BFTN #8 2018-05-28
May 28, 2018
BFTN #9 2018-06-04
June 4, 2018
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Part FIFTEEN of our series on the WAR ON DRUGS – Arnold Rothstein invents the modern drug racket.

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Show Notes:

  • Arnold Rothstein.
  • As someone pointed out, Hyman Roth in The Godfather Part II is actually based on Meyer Lansky, not Rothstein.
  • In the film, Roth’s original name is Suchowsky.
  • When he was a toddler, his father saw him standing over his sleeping brother with a knife.
  • As a small boy, he was a freak with mathematics.
  • From the age of twelve, he knew that his father, who was a respected member Manhattan’s Jewish community, a wealthy cotton goods dealer, known as “Abe the Just”, wouldn’t dream of carrying cash from the setting of the sun on Friday night to the end of the Sabbath the next day, so Arnold stole the money from his wallet, played craps, and won so often and so big he could always replace the cash without anyone’s noticing.
  • He left home at 17 to become a travelling salesman and gambler.
  • “There are two million fools to one brainy man.”
  • And he became known as “The Brain”
  • He learned the greatest truth of gambling: the only way to win every time is to own the casino.
  • So he set up a series of underground gambling dens across New York City, and when they got busted, one after another, he invented the “floating” craps game: a never-ending craps shoot that skipped from shadowy venue to dusky basement across the island.
  • He carried the cash on him, up to a hundred thousand dollars at a time, and he obsessively counted the money, by hand, again and again.
  • When he met his future wife at a party,  he told her he was a sporting man.
  • “I thought that a sporting man was one who hunted and shot,” she wrote. “It wasn’t until later that I learned all a sporting man hunted was a victim with money, and all he shot was craps.”
  • On the night of their wedding, he told her he would need to pawn her engagement ring to free up funds, and she handed it over without complaining.
  • He guarded his money without a smile. One day, a gambler Rothstein knew called him long distance. He said was broke and desperately needed five hundred dollars to get back to New York and back in the game.
  • “I can’t hear you,” Arnold said into the phone. The gambler kept repeating his request. “I can’t hear you,” Arnold repeated. The caller fiddled with his phone until the operator interrupted:
  • “But Mr. Rothstein, I can hear him distinctly,” she said.
  • “All right,” Arnold replied, “then you give it to him,” and hung up.
  • At the racetrack, he would pay jockeys to throw the race, and gradually, year by year, he took this to a higher level.
  • The bets got bigger and his winnings got more improbable, until he finally reached the biggest, most watched, most adrenaline-soaked game in America: the World Series.
  • Fifty million Americans were listening in 1919 when, against all the odds and every prediction, the Cincinnati Reds beat the far-and-away favorites, the White Sox.
  • Long after the gasps were silent and the stadium was full only of echoes, the reason emerged: Rothstein had paid eight White Sox players to throw the match.
  • All eight players were charged with fraud—and all were mysteriously acquitted.
  • Because Arnold had bought off enough cops and judges.
  • And then Arnold was handed two of the largest industries in America, tax-free.
  • He immediately spotted that the prohibition of booze and drugs was the biggest lottery win for gangsters in history.
  • There will always be large numbers of people who want to get drunk or high, and if they can’t do it legally, they will do it illegally.
  • “Prohibition is going to last a long time and then one day it’ll be abandoned,” Rothstein told his associates.
  • “But it’s going to be with us for quite a while, that’s for sure. I can see that more and more people are going to ignore the law …. and we can make a fortune meeting this need.”
  • He realised that people would be so desperate they’d pay good money for watered down booze.
  • And he made a fortune out of prohibition.
  • Then, when FDR realised the United States treasury needed to tax booze again to get out of the Depression, Rothstein turned to drugs.
  • He knew they would stay prohibited for a lot longer.
  • At first the street peddlers had controlled the trade, and they got their supply in one of two ways: by staging heists of legal opiates as they were delivered to hospitals, or by ordering in bulk from legal suppliers in Mexico or Canada under fake company names.
  • In 1922, Congress cracked down on this.
  • Rothstein saw that these small-time crooks were missing the bigger opportunity anyway: this, he concluded, was a task for industrial manufacturing and industrial-scale smuggling.
  • He sent his men to buy in bulk in Europe, where factories could still legally make heroin, shipped it over, and then distributed it to street sellers across New York and beyond.
  • For his system to work, Rothstein had to invent the modern drug gang.
  • There had been gangs in New York City for generations, but they were small-time hoodlums who spent most of their energy beating each other up.
  • Arnold’s gangs were as disciplined as military units, and he made sure they had only one passion: the bottom line.
  • That is how, by the mid-1920s, Rothstein and his new species of New York gang controlled the entire trade in heroin and cocaine on the Eastern seaboard of the United States.
  • BTW, Rothstein didnt use drugs, drink or smoke.
  • Or even chew gum.
  • When it came to addicts, Rothstein was as repulsed as Anslinger.
