Top Hoodlum

by Anthony M. DeStefano

  Costello made deals with a company in Chicago, the Mills Novelty Company, to make the machines for his New York-based Tru-Mint Company. Costello was able to make money because he was able to place the machines in candy stores, speakeasies, restaurants, and other establishments, which paid him part of the proceeds. The retail owner would also get a cut, as would the salesman of the machine who worked for Tru-Mint. Since the machines delivered a mint into the hands of the patron, Costello could plausibly argue that it really was just a candy vending operation, with somebody occasionally getting small change back. Costello is reported to have even provided small ladders so children could reach the machines and play.

  Costello had an estimated 5,000 machines in the city alone. But even his friend George Wolf said it was unclear how much Costello made off the operation. With the salesman and store owners getting a cut, Costello had to share the wealth. There was also political protection needed to assure the machines weren’t vandalized or removed by competitors, Wolf recalled. Police also noted that owners of the machines would provide money to establishments leasing the machines to cover any legal costs and fines.

  Costello had developed the political hooks to protect his businesses through his ties to Tammany Hall, the Democratic Party organization that by this time had control over much of the action in the city. Costello’s power with Tammany Hall was enormous and will be discussed a little later in greater detail this book. But as omnipresent as Tammany had been in so many levels of city government, the sea was starting to change and getting caught in the shifting tide were Costello’s slot machines.

  Fiorello H. La Guardia had been the consummate politician and civil servant. Born of an Italian father and Jewish mother, La Guardia served as a young man as a mid-level diplomat in Europe for the State Department before returning stateside in the period before World War One. After finishing law school, La Guardia entered politics and as a Republican served through the 1920s as an energetic and feisty congressman, mostly representing East Harlem. It was while he was in the House of Representatives that he made a failed run to become New York City mayor in 1929, losing terribly to incumbent Mayor Jimmy Walker. La Guardia had tried to make a political issue out of some land deals done with the city by Arnold Rothstein, Costello’s old financier, but the issue gained no significant traction.

  Walker would get mired in scandal and was forced out of office. La Guardia made a run for the job in 1932, putting together a coalition of Republicans and Independents, Socialists, Jewish and Italian voters, the latter group having been traditionally allied with Tammany. Despite the presence of another powerful candidate favored by President Roosevelt, La Guardia won the three-way election by a margin of just over 250,000 votes. La Guardia was a progressive who favored labor but didn’t always like what the government did, as was seen when he castigated Bruce Bielaski and his undercover Prohibition enforcement action during the Dwyer-Costello bootlegging trials. But that didn’t mean that Costello or the other Mafiosi were going to have an easy time of things under the “Little Flower,” as La Guardia was known. No, the new mayor was going to be a thorn in the side of Costello and a lot of his friends for a long time.

  La Guardia hated the gangster element. He thought the petty thugs of East Harlem and later the more entrenched Mafiosi were a stain against the Italian people. He also thought gambling was a vice that ruined families and sent children down the wrong road. As mayor, La Guardia didn’t have a great deal of police power, particularly in a city where Tammany and corrupt politicians were still deeply entrenched. The boss of Tammany was James J. “Jimmy” Hines, who was a friend of Costello and other gangsters, notably Dutch Schultz. Politician historians also point out that two of the city’s most important prosecutors, Manhattan District Attorney William C. Dodge and Brooklyn District Attorney William Geoghan had been elected with the approval of Hines.

  But La Guardia did control the police department and found a soul mate of sorts with William Valentine, who was appointed NYPD commissioner in 1934. Valentine had risen through the ranks and had earned a reputation as being an “incorruptible” cop who wanted to root out corruption, which he attempted to do as commissioner. As the Costello, Dwyer and other bootlegging trials had shown, corruption had reached many levels of the NYPD, and Valentine made it a mission to combat this. He also was well aware of La Guardia’s mission against gambling, and even before he took over as commissioner, in the rank of chief of detectives, Valentine took action under the command of then-commissioner and his immediate predecessor John Francis O’Ryan and La Guardia.

