Top Hoodlum

by Anthony M. DeStefano

  As good as freedom felt for Costello, the future held more legal entanglements. While he was at Milan, federal immigration officials had filed an action to strip him of his American citizenship and deport him. He also faced federal income tax charges accusing him of cheating the government out of over $73,000 in taxes from 1946 to 1949. Lawyers and courtrooms were going to be a constant in Costello’s life after prison and there was no guarantee that he would stay out of a jail cell and, if he did, would be able to stay in the United States.

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  Frank Costello’s next round of legal troubles were beginning well before he was even settled in Milan prison. It was in September 1952 that the U.S. Attorney General James P. McGranery said that he was beginning denaturalization proceedings against Costello. The grounds were that Costello had lied on his original application to become a U.S. citizen by not indicating that he had been arrested in his youth.

  “I believe it is incumbent upon me to prosecute matters of this type involving unsavory characters,” McGranery said.

  But the truth was that the government had a thin case against Costello and needed more. So in early October, FBI records revealed that the Immigration and Naturalization Service went on a feverish search for dirt on Costello that could torpedo his citizenship. A crucial piece of information related to the background and whereabouts of Frank Alden Goss and Harry C. Sausser, the two men who were witnesses on Costello’s petition for naturalization. Both Goss and Sausser had been old bootlegging associates of Costello and had been charged in the 1926 case that also snared William V. Dwyer. The INS wanted to try and prove that Goss and Sausser were disreputable characters and thus “incompetent” to be witnesses on Costello’s petition to become a citizen.

  The problem for the INS was that the files on the bootlegging case, which had been in the U.S. Attorney’s Office in Manhattan, had “disappeared.” Immigration agents tracked down Bruce Bielaski, the former special assistant to the attorney general who embarrassingly failed to nail Costello in the Prohibition case, but he apparently didn’t have any files either. The INS was getting frustrated because, apart from some generalities about Costello’s gambling and bootlegging activity, the agency couldn’t find any specifics and saw that part of Costello’s life being “a rather closed chapter.” (The author found some of the federal court files through the National Archives, including papers that contained reference to Goss and Sausser as bootlegging defendants.)

  The INS finally turned to the FBI. Agents did a records check to find what had happened to Goss and Sausser. The FBI also dug up old files on Costello from the jewelry-theft case involving private investigator Noel Scaffa. In that case, Costello, when he was arrested in 1935, gave federal agents a signed statement in which he explained his various business activities. Whatever the FBI found in the records search was enough because on October 22, 1952, the government filed a complaint in Manhattan federal court to begin denaturalization proceedings against Costello. The government charged that before the time Costello became a citizen on September 10, 1925, he had had a bad moral character, having violated the Prohibition laws, failing to file state or federal income tax returns, and conspiring to bribe Coast Guard officials. Officials also found, in part because of Costello’s testimony to the Senate, that the aliases he used such as “Frank Saverio” weren’t disclosed on his citizenship application.

  The move to revoke his citizenship was a blow to Costello because he considered himself to be a patriotic American. When he was arrested for contempt, two other younger men were being processed for draft dodging and Costello berated them for ruining their lives. Friends knew him as a man who relished being an American, on his terms of course. When he toured Manhattan, he would talk about the historic buildings and the stories behind them. But there was strong evidence that Costello had lied on his application on a number of points. It was not going to be an easy case.

  The denaturalization case would be put on hold after the Department of Justice in March 1953 filed an indictment against Costello for income tax evasion, claiming he didn’t pay his fair share of taxes on money he made over a four-year period. The case was one of those strange ones in which the Internal Review Service, frustrated by Costello’s lack of bank accounts and other records, had to reconstruct his income by looking at his expenses and then trying to estimate what income he needed—and didn’t report—to support that lifestyle.

  As it turned out, the government had help from an unwitting Loretta Costello. IRS agents John Murphy and Wilfred Leath had been poring over the Costello tax returns from 1946 through 1949 in the hopes of finding that the couple was spending more than they reported as income, which in those years averaged around $39,000. Loretta Costello had a check book and spent a fair amount of money on small luxuries, which added up to several thousand dollars. Then one day the agents came across a check for a little over $5 to a florist whose records showed that a small spray of plants had been sent to St. Michael’s Cemetery in Astoria.