  • The day he found one of his associates sucking on an opium pipe, he threw him out.
  • But it’s not hard to see why Arnold stuck with his new trade.
  • The World newspaper reported: “For every $1000 spent in purchasing opium, smuggling it into the country and dispensing it, those at the top of the pyramid collect $6000 or more in profit.”
  • Arnold soon discovered that when you control the massive revenue offered by the drug industry, individual police and politicians are easy to buy.
  • His profit margins were so vast he could outbid the salaries cops earned from the state.
  • “The police,” a journalist wrote in 1929, “were as gracious to him as they were to a police commissioner.”
  • This is why every time Arnold Rothstein was caught committing violence, the charges “mysteriously” vanished.
  • Arnold tamed the police with an approach that, years later, would be distilled by his successors, the Mexican drug cartels, into a single elegant phrase: plato o plomo.
  • Silver or lead.
  • Take our bribe, or take a bullet.
  • Every now and then, there would be a police officer who refused to accept these ground rules.
  • When two detectives broke into one of Rothstein’s illegal dens one night, he shot at them, suspecting they were robbers.
  • The judge dismissed the case.
  • A journalist asked: What’s “a little pistol practice with policemen as targets” when you are Arnold Rothstein?
  • Rothstein also, of course, had people killed.
  • One day, Arnold met in a hotel on East Forty-Second Street with Captain Alfred Lowenstein, a financier so rich that when the Germans seized Belgium during World War One, Lowenstein reputedly offered to buy it back with his own cash.
  • He was the richest man in Europe and the third richest man in the world.
  • He was born to a wealthy Belgian-Jewish banker, became a banker himself, and ended up owning electricity companies across Europe and silk businesses.
  • At his peak in the 1920s he was worth hundreds of millions of dollars.
  • He also offered to loan the Belgian government $50 million interest free at one point, to help stabilise their currency.
  • With Rothstein, the captain signed the biggest drug deal in history up to that point, a plan to mass-market a range of opiates to a growing new market.
  • Soon after making the pact, On the evening of 4 July 1928, he got on his private plane, a Fokker F.VII trimotor, along with six other people, and flew to Europe.
  • When the plane landed, Captain Lowenstein was not on board.
  • The staff said he had gone to the toilet and not come back.
  • The New York Times reported that “it was practically impossible to open such a door if the plane were flying at ordinary cruising speed.”
  • Presumably, whatever Rothstein got in the deal up front, he kept.
  • BTW, one researcher in the 80s decided the pilot had thrown him out of the plane in a secret deal with Lowenstein’s daughter, who wanted to inherit the family fortune.
  • Unfortunately, it turned out, after he died, that he was highly leveraged and his death created a collapse in the company’s shares.
  • After Prohibition, everyone in government must have understood that the supply of drugs would end up in the hands of criminals.
  • When a popular product is criminalized, it does not disappear.
  • Instead, criminals start to control the supply and sale of the product.
  • They have to get it into the country, transport it to where it’s wanted, and sell it on the street.
  • At every stage, their product is vulnerable.
  • If somebody comes along and steals it, they can’t go to the police or the courts to get it back.
  • So they can only defend their property one way: by violence.
  • But you don’t want to be having a shoot-out every day—that’s no way to run a business.
  • So you have to establish a reputation: a reputation for being terrifying.
  • People must believe that you are so violent and brutal that they are too afraid to even try to pick a fight with you.
  • You can only establish that reputation with attention-grabbing acts of brutality.
  • The American sociologist Philippe Bourgois would give this process a name: “a culture of terror.”
  • But the first person to notice and begin to articulate this dynamic was a half-drunk, nicotine-encrusted tabloid journalist, Donald Henderson Clarke, whose beat was to hang out in bars, from Midtown to the Bowery, with Rothstein and his fellow thugs.
  • It is hard, he wrote, to convey “the fear with which Rothstein was regarded. Get in bad with a Police Commissioner, or a District Attorney, or a Governor, or anyone like that and you could figure out with a fair degree of certainty what might happen to you on the basis of what you had done. Get in bad with Arnold Rothstein, and all the figuring in the world wouldn’t get you anywhere. It’s true that nothing might happen to you but Fear. But that’s an awful calamity to come upon any man.”
  • Arnold’s men sprayed bullets across the city with the cheerful abandon of wedding guests tossing confetti.
  • One of his chief henchmen, Jack “Legs” Diamond, was on the receiving end of so much return fire he was nicknamed “the human ammunition dump for the underworld.”
  • But Rothstein and his men seemed always to come out on top, and as a result, nobody dared to cross them.
  • One day, Arnold was on the subway when some anonymous pickpocket silently stole his pearl stickpin, the only personal adornment he had ever loved.
  • Over dinner, with his mirthless laugh, he explained to some other gangsters how he’d been robbed: “Me, the wiseguy.
  • What do you think of that?”
  • The next day, a package arrived at his house.
  • It contained the stickpin and a note reading, “The guy who took it didn’t know who you were.”

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