  However, there was a fly in the ointment so far as La Guardia going after the Costello slot machines, or anybody’s machines for that matter. In 1933, before La Guardia took office, the Mills Novelty Company, the Chicago-based supplier of the machines, got an injunction from a federal judge in Manhattan that restrained police from seizing the slot machines unless they were actually being used for gambling purposes. The key distinction for the court was that NYPD officials and city lawyers had conceded that the machines were not gambling devices “per se” and that police admitted that they were making illegal seizures. The state law would have to change in order for the cases to stick.

  An appeals court upheld the ruling and a clearly frustrated La Guardia vowed to fight all the way to the U.S. Supreme Court. La Guardia also carried out his own publicity stunt in February 1934 at a Brooklyn police station when, using the rarely used mayoral power to act as a committing magistrate, ordered a Brooklyn man who had been freed on charges of possessing an illegal slot machine rearrested. He tried to get the store owner to tell him who provided him with bail earlier.

  “I don’t know—the machine people I guess,” answered the perplexed store owner. He had been accused when an undercover officer put ten nickels in the machine and got ten slugs in return. The cop then used them to get a package of cigarettes and thirty-five cents in cash. It was a questionable case and seemed on shaky legal grounds, given the federal court rulings.

  “I supposed the machine people will bail you again,” said La Guardia. “If they are going through with this case I will welcome the opportunity of having them here.”

  The whole proceeding seemed like a stunt to give La Guardia a platform to criticize the federal court rulings and insist that the law prohibited the devices, as well threaten Costello and the other slot machine operators.

  “I want to serve notice now on the owners, operators, racketeers, criminals, the riff-raff and the pimps who own them, they will find no comfort now,” said La Guardia, who called the machines “mechanical larceny.”

  Other stunts done by La Guardia included his token smashing of seized slot machines—his blows of a sledgehammer barely dented them—before they were taken out to sea on a barge and dumped. To La Guardia, Costello’s machines were part of a fast-growing racket generating huge profits, although it was unclear how large. What really troubled La Guardia about what he called “the most menacing evil” was that children were losing their money and tempted to steal from relatives to feed the one-armed beast. The city subway system was also losing money because the slugs, some 720,000 in one year, would fit into subway turnstiles, as well as telephone coin slots which took in 250,000 of the tokens.

  La Guardia stuck to his guns and city lawyers finally won in a critical legal victory when the U.S. Supreme Court in 1934 said the case against the city on the slot machine injunction should be dismissed. La Guardia was ecstatic with the brief order from the court. Coupled with the fact that bills in the Albany legislature outlawed slot machines, the Mayor went after the operators with new found zeal.

  During a series of raids in May 1934, the NYPD hit Costello’s Tru-Mint Company, also known as the Tru-Mint Mills Novelty Company at 1860 Broadway, and took away over 500 slot machines, as well as records showing the company’s operations. The records led cops to three other Manhattan locations where hundreds more machines were found. Some of the devices contained slugs but many were apparently in—pardon th
e pun—mint condition and had not yet been used. In all, newspapers reported a total of 1,825 machines had been confiscated. Some of the machines had been stored in a space rented by Edward Costello.

  “There has been a stream of gold flowing into the pockets of racketeers which will now be stopped,” said Commissioner O’Ryan.

  The raids also rousted hundreds of bookmakers, slot machine operators, and others involved in gambling. Fixated as he was on gambling and slot machines, La Guardia would later claim victory and boast that the racket had been eliminated from the city. However, slot machines were only one aspect of gambling in New York, and bookmakers were all over the city, including one Stephanie St. Claire, an indomitable black woman who controlled a sizeable numbers operation in Harlem and kept Dutch Schultz, the Bronx beer baron, at bay when he tried to squeeze her out of her territory. For Costello, when one door was slammed shut another opened for him in a place where La Guardia couldn’t interfere and probably never thought would become a gangster refuge.