  Had the agents followed the details of Costello’s life they would have known that the family had plots at the cemetery. A visit to St. Michael’s revealed the Costello family mausoleum, which was clearly visible from the road. As described in the book Treasury Agent: The Inside Story by Andrew Tully, agent Murphy discovered from the cemetery that Mrs. Costello had purchased the land for the mausoleum for $4,488, all paid in cash. The contractor who built the mausoleum talked readily to the agent but said he wasn’t commissioned to build the structure by Costello but rather a gentleman named Amilcare Festa, who turned out to be a masonry and stone contractor in Astoria, with a shop right next door to Costello’s mother’s home on Third Street, once a center of bootlegging activity.

  Festa told his story to Murphy and admitted that one day a young man approached him with plans for the mausoleum and asked if he could hire a contractor to build the structure. Festa saw a chance to make some money and was told by the young man that if he needed money to call a number that happened to be a direct line to Costello himself. Over a series of telephone calls, Festa said he told Costello what he needed and within hours received cash payments ranging from $3,000 to $5,000 to handle the costs of construction.

  The mausoleum costs were only some of the cash transactions the agents found that were traced to Costello and his wife. Digging deeper, the agents had found a number of businesses that had generated cash for Costello, including the Beverly nightclub in Louisiana, the Wall Street real estate properties, a jukebox company, and a television distribution company. Some of Costello’s investments, the agents discovered, were made in the names of others such as his brothers-in-law and his attorney George Wolf.

  Costello and his wife had also spent cash well beyond their living expenses and the cost of the mausoleum. The agents discovered that Costello made an $18,000 payment in cash to buy the Sands Point house and that his wife had invested $10,000 in a jukebox company in New Orleans and loaned it $30,000, again all in cash transactions. These disbursements mounted up and convinced the IRS that the Costellos were spending money beyond what they were showing in income on their returns.

  There was also another find that would prove embarrassing to Costello. The agents uncovered that he was paying $15,000 a year in living expenses—a Fifth Avenue apartment rental, car purchase, living expenses—for Thelma Martin, dubbed the gangster’s “good friend” who had no visible means of support, according to Tully. Witnesses said that Costello would often visit Martin and stay for hours at a time, posing as her husband. Doing their addition, the agents believed Costello and his wife spent over a four-year period some $200,000 more than they made and reported in income. This led to an evasion of over $73,000 in taxes, the government charged.

  The trial of Costello on the tax evasion case began on April 5, 1954, and the government needed to call over 150 witnesses in what was a herculean effort to prove its case. But before the jury was selected, the initial judge, Gregory F. Noonan had to disqualify himself because of comments he had made
a year earlier when he said about Costello: “If I had my way he would now be serving his time in the most common jail we could find.” Costello claimed Noonan was biased against him and although the judge insisted he wasn’t still decided to drop out of the trial. Judge John F. McGohey took over.

  Costello didn’t skimp on his defense, hiring noted Washington D.C. attorney Edward Bennett Williams since Wolf was going to be called as a witness. Among the witnesses was Festa, the Queens stone mason, who described the secret cash deals and subterfuge he took part in over the mausoleum. Bank officials testified that Costello gave nearly $30,000 in charitable contributions over a two-year period alone. Wolf also took the stand and said that Costello dealt with him only in cash and that he put the monies in a special account from which he wrote checks to cover expenses. Other bank officials said Costello’s special charity was set up with a deposit of $5,000 in his name.

  On May 13, a jury of seven men and five women convicted Costello on three of the counts of the indictment covering the years 1947, 1948, and 1949 but acquitted him on the count related to the 1946 tax year. In total, the jury found Costello had evaded about $51,000 in taxes. Four days later, McGohey sentenced Costello to five years in prison and fined him $30,000, socking him also with the cost of the trial. Costello was ready for a prison sentence and promptly filed an appeal in an effort to keep from being sent back to a penitentiary.

