilkerson said.
“Then,” Fink declared, “I ask your honor to direct the United States attorney to produce Mattingly’s grand jury testimony.”
Before the judge replied, he sent the jury out of the room so they wouldn’t hear the rest of this farce.
“I have never heard of such a request,” Wilkerson told the defense. “Why haven’t you called Mattingly?”
Rather than explaining why they hadn’t, Ahern asked the judge “to put Mattingly on the stand, so that we can cross-examine him.”
Wilkerson refused.
Ahern then moved for a directed not-guilty verdict.
Motion denied.
Fink tried to have the indictment thrown out as unconstitutional, arguing the government had never proven an overt act of evasion on Capone’s part.
“Well,” Wilkerson said, “I think I will hold the act constitutional.”
At long last, Ahern demanded all charges before 1928 be dismissed because they fell outside the three-year statute of limitations for income tax evasion. In response, coprosecutor Grossman cited rulings upholding the convictions of Ralph Capone and another defendant as proof the six-year rule applied.
Wilkerson sided with the prosecution. But Ahern was right and Grossman wrong. Ralph Capone was convicted of tax fraud, not just evasion, and the law specifically reserved the six-year limit for those who defrauded the government.
The other case awaited a final ruling from the Supreme Court.
That same afternoon, closing arguments began with prosecutor Grossman emphasizing Capone’s high-roller behavior, which so resonated with the jury.
“Capone himself produced witnesses to show that he got revenue in these years,” Grossman told the jury. “His defense witnesses said he lost large sums in race bets in four of those years. These losses totaled $217,000.”
Where had Capone gotten all this money?
“At the start,” Grossman continued, “we find a man living on a fine estate in Florida, spending money like a baron and with the lavishness of an Indian prince. We have heard of jewels and fine furnishings—everything bought with cash.”
The defense witnesses, he claimed, had only proven the government’s case.
“All through this testimony, gentlemen,” the coprosecutor said, “you have heard certain names mentioned together—Al Capone, Jack Guzik, Charles Fischetti, Ralph Capone, and Pete Penovich. They all constitute one gang.”
What did that have to do with Capone’s income taxes?
“It means that when one embarks on a life of crime, one crime leads to another. The watchword of the gang was ‘Sign nothing.’ Conceal your name and conceal your income. . . . Gentlemen, I think the evidence has shown beyond all possibility of a doubt that this defendant had an enormous income. All that you can do is find him guilty.”
The defense had their turn the next day.
Fink went first, praising Capone as beloved by his men, generous, and trustworthy (if you were a bookie).
“This does not fit in with the government picture of a miserly effort to evade income tax,” Fink said. “A tin horn and a piker might try to defraud the government of such a tax, but not Capone.”
The defense attorney spoke for nearly two and a half hours, drawing on his knowledge of tax law to carefully dissect the prosecution’s case. He pointed out, for instance, that Capone could not be found guilty of evasion simply because he hadn’t paid any taxes.
“If I were sick on the day my income tax was due,” Fink said, “and failed to make a return, that would be no crime.”
Nor, he argued, should all the evidence of lavish expenditures count as proof of taxable income.
“How do you know that the money spent wasn’t borrowed?” he asked.
The defendant, Fink insisted, “like many other men,” had believed illegal income was not taxable.
“Suppose he had been advised of that,” Fink said, “and that just as soon as he discovered the contrary he went to Washington and hired an attorney and tried to pay what he owed. And why didn’t they let him pay it instead of using the evidence to try to put him in jail?”
Fink insisted the defendant was not being prosecuted because he’d attem
pted to cheat the government, but merely “as a means to stow Al Capone away.”
“If the latter,” Fink said, arms flailing, “don’t you be a party to it. You are our only bulwark that can resist oppression in a time of public excitement. Judges cannot do it.”
Looking at a wall mural of the Founding Fathers forging the Constitution, Fink told the jurors, “The fathers of this country put this power in the hands of the people.”
After lunch, Ahern picked up, pounding his fist on the jury rail as he said, “The government has sought by inference, by presumption and by circumstantial evidence to prove this defendant guilty. It has sought to free itself from the law, to convict him merely because his name is Alphonse Capone.”
Why had the government gone to so much trouble to convict a man on such scant evidence?
“Because Capone has grown into a mythical Robin Hood,” Ahern said, “whose name is bandied all over the nation.”
That Capone was a spendthrift was all the government had proved.
“The government, too,” the codefender insisted, “is guilty of profligacy by bringing these witnesses here to recite their inferences. It is spending thousands of dollars for that purpose, and in these depressed times this money could better be spent on soup kitchens.”
The jury, Ahern said, was “the only barrier between this defendant and the encroachment of government.” Did he imagine these Depression-era jurors would show any sympathy for the tax problems of rich people?
Ahern was more effective when addressing the evidence, pointing out that Fred Ries’s cashier’s checks had already been used against Guzik.
“How many defendants,” Ahern cried, “will these checks convict?”
But he failed to challenge the check with Capone’s name on it, letting that damning signature stand.
He could have explored how friendly to forgery a penciled signature might be, or perhaps traced the check’s provenance as it passed through accounts connected to E. J. O’Hare and Frank Nitto, before reaching government agents intent on putting Capone away.
Strangely, neither Ahern nor anyone else would ever seriously question that one unusual signature written in lead—maybe not the Chicago typewriter variety, but destructive in its own way.
Scarface and the Untouchable Page 44