Robert Isham Randolph had long argued legalizing beer would deal a fatal blow to organized crime. Now the president put that thinking to the test, claiming the previous summer “that this is a way to divert $300 million or more by way of taxes from the pockets of the racketeers into the Treasury of the United States.”
But the bootleggers had burrowed in so deeply, they naturally had a head start on legitimate competition. And with their illicit brewing operations in tatters, Chicago gangsters saw the return of legal beer as a much-needed source of new revenue.
In the spring of 1933, Ness told reporters the bootleg gangs would do whatever it took to control the beer business. Already federal officials had reports of gangsters telling Chicago retailers to buy Outfit beer “or else.”
As Ness saw it, the government’s best hope of beating back the mob lay in controlling who got licenses to open up legitimate breweries. Gangsters might use men with clean records as fronts, or take over brewing companies by buying up stock—the feds had to vigorously investigate possible mob ties, or else hand the industry back over to the gangs.
“Only a dictator for the breweries,” Ness said, “can meet the problem.”
That dictatorship fell to Ness’s old boss, E. C. Yellowley, who promised to investigate applicants for brewing permits “from top to bottom.” Once again, Yellowley’s leadership left much to be desired. In 1934, he failed to stop Joe Fusco’s distribution company, Gold Seal Liquors, from getting its own license. Yellowley later personally renewed the permit, citing evidence of Fusco’s criminal activities as “not very strong.”
Ness and the Untouchables had previously identified Fusco as a key Outfit leader, but the hood’s role in the racket remained unproven, because George Johnson never brought their case to trial. Now this onetime “public enemy” claimed he’d gone legit, and no one could prove otherwise.
So had Nick Juffra, the onetime beer baron Ness arrested during Capone’s trial, who soon found work with a liquor wholesaler.
Through such semilegitimate businessmen, organized crime infiltrated American commerce in the post-Prohibition era. Fusco and his associates locked up a sizable chunk of the midwestern beer and liquor market, enforcing their monopoly with pipe bombs. By the early 1950s, Fusco took in a reputed $30 million in gross annual sales.
As the head of the Chicago Crime Commission observed in 1952, “The repeal of Prohibition has not interfered with the lucrative nature of Chicago’s liquor and beer industry insofar as some of Al Capone’s friends are concerned.”
By locking Capone up for income tax evasion, the feds proudly and publicly plucked the largest criminal weed in Chicago, but left the root structure intact.
Within days of legal beer’s return, Michigan became the first state to ratify the Twenty-First Amendment to the Constitution, to repeal the Eighteenth. As the amendment raced toward ratification, its success a foregone conclusion, the Prohibition Bureau faced extinction; deep cuts whittled their agents down to a select few—mostly “elders.”
Despite his youth, Ness managed to hang on. He kept working with his usual determination, in June raiding his biggest still yet. Concealed on the top floors of an iron company warehouse, this $250,000 “cooker in the sky” was reportedly the last major Outfit distillery, its demise marking the end of Ness’s anti-Capone campaign.
The new attorney general, Homer Cummings, had plans for what remained of the Prohibition Bureau. He dreamed of creating a new federal law enforcement agency, an “American Scotland Yard” making war on organized crime. J. Edgar Hoover’s Bureau of Investigation fit the bill, but remained small and largely unknown, employing just 326 agents.
Cummings needed more men, and the Prohibition Bureau had them to spare, even at reduced strength—1,200 agents who, unlike Hoover’s, had experience carrying guns. On June 10, Roosevelt signed an executive order merging both bureaus into a new Division of Investigation. But Hoover bristled at the thought of so many corrupt and inept dry agents flooding his ranks.
“They would have swamped us,” Hoover said, “and undone all the work we had done to make the Bureau honest, sound, and efficient.”
Then on June 17, bandits opened fire on a group of law enforcement officers in Kansas City, killing one of Hoover’s agents. This “Kansas City Massacre” galvanized the nation, spurring Cummings and Hoover to build their “super police force” without castoffs from the Prohibition Bureau. When Hoover became director of the new Division on August 10, he sequestered the dry agents into their own Alcoholic Beverage Unit.
