Capone was thirty-three, Ness twenty-nine. Each had used up more than half his life, and neither would see the other again.
Frank Nitto in 1933.
(Abraham Lincoln Presidential Library & Museum [ALPLM])
Thirty
1932–1934
Like Al Capone, Secret Six financier Samuel Insull spent the waning days of the Roaring Twenties defending his empire from greedy rivals, battling not with bullets but with stocks and bonds. After the stock market crash, Insull created holding companies to prop up his failing empire. High-pressure salesmen went out falsely inflating stock values, trading on the great man’s good name, targeting “little people.”
Insull took out massive illegal loans from Chicago’s biggest banks, burdening his holding companies with catastrophic debt. As one judge observed, Insull’s empire devolved into “nothing but a glorified gambling institution.”
The collapse came in the spring of 1932. Chicagoans watched in horror as Insull’s companies filed bankruptcy, igniting a panic culminating with forty-two bank failures, hundreds of millions of dollars gone, thousands of investors ruined.
Facing state and federal fraud and embezzlement charges, a confused Insull fled to Europe. “What have I done,” he asked, “that every banker and business magnate has not done in the course of business?”
Not much—Senate hearings in early 1933 uncovered the roots of the stock market crash, exposing the heads of major financial institutions gambling recklessly with depositor savings, paying themselves huge bonuses, short-selling their own stock, and giving preferential loans to Insull and other insiders.
President Hoover, noting the unmasking of these corrupt bankers with disgust and dismay, told his attorney general, “If only part of the things brought out prove true, these men have done the American people more damage than . . . Al Capone.”
They were not bankers, Hoover wrote, but “banksters who rob the poor, drive the innocent to poverty and suicide and do infinite injury to those who honestly work and strive.”
The public wanted someone to pay for all the sins of the Roaring Twenties, and the government chose Insull. An extradited Insull arrived in federal court almost exactly three years after the Capone trial, to face lead prosecutor Dwight Green, a Johnson assistant on the Capone tax case. Green didn’t have just one incriminating ledger, but enough financial records to dizzy a jury.
Insull’s lawyer made the same argument as Capone’s—the government indicted his client not because he’d done anything wrong, but because of what he’d come to symbolize.
Insull even faced the same judge as Capone: James H. Wilkerson.
Back in January 1932, Herbert Hoover had rewarded Wilkerson with a nomination to the Circuit Court of Appeals, a stepping-stone to the Supreme Court. But that stalled in the Senate over organized labor’s objections to the judge’s antiunion prejudice.
The confirmation hearings also turned up evidence of Wilkerson’s unethical handling of bankruptcy cases, verging on outright corruption—“a pure and simple racket,” according to congressional investigators. The judge’s boosters played up his gangbuster record, slandering his critics as allies of organized crime. But the political winds had shifted—the nomination would never come up for a Senate vote.
Wilkerson’s misconduct led to calls for impeachment, though he remained on the federal bench when Samuel Insull came before him. Perhaps because the two men had been friends for decades, Wilkerson’s rulings heavily favored the defense, helping portray Insull as a victim of his own success, as much a casualty of the financial collapse as his investors.
The jury decided on acquittal in five minutes, but waited two hours to announce it, not wanting to look hasty.
Insull died in Paris in 1938, at least $14 million in debt but never convicted of any crime. Wilkerson retired from the bench three years later, his reputation for honesty overruling memories of his more questionable conduct—to say nothing of his narrow definition of running a racket.
The Secret Six, dealt a serious blow by the collapse of Insull’s empire, struggled to stay afloat.
Alexander Jamie said he had some fifteen investigators on staff, though an agent with the Bureau of Investigation put the actual number at no more than five.
“I am inclined to believe,” the agent reported, “that the Secret Six is gradually passing out of existence.”
But the Six’s public profile remained high. A 1931 film, The Secret 6, glorified the group as “the greatest force for law and order in the United States.” Copycat crime commissions sprang up around the country.
