They began with the madams.
In the summer of 1937, the federal government launched a two-pronged attack on the resort’s prostitution business. At about the same time Frank’s men began their probe of the madams, a new team of federal investigators appeared in town in response to complaints that large numbers of women were being transported from out-of-state to the resort for purposes of prostitution. On August 30, 1937, the FBI raided all of the brothels, arresting the proprietors, “inmates,” and customers. The arrests totaled more than 200, of whom 140 were prostitutes.
The prostitutes were held as material witnesses at various county jails throughout the state. As a result of the testimony, all of the madams and about 30 pimps were indicted for violation of the Mann Act, commonly known as the White Slavery Law. Also indicted were Ray Born, undersheriff of Atlantic County; Leo Levy, special assistant to the Mayor of Atlantic City; and Louie Kessel, Nucky’s bodyguard and valet. Born was the bagman to whom the madams paid protection money each week. Levy and Kessel were involved in the initial arrangements for establishing several brothels. Nearly 40 ranking members of Atlantic City’s prostitution business were convicted for Mann Act violations, but none of them would cooperate with Frank and his agents. The investigators then proceeded with tax evasion charges for a second series of indictments.
The madams ran their houses on the same exclusively cash basis as everyone else in Atlantic City’s vice industry. Because of this the agents were forced to be creative. From interviews with the individual prostitutes who had been held as material witnesses, the agents secured affidavits as to their earnings, which, according to established practice in Atlantic City, represented one-half of the 50–50 split between madams and prostitutes. This estimate of earnings was further refined by a review of the records of local doctors who routinely examined the girls and laundry records, which were a rough reflection of each house’s volume of business. By piecing together these bits of evidence, the FBI established fairly accurate figures for the gross income of each brothel. The madams were indicted and convicted a second time for income tax evasion, but they all remained silent. “The whores hung in there—they were tough old girls.”
While prostitution turned a profit, it was only entertainment. Gambling was Atlantic City’s serious business. Gambling of every type, and at stakes to suit every class of player, had been part of the resort’s economy for several generations. The people who profited from gambling were firmly entrenched in the community and were a force to be reckoned with by anyone who sought political power. While Nucky was a cunning politician, it required more to remain boss for 30 years. “Nucky was Boss because he delivered. He made it possible for everybody to make a buck without a hassle. That’s why he was Boss so long.” If he hadn’t protected the racketeers they would have replaced him long before William Frank and the FBI came to town.
What the agents found were gambling rooms operated out of storefronts and as part of restaurants and nightclubs. They were run as if gambling was legal and open to anyone who walked in off the street. The furnishings of the rooms varied from those rooms that were quite austere, with rows of crude benches, to others that were elegantly furnished salons. Some of these casinos operated on two floors; the street floor being cheaply furnished for the $.50 and $1 players, while the upstairs was luxuriously equipped for $5 and $10 players. Complimentary food and beverages were served, and the management of the casinos paid round-trip railroad fare to any player producing a ticket showing they had come to town that day to gamble.
Indicative of the volume of gamblers was that Atlantic City’s horse rooms paid “track prices.” This meant they paid the same odds as those paid at the racetracks. Without a routinely heavy volume of bets there wouldn’t have been enough of a “spread” to justify paying the prevailing odds. Nucky had total control over the horse rooms. He had gone to Chicago in 1935 and made arrangements with the underworld Nationwide News Service for the exclusive agency in Atlantic City for racing results. Each room paid $200 per week for this service. The price charged by Nationwide News was $40 per week with the difference going to Nucky.
Most of the gambling rooms were involved with everything from horse races and numbers to casino games such as blackjack, poker, craps, and roulette. The rooms that emphasized horse races usually provided craps tables or a game of poker so there would be a second chance to grab the money lost on the horses. The higher priced casinos were usually connected with nightclubs, and the accommodations—food, booze, or broads—were equal to any casino in the world. The smaller rooms had average daily winnings of $500 to $1,000 per day, while the larger rooms grossed $5,000 to $6,000 per day.
Those nightclubs/casinos, which flourished under Nucky’s reign, were the 500 Club, Paradise Cafe, Club Harlem, Little Belmont, the Bath and Turf Club, the Cliquot Club, and Babette’s, which was one of the most chic gambling casinos of that era, attracting patrons from around the country. “Only the very best people went to Babette’s. They had the best steaks and mixed drinks in town, and great entertainment. I saw Milton Berle there when he was first startin’ out.”
These nightclubs were nationally advertised and well known, featuring name bands and Broadway or Hollywood stars as entertainers. The owners didn’t care if they turned a profit on the nightclubs; the main reason for having them was to attract business to their gambling casinos. The owners of Atlantic City’s gambling rooms were all underworld figures, most of whom had arrest records and lived a fast life. Many of them used aliases or were known by nicknames: there was William Kanowitz, who was known as “Wallpaper Willie”; Lou Khoury went by “Lou Kid Curry”; Michael Curcio aka “Doc Cootch”; and Martin Michael, known as “Jack Southern.” Had Nucky gone by “Enoch” he would have been considered an oddball.
The most prevalent gambling racket in Atlantic City was the “numbers” game. In a city of 66,000 year-round residents and in a game where the average bets ranged from $.05 to $.10, the enormous volume of play is revealed by the fact that the daily winnings for the number syndicate averaged between $5,000–$6,000, or $1.5 to $2 million per year. The numbers game became so popular there were two plays per day, one for daytime and one for evening. As part of their probe, the agents surveyed nearly 1,500 local retail businesses, interviewing the individual owners. Of these, 830 signed affidavits admitting under oath that their place of business was used to sell numbers. Another 200 to 300 admitted to writing numbers but were afraid to sign affidavits. “If you went to the corner store to buy a quart of milk, you could get your change or play a number. Nearly everybody who had a business wrote numbers.” Nucky had succeeded in making the entire community a partner with the rackets.
By the spring of 1939 the investigation had produced more than 40 indictments. The first indictment of the racketeers was against William Kanowitz and David Fischer, who were horse room operators. Following them were the indictments of the principals of the numbers syndicates. In approximately the same period, charges were filed on the county highway contracts and the city garbage contracts. In all, nearly 30 of Nucky’s lieutenants were awaiting trial. They were continually pressured by the agents and repeatedly called before the federal grand jury in Camden. But there were no cracks in the wall. Rather than testify against Nucky, Atlantic City’s racketeers accepted contempt citations and perjury indictments.
The first tax evasion defendant to go to trial was Austin Clark, a numbers banker. With the exception of the judge having to remove three of Nucky’s strong-arm men who were sitting in seats directly in front of the witnesses, the trial was uneventful. Clark was found guilty and sentenced to three years in jail but still refused to cooperate. The government had hoped Clark’s conviction would cause the other members of the numbers syndicate to reconsider their silence. But the agents had underestimated the resistance of Nucky’s lieutenants.
With the conviction of Austin Clark, Nucky and his people began to obstruct the government in the preparation of its cases. Witnesses for upcoming trials were requested to appear at the FBI’s office on the second floor in the new Post Office Building on Pacific Avenue. Most of them never showed. Those who did were, immediately after
