Crime Library: Criminal Minds and Methods

Arnold Rothstein, Dark Genius of the Mob

Bucket Shops and Lawyers

In "The Big Bankroll," Leo Katcher gives us the following description/definition of the "bucket shop," an operation which began shortly after the Civil War when railroad stocks flooded the market and were purchased by thousands of investors:

"The bucket shop was a cut rate, bargain basement securities supermarket. It operated on the layaway, or installment, plan, with very little down. Purchasers of stocks could buy on a margin as low as one point.

"The bucket shop was a brokerage house. It had the normal complement of tickers and a board on which prices were posted and they came over the tickers. In their early days the bucket shops were straight gambling houses."

The bucket shops enjoyed their initial popularity from 1900 until the "financial panic" of 1907. After a decade the booming economy brought on by World War I began a second round of activity, this lasting until the market crash in 1929. The operations were not exclusive to New York City. Several successful operations had branch offices in other cities in the country.

While no dollar figures from the bucket shop operations were ever tallied, New York State bankruptcy courts did report that during one five-year period customers were bilked to the tune of over $212 million dollars.

Arnold Rothstein
Arnold Rothstein

Rothstein did not have a direct hand in the ownership of these bucket shops. He backed some of the major operations like Dillon & Company and E. M. Fuller & Company. These operations, although large and profitable, required less start up money. However, what they did require was protection. This is where Rothstein prospered. With Rothstein's influence with the police, the prosecutor's office and Tammany Hall, he helped protect the bucket shop operators from legal harassment and from regulatory laws that might be initiated in the state capital.

When a bucket shop operator was arrested, Rothstein would post bail and provide legal counsel. However, when E. M. Fuller & Company, an operation run by Edward Fuller and William McGee, went under costing investors some $5 million, a newspaper journalist, Nat J. Ferber of the American, investigated the losses, which resulted in sensational trials and media coverage — and Rothstein's presence in front of a grand jury.

When E. M. Fuller & Company filed bankruptcy, all of the assets, as well as the two principals, disappeared. Fuller and McGee were hiding out in the Rothstein home riding out the storm. Once Rothstein hired the law firm of Fallon and McGee (no relationship) to represent them, the two men surrendered. This would begin a five-year long saga involving trials and grand jury hearings, with the case never really being resolved.

In the ensuing investigation prosecutors found checks totaling $353,000 made out to Rothstein, who was then called before the grand jury to testify. Allegations were made that the payments were either gambling losses Fuller was repaying to Rothstein, including supposed bets made on the 1919 World Series, or that Rothstein was laundering the stolen Liberty Bonds through the company. This latter belief arose after it was revealed the same type of bond laundering occurred with Dillon & Company, a bucket shop run by Rothstein intimate Philip "Dandy Phil" Kastel, in which $407,000 had been loaned to Rothstein with Liberty Bonds put up as collateral.

During the inquiries Rothstein seemed nervous at first, but then began to enjoy matching wits with the prosecutors. As the inquests dragged on for years he became a formidable foe to them. Perhaps the highlight of Rothstein's testimony came during an exchange regarding how the gambler had obtained the Liberty Bonds. After much bantering between the prosecutor, judge, and Rothstein, the judge suggested the question put to Rothstein be rephrased.

"Where did you buy the Liberty Bonds, or, if you did not buy them, where did you procure them," asked the prosecutor.

"Now, that's a question I can answer," replied Rothstein. "I can't remember."

In the meantime, Fallon and McGee were busy defending Fuller and McGee, each time the trial ending in a hung jury. After the second trial a juror admitted he had been bribed by Fallon, not only in the Fuller trial, but also in an earlier one in which he had sat on the jury. When a second person came forward to corroborate the allegations, Fallon found himself on trial. In what was considered his greatest courtroom performance, Fallon ably defended himself and was acquitted by an awe struck jury. As Fallon made his way out of the courtroom he stopped in front of Ferber, the journalist whose investigation had initiated the bucket shop trials. In a voice loud enough for the entire courtroom to hear, Fallon told him, "I promise you I'll never bribe another juror."

Fallon's trial brought to an end the sensationalism that surrounded the bucket shop investigations. It also was the last hurrah for Fallon. The "Great Mouth Piece" died not long afterward and one of the shooting stars of the 1920's Broadway scene was extinguished.

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