Robert Isham Randolph became a national law enforcement authority, advocating Prohibition’s repeal and a federal antikidnapping law. He bragged of driving around town with a gun in hand, “ready to shoot to kill,” and openly defended police using the third degree.
Yet for all Randolph’s talk, battling gangsters seems not to have been the Six’s primary mission. Instead, they focused largely on crimes against the rich—extortion, kidnapping, and labor trouble. Their most shadowy work, according to the New York Times, didn’t involve organized crime at all, but rather suppressing “political matters such as communism, which involves criminal activity only occasionally.”
When Secret Six investigators searched for the sender of threatening letters to a steel company executive’s daughter, they arrested a young broker named William Kuhn. But after another poison-pen letter—sent while Kuhn was in custody—cleared the broker, a $100,000 lawsuit was filed against Jamie and others for false arrest and malicious prosecution, exposing the Six’s shoddy detective work in the press.
The Six’s most publicized success involved a $2.8 million bank heist in Lincoln, Nebraska. Jamie cracked that case by having Gus Winkeler charged with the crime—not because he believed the former American Boy had anything to do with it, but because he hoped the killer could lean on underworld contacts to get the bonds back. Winkeler did just that, “thereby saving,” Jamie wrote, “five banks from possible closing.”
But not everyone approved of Jamie’s methods. Nebraska’s governor, disgusted Jamie would bargain with such a notorious criminal, called the deal “one of the blackest pages in the history of Nebraska.” Other investigations echoed the work Jamie had done for the Pullman Company, helping businessmen keep tabs on workers. In one case, a Secret Six operative posed as a labor organizer to spy on Standard Oil employees. He and Jamie gave their findings to the company for $5,000.
Such cases didn’t make the papers, preserving the Six’s antigangster image. In truth, they’d become a private police force for the wealthy, dangerously unregulated and hidden from public scrutiny. Tapping phone lines and paying off informers, they amassed information ripe for blackmail, even as Jamie staffed his group with castoff cops and criminals.
Among them was Shirley Kub, a former snitch for the Chicago P.D. now in her early forties. The stout, diminutive investigator was no looker, her spine bent by a childhood tumble. Savvy or perhaps crazy, she had a magnetic personality and a smooth tongue that, one police official noted, made her “a dangerous person to have around.”
Somehow Jamie fell under her spell. They made an odd pair—drawling six-footer Jamie and glib four-footer Kub. She did most of the talking, and he would light two cigarettes at a time for them. Although privately resenting Jamie for bringing such a disreputable character into the Six, Randolph stuck up for them in public.
“When digging in the mud,” Randolph told the Evening Post, “you use mud-digging tools.”
Kub won Jamie’s confidence with an outlandish story custom-fit for his vanity and ambition. She described a nationwide “Crime Syndicate” taking orders from a shadowy organization—“The System”—made up of leaders in business and government. The System extorted money from The Syndicate, sending those who couldn’t pay to prison.
Kub said The Syndicate, having resolved to expose The System, wanted Jamie—a man “absolutely clean and free from any double-crossing”—to do the jo
b. Playing on his yen to return to the Bureau of Investigation, Kub hinted The System included the man who’d kicked him out—J. Edgar Hoover. Expose Hoover, Kub said, and Jamie would be first in line to take over.
Breaking up The System became Jamie’s “crusade,” even as Kub sold info from his files to the underworld. State’s Attorney John Swanson—who’d inspired Randolph to establish the Six—suspected blackmail, and tapped Kub’s office phone.
When Jamie found out, he and Randolph launched a mudslinging campaign to foil Swanson’s reelection, damaging only the Six’s reputation. George Johnson, once a backer of the Six, now considered it untrustworthy.
Jamie laid off half the Six’s staff, claiming a lack of funds. Among those who lost their jobs was Jamie’s stenographer, Edna Ness. Her abrupt dismissal, apparently on Kub’s orders, drove a rift between Jamie and his onetime hero-worshiping brother-in-law, Eliot Ness.
The once-inseparable pair had chosen very different paths. Ness embraced the ethos he’d learned from August Vollmer—he might bend the rules to make a case, but he always saw himself as a servant of the public good.