  The issues on appeal weren’t frivolous. It came out in court papers that the government had not included in its net worth analysis any of the assets of Loretta Costello. Also. Costello contended that it was unfair to attribute his wife’s expenses to him while at the same time not giving credit to non-taxable income she received. To Costello’s lawyers, the whole idea of “net worth-expenditure” prosecution was unfair.

  “The government says, in substance, that when a man spends money, the assumption is that it represents income in the same year unless the defendant comes forward and explains the expenditures. If he does not, he goes to jail,” Costello argued through his lawyers.

  Costello’s attorneys stressed at the trial that substantial sums of money were paid out by Loretta Costello and not by her husband, with the court never receiving evidence that she did not have money of her own. The net worth theory seemed to place an almost impossible burden on a man like Costello, his attorney argued.

  It would take months for the Second Circuit Court of Appeals to rule on Costello’s appeal and his attorneys asked in the meantime that he be granted bail. The lawyers stressed that “it is hard to believe that bail would be denied to the defendant . . . where the defendant’s name not Frank Costello. There seems to be a feeling that where Costello is concerned, constitutional rights are unimportant.” The appeals court didn’t buy the argument on bail and ordered Costello to stay in a local jail until the court decided his case.

  Finally, on June 18, things moved in Costello’s favor. U.S. Supreme Court Justice Robert H. Jackson said that his court had suddenly decided to hear four cases dealing with the net-worth theory of income tax evasion, which had been the very cornerstone of Costello’s prosecution. By granting hearings in those cases, the Supreme Court was saying there is a “substantial question” about the use of the net-worth theory, said Jackson. So, while the courts were taking the time to decide how the law would be applied in a case like Costello’s, Jackson granted him a $50,000 bail. This meant that even if the Second Circuit Court of Appeals shot down Costello’s appeal, he could remain a free man until the Supreme Court decided the larger issue of the net-worth theory.

  On April 5, 1955, almost a year after Costello was convicted on the tax case, the appeals court reversed his conviction on one count—dealing with tax year 1947—but upheld it on the two remaining counts. The result lowered Costello’s fine to $20,000, but his prison sentence of five years still remained the same. It was a small victory but wouldn’t prevent Costello spending at least some time behind bars.

  A month later, Costello tried another tactic to stay out of jail. He had his attorneys ask the government to suspend the five-year sentence because he was simply too ill to serve it and that if he did it would be essentially a death sentence. His age and health conditions, which included heart issues, had deteriorated since he was sentenced, said Costello. Then, in a bold move, Costello offered to drop his fight against the pending denaturalization proceeding and agree to leave the country voluntarily if the government agreed.

  Prosecutors didn’t bite on Costello’s offer, and on May 14, 1956, he surrendered to federal authorities to begin his five-year sentence. Costello bid good-bye to Loretta that afternoon and then took a taxi from his Central Park West apartment with his attorney Joseph Leary Delaney to the U.S. Courthouse at Foley Square, as Treasury Department agents followed them. At the courthouse, Costello walked into the office of the U.S. Marshals at 3:25 P.M., about thirty-five minutes early, posed for photographers and then was handcuffed for the trip to the local detention center to begin the journey to prison again.

  The lawyers Costello had hired to fight for him hadn’t been able to keep him out of jail, much less clear his name. He wanted to keep fighting, but the legal community seemed to think Costello was a hopeless cause. Looming ahead was the fight with the government to take away Costello’s citizenship and quite possibly deport him. Wolf didn’t think his client had a chance and counseled him to plead guilty and hope for leniency. Costello angrily told Wolf that if he couldn’t go to bat for him he wanted to get another lawyer.