Ness now reported, at least indirectly, to J. Edgar Hoover, but he abhorred the Prohibition ghetto and hoped to join the Division’s elite special agents, the G-men doing battle with bandit gangs roaming the Midwest.
Hoover’s agents, like Ness, were mostly college boys, typically with law degrees. But their book-learning didn’t always translate into street smarts. Too many lacked Ness’s law enforcement experience and ability to keep a cool head. In the coming months, they would shoot multiple innocent bystanders and repeatedly let suspects slip away.
With Hoover sorely needing competent men, Ness’s background and temperament made him an ideal candidate. But in trying to win that job, he would compromise the one trait that always set him apart: his straight-arrow honesty.
After a miraculous recovery from his gunshot wounds, Frank Nitto went back to furthering Capone’s plans to muscle in on legitimate industry by taking over labor unions. He displayed little of the Big Fellow’s trademark charm and empathy; no newsmen ever wrote misty-eyed profiles of Nitto.
“If you don’t do like I say,” Nitto told one union official, “you’ll get shot in the head. How would your old lady look in black?”
Through such strong-arm tactics, the Outfit came to control Chicago’s bartenders’ union, drumming up business for their legitimate breweries and distilleries.
“We’ve got the world by the tail with a downhill start,” Nitto said in the summer of 1933.
Having seemingly learned from Capone’s mistakes, Nitto kept a low profile—refining the organization, shaving off its rough edges to create the modern Syndicate. With the same cold ruthlessness marking the murders of Hymie Weiss and Joe Aiello, Nitto wiped out the gunslingers who had made the Beer Wars so bloody.
Gus Winkeler of the St. Valentine’s hit squad bought it in October 1933, shot in the back on a North Side street. Another American Boy, Fred Goetz, died in a shotgun ambush a few months later. Winkeler’s wife, Georgette, saw the killings as an attempt to stifle any and all opposition.
With the deaths of these “independent bastards,” as one Outfit member called them, others rose to take their place, men more in Nitto’s businessman mold—addicted to their work, scorning the spotlight, undistracted by the pleasures and passions leading to Capone’s downfall. Their ranks included Louis Campagna, Joe Fusco, and up-and-comer Paul Ricca, who emerged as Nitto’s protégé, as Nitto had once been Capone’s. Above all, they avoided the kind of publicity that painted a target on Capone’s back.
Racing remained a major source of Outfit revenue, thanks to the ever-resourceful E. J. O’Hare. After all his talk of separating himself from the mob, O’Hare only got in deeper following Capone’s conviction.
As much of the country made Depression ends meet, O’Hare raked in millions. By 1939, he controlled dog- and horse-racing tracks in six states, with Nitto a silent partner in at least three. But Artful Eddie’s ambition outstripped his judgment. On November 8, 1939, after trying to cheat Nitto out of his share, O’Hare was shot to death while driving home from his Cicero track.
Only then did the Tribune reveal O’Hare’s role in the Capone investigation. O’Hare’s motives, they said, were twofold: to save himself from prosecution on tax charges, and to protect the Outfit from damage caused by Capone’s notoriety. Raids, arrests, and high bail bonds “put a serious crimp in the gang’s revenue,” said the Trib. “It is significant that O’Hare’s real rise to power in the gang began with Capone�
��s departure for prison.”
Publisher Robert McCormick nonetheless found a way to repay O’Hare for his role in Capone’s conviction, pushing in 1949 to name Chicago’s international airport for another Ed O’Hare—son Butch, the first navy flier to receive the Medal of Honor in World War II.
The inquiry into the O’Hare murder uncovered a familiar name: Leslie Shumway. Investigators were shocked to discover the bookkeeper whose testimony landed Capone in jail had worked until recently as the pari-mutuel betting manager at Sportsman’s Park, the Cicero racetrack run by O’Hare under the Outfit’s aegis.
Unlike O’Hare, Shumway’s role in Capone’s downfall was no secret—he had testified before the gangster in open court. Yet here he was, less than ten years later, working amid underworld characters known for having very long and unforgiving memories. And he would continue to work in Outfit-affiliated tracks until at least 1950, when his employer claimed that Shumway’s presence proved he had no gangland ties.
“If I had any strings on Capone,” the track owner said, “or he had on me, is it likely that Shumway would be working in that track?”