Jamie let his ambition warp his judgment, his allegiance going to the rich men who paid his salary. As he let Kub take over his life, he seems to have grown apart from Ness.
William Froelich told the Bureau of Investigation in 1933 “that misunderstandings exist between [Ness] and his brother-in-law.” Though Jamie’s son Wallace remained close to Eliot, the in-laws were clearly on the outs—the two men seem not to have kept in touch after the early 1930s.
The Chicago Association of Commerce disbanded the Six in April 1933, replacing it with a “Co-ordinating Committee for Prevention of Crime and Civic Injustice.” Fearing information gathered by the Six might be blackmail fodder, the new committee burned the group’s records.
Jamie went into business as a private investigator, still working to expose The System and restore his good name. In 1935, wealthy residents of Minneapolis hired him to run a committee gathering dirt on local labor unions.
Once again, Jamie turned to Kub. She told him whom to hire as investigators, siphoning off anything they uncovered for blackmail fodder. Throughout, she kept Jamie hooked with the idea of toppling J. Edgar Hoover. But in early 1936, a former FBI agent exposed Kub’s lies to Jamie.
“I had the utmost confidence in Mrs. Kub’s sincerity . . . ,” Jamie wrote, “and in spite of the loss of my position and two years of unpaid effort . . . the greatest disappointment is that I could have been so deceived.”
He would later attempt a return to federal service, but the Treasury Department wanted nothing to do with him, his long history with Kub leaving his reputation in ruins.
In the months following Capone’s departure, Eliot Ness and Prohibition Administrator Malachi Harney launched an aggressive effort to shut down every brewery, still, and speakeasy in Chicago. They mapped out the city’s known watering holes—nearly two thousand—and promised to padlock them all. Their pledge prompted laughter from the city’s seasoned reporters, but Harney remained undeterred.
“We’ll close these places, positively, as fast as we can get around to it,” he said, adding they’d shuttered thirty speakeasies just that past weekend.
The raids and arrests came at a bad time for the already weakened Outfit. The Depression had driven down prices, but Ness’s raids forced the mob to keep charging $55 for a barrel of beer, squeezing their profit margin even further. With Capone in prison, Joe Fusco had stepped in to run the beer racket, but Ness kept shutting his breweries down.
By mid-July, Fusco and Bert Delaney had no choice but to slash wages. Truckers responded by going on strike.
“Matters became so desperate,” reported the Tribune, “that Fusco and Delaney themselves, gallantly arrayed in white linen suits, buckskin shoes, and panamas, were forced to get out and hustle a few barrels of beer.”
After that daylong indignity, they called another meeting. The drivers walked in to find a muscle-bound bruiser, “Mussolini,” cracking a whip and flanked by two hoods. Work resumed the next day.
That fall, Ness’s agents arrested two men delivering Capone beer to a South State Street speakeasy. The pair drove a Ford sedan converted into a camouflaged delivery vehicle. All the seats, save the driver’s, had been removed and a pair of skids installed under the door, so beer barrels could be rolled into and out of the vehicle.
“We have seized so many of their trucks that the syndicate is running short on finances,” Ness told the press. “Also, they probably thought they could fool the agents with these small automobiles.”
What they drove didn’t matter—the days of hauling contraband freely through Chicago’s streets were long over.
As the last full year of national Prohibition drew to a close, the booze business had grown so quiet Ness and his raiders had to go outside the city for action. In early September, they raided a brewery concealed on a farm in Lake County, Illinois, arresting four people and confiscating ten thousand gallons of beer. The brewery belonged to Bugs Moran, who had taken over Lake County’s gambling and liquor rackets since leaving Chicago, so well hidden the agents had to search for three weeks—by land and by air—to find it.
Then, on December 27, Ness’s men smashed a still hidden on the upper level of a barn on a dairy farm near Dundee, Illinois. After making seven arrests, the agents found themselves in a predicament.
“For there were forty dairy cows on the place,” reported the Herald and Examiner, “and neither Eliot Ness . . . nor any of his assistants was able to milk a cow.”