  As it turned out, one of Wolf’s partners was Morris Ernst, a respected lawyer who hobnobbed with civil libertarians. It was during a cocktail party in Washington D.C. for the American Civil Liberties Union that Ernst openly complained about the way Costello had become something of a pariah in New York legal circles. Within earshot was a well-known attorney named Edward Bennett Williams, who had rocketed to fame defending another pariah named Senator Joseph McCarthy, the red-baiter. According to Williams’s biographer, Evan Thomas, upon hearing Ernst bemoaning Costello’s situation, the Washington lawyer said “tell Wolf to call me.”

  As Wolf recalled, he told Costello that Williams was the best man to handle his case but bluntly told him that the legal legend would “come high” in terms of the fee he would want. Costello’s response: “Let’s get him, while I can still afford it.”

  Williams seemed to relish unpopular clients and in Costello’s case he seemed to have a fascination with the old gangster’s lifestyle. The “New York demimonde in the 1950’s, the nightclubs populated by gamblers, professional players and show business personalities” thrilled Williams, wrote Thomas.

  Williams went to work quickly and used the arcane fact that the government had used wiretaps on Costello in 1925, mixing legal evidence with illegal evidence in such a way that it was hard to isolate the good from the bad elements of the government’s case regarding the naturalization issue. Williams also came up with the notion that Costello was sentenced incorrectly in the tax evasion case with too high a sentence. Costello should have been sentenced under a provision of the law that covers misdemeanors to no more than a year and a $1,000 fine, Williams said in a petition to the U.S. Supreme Court. Luck finally broke Costello’s way. On March 11, 1957, the high court not only agreed to hear his appeal but granted him bail after the government couldn’t come up with a reason for Costello not to be freed.

  The eleven months Costello had spent in captivity had not been good for him. He claimed to have lost fifteen pounds and suffered from a cold for months. His heart was also having problems. So, after posting a bond, Costello walked out of the federal detention center in Manhattan and went home to Loretta at the apartment on Central Park West.

  CHAPTER TWENTY-THREE

  “SOMEONE TRIED TO GET TO ME”

  WITH HIS NEWFOUND FREEDOM, Frank Costello was able to gravitate toward his old haunts and lifestyle. Costello invariably took taxis wherever he went. He could be found at the Waldorf-Astoria and the Biltmore Hotels where he would av
ail himself of the massage room. His favorite restaurants were numerous: Pompeii, Les Champs, the Copacabana, and the Stork Club. Costello was naturally followed by law enforcement, and the FBI files noted that while making his rounds he was “always circumspect and deferential.”

  But life for Costello was not going to be just socializing and eating out. The Mafia in New York City was entering a period of bloodshed. Since Costello had been away in prison and besieged by legal problems, the leadership of the family had shifted to Vito Genovese, who had originally been Luciano’s number two until he had to flee the U.S. because of a murder indictment in Brooklyn. Once Genovese returned to the country after World War Two, he jockeyed for power with Costello. During the 1940s and 1950s, Costello had made some significant alliances with other Mafiosi such as Albert Anastasia, Joe Adonis, his cousin Willie Moretti, and the politically connected Anthony Carfano. Genovese had to tread carefully if he ever thought of challenging Costello.

  Yet, over time Costello’s allies were removed from the scene. Moretti, who Joseph Valachi said suffered from syphilis and had shown signs of being too talkative and unpredictable, was gunned down in May 1951 in Joe’s Elbow Room restaurant in Cliffside Park, New Jersey. The killing was done after Genovese planted the suggestion during a meeting with others in the crime family, saying that Moretti was a liability now, Valachi recalled. Genovese even said that if he ever lost his mind that he would want to be killed as a precaution so “as not to bring harm to this thing of ours,” said Valachi.

  Costello’s striving to be legitimate appeared to keep him away from the volatile and dangerous world of narcotics which Genovese and others in the crime family were involved in. Genovese was clearly playing with fire in terms of drugs, something that would ultimately lead to his downfall. But against Costello, Genovese steadily seemed to be gaining the upper hand. In January 1956 another of Costello’s close associates, Joe Adonis, agreed to be deported and was sent back to Italy while his wife and family remained in the U.S. Adonis had wanted to fight the government claim that he was in the U.S. illegally but decided to fold up his tent and leave to live in the relative luxury of Milan.