Likely or not, Shumway stayed in Miami, dying in 1964 at the ripe old age of eighty-six. His continued association with the Outfit reflected their approval of what he’d done in 1931—fingering Capone without touching other gangsters. The little bookkeeper had, after all, played a key role in a coup d’état, removing a mob boss whose notoriety and increasingly erratic leadership threatened the entire organization.
The men who took over the Outfit benefited from, and welcomed, Capone’s departure. Although rumors would persist of Capone directing the gang from jail, in reality he was suddenly cut off after 1932—a surprising circumstance, given that prison bars had never stopped him from running his rackets before.
Instead, Frank Nitto slid quickly onto the throne, showing little further interest in his old boyhood friend from Brooklyn. When coupled with Shumway’s otherwise inexplicable survival, Nitto’s behavior during and after the investigation suggests a possibility never seriously considered by gangland observers—that he used the income tax case to get Capone out of the way.
As Frank Wilson told the story, O’Hare acted alone, informing on Capone out of love for his son. But O’Hare passed along information he couldn’t have known on his own, and the Tribune referred to at least one other “gang associate” who informed along with him.
That Nitto, and perhaps other gangsters as well, also served as a conduit to the tax investigators seems obvious. Why else would Nitto meet with Wilson’s two key informers, O’Hare and St. Louis reporter John Rogers, at Leavenworth in March 1931—less than two weeks after Shumway testified before the grand jury?
Equally telling is Nitto’s refusal of Gus Winkeler’s offer to fix Capone’s trial. As Winkeler explained it, Nitto and his top aides wanted Capone gone so they could be in charge.
Nitto might have been in league with Johnny Torrio, perhaps doing the elder gangster’s bidding. Torrio had long desired a peaceful, profitable, smoothly operating Outfit; after reclaiming certain powers from Capone at the Atlantic City conference, he’d surely seen how Chicago’s gangsters got along while the Big Fellow was locked up elsewhere. Maybe that brief stay behind bars convinced Torrio that his former protégé had to go—for the good of the organization. And with Capone safely behind federal bars, Torrio finally got his wish.
In their single-minded determination to topple Scarface, George Johnson and the tax investigators had unwittingly facilitated the transfer of power from Capone to Nitto, allowing the Outfit to go underground and evolve into something far more insidious.
Whether Nitto informed on Capone directly, or hid behind O’Hare and Rogers, will likely never be known. But what is known is this: on May 5, 1931, one month before Capone’s indictment on tax charges, Frank Wilson of the Intelligence Unit met with Nitto at Leavenworth. And five days after Capone was sentenced to prison, Wilson’s boss, Elmer Irey, called the head of the parole board to urge Nitto’s early release.
Perhaps Irey simply wanted to abide by the plea bargain Johnson had struck, believing Nitto sincerely intended to abandon his criminal career. Or perhaps his call was meant as a reward for services rendered.
In the summer of 1933, Eliot Ness made himself a presence around the office of flamboyant Illinois senator J. Hamilton Lewis, who shared the Bankers Building with the Chicago branch of the Division of Investigation.
Ness appears to have been trying, as Alexander Jamie had so often done, to make a political contact who could help him switch jobs. Democrat Lewis had long controlled federal patronage in Ness’s home state, making him just the man to see about pulling strings with the Justice Department.
That August, Ness met frequently with Lewis’s secretary, a man known to authorities only as Mr. Kemp. During one visit, Kemp introduced Ness to Walter Newton, a young Ninth Ward precinct captain who worked as a Bankers Building elevator operator. Newton hoped to help a constituent, Joe Kulak, a Polish immigrant who ran an illicit still.
After promising to get payoff-seeking cops off Kulak’s back, Newton went to see Kemp, who agreed to arrange protection for a few hundred dollars a month. Days later, Newton came back to make sure the deal was squared away and was assured it was. Ness, sitting a few feet away, apparently took no notice of the conversation.
But when the police kept shaking Kulak down, Newton returned to the senator’s office and once again found Kemp with Ness. When Newton asked why the still hadn’t been protected, Kemp “patted Mr. Ness on the back and told him to give the boys a break.” Then he wrote down Kulak’s address and handed it to Ness, who slipped it inside his jacket and told Kemp “that it would be OK.”
