Arnold Rothstein, Dark Genius of the Mob
Organizing Crime
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."
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.