  * * *

  Huey Long was one of those flamboyant, boisterous politicians who while he was on the scene had a career that was simply unforgettable and earned a special niche in American history. Born in August 1893 in a dirt-poor part of Louisiana, Long distinguished himself as young man as a debater and won a university scholarship, only to have to give up the opportunity because he was too poor to cover the other necessary expenses. Long bounced around for a few years as a traveling salesman, attended a seminary, and went to law school where after only a year he convinced officials that he should be able to start his own practice. After setting up shop in Shreveport, Long started a law practice representing mostly poor plaintiffs. He also earned a reputation of taking on big corporations doing business in the state like Standard Oil and became an advocate for the common people against public utilities.

  In 1928, Long was elected governor of Louisiana and pushed programs that were progressive for the day: a free textbook program for school children and adult literacy courses. Such programs were popular in a state like Louisiana, which was generally poor and dominated by some wealthy businesses that for decades had their way in the state. When in 1929 Long proposed a five-cents-a-barrel tax on oil produced in the state to fund his social programs, a move erupted to impeach him. The impeachment effort failed and only emboldened Long’s drive to advance his progressive and populist agenda.

  In 1932, Long ran for one of Louisiana’s U.S. Senate seats and won. Once in Congress, Long, like Frank Costello would in his own way, worked to get Roosevelt elected president. Historians credit Long with helping Roosevelt retain in his camp some wavering state delegations during the Democratic Party convention, which ultimately gave Roosevelt the candidacy. As a populist, Long backed Roosevelt’s New Deal but often ended up criticizing the President when he didn’t seem to be doing things fast enough or appeared to sell out to business interests. He was never shy about speaking his mind and cut his own wild path through Washington.

  “Long strode into the national arena in the role of the hillbilly hero and played it with gusto,” wrote historian David Kennedy. “He wore white silk suits and pink silk ties, womanized openly, swilled whiskey in the finest bars, swaggered his way around Washington, and breathed defiance into the teeth of his critics.”

  Being a boozer, Long got into his share of trouble and he did it in a big way in the small, upper-crust community of Sands Point on the North Shore of Long Island. It was during a charity ball and dinner at the Sands Point Bath and Country Club in August 1933 amid the long gowned and staid women that Long made his own special spectacle of himself. As Long biographer Richard D. White Jr. reported, the Senator “got rip-roaring drunk, flirting with women and insulting other guests,” including calling a black musician a “coon” and a “shine.” To top things, when Long went to the bathroom he wasn’t good with his aim as he stood at the urinal and apparently peed on the shoes of a man standing at the next commode. The offended gentleman apparently slugged Long, who eventually left the bathroom with a swollen and bleeding left eye, said White.

  In an account he gave to Associated Press of the incident and published in The New York Times, Long said the incident was a “ganging” by up to four strangers who he said struck him from behind and then continued to strike him with “a knife or something sharp.” Huey also took his lumps in the Louisiana newspapers for the Sands Point incident and it would dog him when he tried to give speeches. He got so angry with reporters that he told his bodyguards to “bust ’em up” when they tried to take pictures. The boorish conduct soured many Louisianans toward Long—not so Frank Costello.

  As the story goes, Costello, facing La Guardia’s unrelenting campaign against slot machines, which survived the purge and were mothballed and producing no income, saw an opportunity in Louisiana. Costello apparently had met Long in a nightclub and talked about bringing the slots to Louisiana. What happened next depends on who is doing the talking. As Costello would remember it in 1940 (five years after Long was assassinated in 1935), he and the Senator met in 1935 and agreed that Costello could bring one thousand slot machines into New Orleans, provided he paid Long’s political organization a yearly fee of $30. Testifying in 1951 before a Senate investigating committee, Costello told essentially the same story, claiming that the money he paid out was supposed to go to a charity in Louisiana.