Fortunately, the arrested men made bond, getting back to their barn in time to give the cows much-needed relief.
On January 9, police pulled in Bert Delaney, onetime head of Capone’s $20 million-a-year beer business, who now insisted he was eking out a living as a trucker, hauling produce for eighty-five cents a barrel.
“Why pick me up?” Delaney complained. “Once I was in the bucks. Now the racket is done. Eliot Ness of the prohibition department put Capone out and everybody else has folded up. There’s no more money in anything crooked.”
Thanks in part to the deepening Depression, Ness’s strategy of bankrupting the gang was proving remarkably effective. But that would only work as long as the Outfit depended on alcohol to stay in business—and as long as booze remained illegal.
Delaney would spend the next few years trying to make his way as a labor racketeer, but success eluded him. He died in October 1938, shot in the back.
Mayor Anton Cermak seemed to be fulfilling his pledge to voters to cleanse the city of crime, assuring rich backers he’d do so before the World’s Fair opened. But to Frank Nitto and his associates, Cermak wasn’t battling crime—he was targeting only the gangs who’d backed his opponent, Big Bill Thompson.
The new mayor didn’t go after gangsters on his own West Side, or certain North Side gangs, either. Deals had been sealed and plans made to remove Nitto and take over Outfit bootlegging and gambling rackets, giving Cermak domain over vice citywide.
On December 19, Harry Lang and Harry Miller, bent cops assigned to the mayor as his “hoodlum squad,” raided the offices of the Quality Flour Company, an Outfit front on the fifth floor of 221 North La Salle.
Stupidly taking along a cop unaware of their intentions—and who would expose them in court—the two Harrys rousted half a dozen mobsters, including Frank Nitto.
Lang shot the handcuffed Nitto three times. As Capone’s successor fell, apparently mortally wounded, Lang gave himself a flesh wound and beat his victim to a doctor.
While Nitto clung to life in a hospital bed, Eliot Ness interrogated Louis Campagna and five other hoods arrested at the “flour company” offices. Campagna set the tone by remaining tight-lipped. The other gangsters followed his lead, refusing to give up any useful information. Before long, they all got out on bail.
Two months later, a Sicilian assassin fatally shot Mayor Cermak in Miami at a rally for President-elect Franklin Roosevel
t. History records the shooting as a botched attempt on FDR’s life, but Chicago gangland observers—including Frank Loesch and Judge John Lyle—always held that Giuseppe Zangara was on a suicide mission for the Outfit.
In late February 1933, Ness raided a major brewery occupying the top two floors of a South Side warehouse near the University of Chicago. With Ness in the lead, the raiders hurried up a fire escape and broke in through a window, discovering a $100,000 plant capable of turning out $10,000 worth of beer a day. The bust turned violent—two men inside assaulted a raider before their arrest.
Ness couldn’t have known it, but he’d never raid another Capone brewery. The federal government, with the best of intentions, was about to take away his primary means of fighting the mob.
A few days later, Franklin Delano Roosevelt took his oath of office. During the campaign, Roosevelt had promised to legalize real beer “just as fast as the Lord will let us.” His pledge had to wait amid the flurry of his first week in office, as he worked to pull the country out of an economic tailspin. Some of those measures required serious belt tightening, but the new president knew just how to win the public over.
On March 12, he told his aides: “It’s time the country did something about beer.”
Later that night, the president drafted a three-sentence amendment to the Volstead Act, redefining “intoxicating liquor” to exclude 3.2 percent beer. Cheers greeted the proposal at the Capitol; Congress passed it immediately. The Eighteenth Amendment remained in effect, but the beleaguered nation celebrated this as its symbolic end. A truck loaded with beer arrived at the White House under police escort, carrying a banner that proclaimed: PRESIDENT ROOSEVELT, THE FIRST BEER IS FOR YOU.
“Bars were opening overnight, with every other beer on the house!” Studs Terkel recalled. “In the midst of the Depression it was a note of hope that something would be better.”
Scarface and the Untouchable Page 50