Newton went downstairs and waited for Ness to get off the elevator, then hit him up for more information. Although Ness had no authority over the cops harassing Kulak, he said (according to Newton) “that if the police bothered Joe, there will be no case on it.”
This was a statement of fact—with the dry law limping toward its demise, Kulak faced a slim chance of prosecution. When Newton asked how many dry agents remained in Chicago, Ness replied “very few”—again, the obvious. Newton assumed Ness expected a bribe, and offered to “take care of him.” But Ness “shook his head and didn’t answer.”
Ness had never much cared about busting small, lone operators like Kulak, who didn’t make nearly enough money to contribute more than a trickle to the flood of Prohibition-era corruption. Better to go after the major players.
But Newton took his words as a promise, reporting back Ness had them covered. To make it official, Newton gave Kulak a handwritten note directing anyone who raided the still to see Kemp “or E. Ness.”
Ness did nothing to shelter the still—six Prohibition agents raided it a few weeks later, placing Kulak under arrest. The agents found Newton’s note on him, with its damning implication Ness was on the take.
The Unit launched a full investigation, interrogating both Newton and Kulak. Neither said anything suggesting Ness was corrupt, but Newton’s statement indicated Ness at least knew of the still. The new Chicago Prohibition office chief, Robert Coyne, questioned Ness on August 28.
The two men had once been rivals—Coyne had dated Edna Stahle before she became Mrs. Ness. Now the new chief held her husband’s federal fate in his hands. Although no report on their conversation survives, Ness never faced any formal disciplinary action—nor, apparently, was Kulak prosecuted.
But within a month, the Unit transferred Ness to the Cincinnati office, his first posting outside Chicago. This may well have been a penance—if Ness hadn’t exactly crossed a line, he’d come dangerously close, led astray by his own ambition. In his determination to move up the federal ladder, Ness had stumbled, attempting the brand of Chicago politicking he’d always before rejected—only to have it backfire terribly.
The man who spurned Capone’s offer of $2,000 a week still wouldn’t accept a bribe to protect anyone. But he would, with reluctan
ce, let slip a small-timer like Kulak, who was breaking a law soon to be defunct, if it meant staying in the good graces of a powerful friend.
The transfer came just as Ness’s marriage was fraying. Edna felt her husband’s extended family, the Jamies, thought Eliot had married beneath him—Edna might be good enough to be Alexander’s secretary, but not his sister-in-law. Her firing from the Secret Six must have increased her resentment, with Eliot’s closeness to Jamie’s son, Wallace, an ongoing source of tension.
On weekends, Ness often spent his time with Wallace, not Edna; when she’d suggest an evening out, he’d be too tired, saying she didn’t like spending time with his friends anyway. Feeling abandoned, Edna stayed in touch with Robert Coyne, her old beau, “a very dear friend.”
Edna took to sitting around the Chicago Prohibition office where she’d once worked, waiting for Eliot. Her husband, she confided emotionally to another agent, “apparently preferred to associate with other people instead of being with her.” Eliot arrived soon after, walking wordlessly by. Later, when he was transferred to Cincinnati, Edna stayed behind.
Ness seemed determined to get back home, arranging with a friend in the U.S. Attorney’s office for temporary Chicago assignments. But his best chance at a permanent posting remained a transfer to the Division of Investigation, and he put in a formal application that fall.
He reached out for a recommendation from ex-prosecutor George Johnson, now a former judge. Herbert Hoover had promoted Johnson to the federal bench in 1932 as a reward for Capone’s conviction. But with Hoover voted out, Senate Democrats refused to confirm Johnson.
Now in private practice, Johnson wrote J. Edgar Hoover, praising Ness’s intelligence and experience. The Untouchables, Johnson wrote, “did a splendid piece of work. [Ness’s] integrity was never questioned and I recommend him to you without reservations.”
The Director promised to review Ness’s application personally, then ordered his Chicago office to run a full background check, giving it “preferred attention.” The agents sifted through Ness’s scholastic record and questioned former coworkers. Johnson, William Froelich, Dwight Green, and others gave glowing recommendations.
Scarface and the Untouchable Page 51