  Others question whether Long would have met Costello without having an intermediary set up the deal. It was also open to question whether Long, who was in the U.S. Senate at the time and not in local Louisiana government, had the connections to assure the deal worked the way Costello said it did. Author Dr. T. Harry Williams, who penned the 1969, Pulitzer Prize-winning biography of Long titled Huey Long, thought Costello was actually shielding someone else.

  “His overeagerness to connect his entrance into the New Orleans slot-machine business with Huey suggests that he was trying to shield somebody who had permitted him to come into the city later,” opined Williams. “But there was an even bigger hole in Costello’s statement. Slot-machine operators never went into a city without concluding a ‘protection’ agreement with the municipal government; they agreed to pay a specified sum of money in return for a promise that the police would not raid the places where the machines were installed and seize them. In 1935, Huey could not provide this protection in New Orleans, for the city government was controlled by his bitter enemy Semmes Walmsley, who would have rushed to confiscate any machines operating under Long sponsorship.”

  But whomever he cut the deal with, Costello’s slot machines did enter New Orleans openly and for a time flourished. It was in 1935 that both Costello and his friend Philip Kastel, who had run a slot machine operation in Manhattan before La Guardia went after the businesses, traveled to New Orleans to check out the market for slots. Kastel and Costello had shared offices at Tru-Mint and had worked together for years. Once in New Orleans, Costello wasn’t impressed. He had apparently told Kastel that he had spoken to Huey Long who told him of the license or tax on each machine, which was to go to a special fund. Records later submitted to a federal tax court showed that Costello was turned off by the prospect of such an arrangement, didn’t want to participate but encouraged Kastel to go ahead if he wanted.

  Kastel, born on Manhattan’s Lower East Side, had a reputation in New York of being a con man who reportedly ran some stock market bucket shops with Arnold Rothstein back in the 1920s and did his own bit of swindling. He dodged an extortion rap back in 1918 when the charges were dismissed. But he got involved in one of the Roaring Twenties’ big stock swindles involving the brokerage firm of Dillon & Co, located at 32 Broadway at the tip of Manhattan. As would be revealed in the firm’s bankruptcy case, the firm used as its namesake one Daniel Dillon, a writer of market newsletters and a former war correspondent, who signed a contract with Kastel and two other investors who provided the initial working capital. For lending his name and respectability, Dillon was to get a salary of $200 a week and five percen
t of the profits. Kastel was to take 65 percent of the profits and the other two investors, who happened to be swindlers, were to split the remainder of the earnings.

  As things turned out, according to a report filed by a bankruptcy trustee, Dillon & Co. was something of a Ponzi scheme. When the company failed in September 1921, it had assets of $3,000 and debts to customers of $575,000. Just prior to the filing of the bankruptcy, Kastel called a meeting in his private office and got a drunk Dillon to sign over cash, securities, and notes. Then Kastel disappeared after having received more than $150,000 of the firm’s money. The trustee found that most of the money received from customers had been “squandered in the profligacy of upper Broadway, in cabarets, restaurants, road houses and on race track touts, moving picture actresses, and gambling.” In short, the kind of world Costello, Luciano and even Damon Runyon were very familiar with.

  Neither Dillon nor Kastel or anybody else in the firm was a member of the New York Stock Exchange. Dillon & Co was unable to earn any money as a legitimate stock brokerage and attempted to use other firms that were members to make transactions. Of the over $575,000 collected from customers, which included gullible families with children living outside of the New York City metropolitan area, less than $219,000 was actually used to buy stocks, said the trustee. The money not used for securities went all over and was used for housekeepers, fur coats, monogrammed cigarettes, as well as alimony. Some cash was even traced to Saratoga, New York, for betting on horses.

  Kastel’s reputation for the nightlife, funded by his unwitting stock customers, earned him the sobriquet “Dandy Phil.” According to Leonard Katz, in his 1974 book about Costello titled Uncle Frank, Kastel loved putting up a good front.