The Mafia Encyclopedia defines Prohibition as “the
greatest day for organized crime in America.” Little did Rothstein
know at the advent of the Volstead Act that he would be one of the
founding fathers of organized crime in the United States. In fact,
Rothstein actually believed the new law would be effective.
When Prohibition began on January 16, 1920, Rothstein had many of
the component parts of organized crime in place. Leo Katcher
explains:
“Rothstein was one of the first rumrunners. He made the
smuggling of uncut diamonds and narcotics a side enterprise.
“He operated one of the largest bail bond businesses in New
York. Each man for whom he provided bail had to give Rothstein his
insurance business.
“Rothstein had ‘pieces’ of many night clubs and
cabarets. This was a bonus he took for financing them, at his usual
rate of interest. His ‘partners’ found that they had to purchase
or rent such equipment as silver and linens from firms that
Rothstein owned. They also had to place all their insurance with
Rothstein’s firm.
“Rothstein financed many retail outlets for bootleggers. His
realty firms negotiated rentals and leases.
"He bankrolled many bootleggers and provided them with
trucks and drivers to transport their illegal cargo.
"Rothstein’s main function though was organization. He
provided money and manpower and protection. He arranged corruption
– for a price. And, if things went wrong, Rothstein was ready to
provide bail and attorneys. He put crime on a corporate basis when
the proceeds of crime became large enough to warrant it.”
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Waxey Gordon |
One of Rothstein’s first ventures into rum running came after a
meeting with Waxey Gordon (Irving Wexler) and Detroit bootlegger
Maxie Greenberg. While in Detroit, Greenberg began smuggling in
whiskey from Canada. Realizing how profitable this venture was, he
wanted to expand and needed $175,000 to do so. He traveled to New
York in hopes that through Gordon, he could obtain financing from
Rothstein. Gordon knew Rothstein from having worked for him in the
garment district as a labor enforcer.
Rothstein met the two in Central Park. Sitting on a park bench,
he listened to their plan to smuggle in Canadian whiskey. The
following day the three men met again, this time in Rothstein’s
office where he made a counterproposal. Rothstein would finance the
venture, but the liquor would be purchased and brought in from Great
Britain. Gordon, who was acting as a middleman, asked to be included
in the deal and was cut in for a small “piece.” From this
“piece,” Gordon would launch a successful rum running empire and
become a wealthy man. After Rothstein ended his partnership with the
two in 1921, he continued to help finance them. Gordon took over two
large warehouses when they split, one in the city and the other on
Long Island. Rothstein would later use Gordon’s speedboats to
smuggle in diamonds and dope.
Rothstein got out of the rum running business for one reason –
he couldn’t control it. While he would continue to bankroll rum
running operations throughout the 1920s, Rothstein would focus on
letting other individuals take the risks while he collected the
profits.
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