Arnold Rothstein- The Criminal Genius Who Founded the American Mafia - Our History

1919, New York City. Although gambling is illegal, in a fourth-floor Manhattan apartment, a game of dice is in full swing. As usual, one man is cleaning up. Arnold Rothstein is no gangster, but he has become a millionaire by keeping one step ahead of the herd. Arnold Rothstein loves money, he loves gambling, he loves the thrill of gambling, and he loves being just a little or a lot smarter than everyone else. These guys live for those games, they love it, that's their high. Rothstein doesn't drink and he doesn't smoke, but he's addicted to gambling and the wealth that comes with it. But tonight, someone is going to kill his winning streak. With a small fortune now on the table, Rothstein is determined no small-time hoods are going to steal from him. That was really the only time I'm aware of that Rothstein actually assaulted somebody in that fashion with a firearm. But it was the wrong time to turn to violence. The intruders are no thieves, they are New York's finest. Though their wounds aren't fatal, no one gets away with shooting cops, millionaire or not. You are not supposed to shoot cops, it is frowned on. Now Rothstein could face a life behind bars. His luck might finally have run out, but Rothstein rarely relies on luck alone. Miraculously, within hours, he walks free. Only someone special gets away with shooting cops. Even as a boy, Rothstein had a brilliant head for numbers and could have taken up a career in finance. Arnold Rothstein was offered a position on Wall Street when he was still a relatively young man, very early in the game. And he turned it down because it just wasn't for him. It wasn't quite as thrilling, it wasn't quite as lucrative, and he liked the nightlife, I think. Instead of a straight life in finance, Rothstein makes his early fortune gambling on anything and everything. Cards, horses, even election results. He believed himself to be a terrific gambler and he had no reason not to because he made a fortune doing it. This is a man who knows how to make his own luck. Rothstein is smart enough to know you can't always beat the odds, so he ensures the odds are always stacked in his favor. He cheats. He only bets when he has fixed a game or has inside information. It's a question of egotism with Arnold Rothstein. He's going to be smarter than everyone else around him. He is going to pull the fast one, either at the racetrack or at the gambling house, to get the extra odds, the edge, so that he will be the gambler who gambles without gambling. It's a lucrative philosophy. By 1912, before his 30th birthday, he racks up his first million. In New York City, they call him the brain. The man who could never lose at the card table or the business table. That's why by 1919, it seems he can buy his way out of anything, even shooting New York cops. Arnold Rothstein, even then, is so powerful. He beats the rap of shooting the cops. How does he do it? In court, Rothstein uses his influence to rig the odds in his favor. He has friends in the court system. Some money is placed with the police, with the judges. And he uses bribes to deal with the witnesses. All the gamblers on the other side, however, go blind. Money is paid. If they didn't agree to not talk, there was other ways to silence them. At that time, Rothstein was a very powerful man, and few people wanted to go against him. This brilliant millionaire gambler never intended to inspire the underworld, but he sets out a blueprint that will influence future generations of gangsters. Fixing dice games and corrupting the justice system are only the prelude to the sting that will make him the most talked-about man in America. Free from jail and the charge of violent assault, Rothstein sets his sights on fixing the greatest sporting event in the country. In 1919, baseball is a religion in America, and the World Series is the most sacred of all its competitions. But fixing an entire series of baseball games isn't like loading the dice or doping a horse. It's a challenge on another scale. If you're able to fix a World Series, that was considered very, very impressive. Rothstein is a man who can spot an opportunity, and when he hears a rumor the favorites to win the World Series, the Chicago White Sox, are unhappy with their boss, he knows now is the time to make his play. The White Sox players were unhappy because their owner, Charles Comiskey, was a cheapskate and didn't want to pay them, so they were getting peanuts. If they're short of cash, Rothstein realizes they're ripe for corrupting, so he sets out to bribe them to lose. Covertly, he approaches the ballplayers and eight agree to throw key games. So this was a way of getting back at Comiskey by dumping the World Series and making some money. Because the White Sox are clear favorites, the odds on their rivals are high. So Rothstein bets big on the Cincinnati Reds to win the World Series. He gambles every dime he's got and spreads the bets across the country so as not to raise suspicions, and it looks like his plan is working. The White Sox lose the early games and give the Reds a series lead. But by game five, the players are angry. Rothstein's deal was cash on delivery. They want paying, now. Except all Rothstein's money is tied up in bets. Arnold Rothstein is essentially a Ponzi scheme. He never has any money. He's always making money, but it's always going out the back end of the door to something else, especially gambling. The ballplayers think Rothstein's taking them for fools and turn against him. The ballplayers feeling cheated and thinking maybe they should win and collect the winner's share of the World Series, that they will finally double-cross the double-crossing gamblers. A starting pitcher in game eight is a guy named Claude Lefty Williams, and he's determined to play to win. If Lefty is not getting paid to play or to lose, he's going to play for the prize money instead. But if the White Sox win the series, Rothstein will be finished, and he can't allow that to happen. His millions have been made through scams and bribes and being smart. Now Rothstein is about to cross a line that will take him into the realm of the gangster. He is turning to violence. It's the night before game eight, and tensions are running high. Lefty Williams and his wife take a stroll to relax. The story goes that he is approached by a man one night on the street, and said, if you know what's good for yourself, and you know what's good for Mrs. Williams, you will lose that game, and you will lose it very, very early. The next day, the White Sox face the Cincinnati Reds. It all hinges on this one game. The threat works. Lefty and his teammates hand the Reds an easy victory. In New York, Rothstein gets the news. The White Sox have lost, and Rothstein makes millions. The brain has pulled off the biggest sporting fix in American history. But the White Sox collapse is so dramatic, the US government smells a rat. While the series is going on, it just smells to high heaven, and people start talking. People start providing confessions to district attorneys and to newspapers. The whole thing starts to unravel, and the fingers start to point to Arnold Rothstein. It's 1919, and here are leading investigators in probe of recently finished World Series. Rothstein is one step ahead. Before he is indicted, he voluntarily goes to Chicago, and presents himself to a grand jury as an Some money probably crossed hands directly, and it was a really masterful job of fixing the grand jury, probably more so than fixing the World Series itself. Once again, he has rigged the odds, and the case against Rothstein collapses like the White Sox. Rothstein's reputation with the general public is in tatters. He's the man who corrupted America's favorite sport, but not everyone is unimpressed. Rothstein is now on the radar of the disorganized rabble who run New York street gangs. What's more important is not what he did, but what people think he did, which suggests that the power of gangsters is equal to that of the power of the government. It's a turning point for Rothstein. The millionaire now has friends in low places, and wastes no time in recruiting them. Rothstein has his match-fixing windfall burning a hole in his pocket, so when America is declared dry, he spots a lucrative new business venture. In 1920, prohibition is imposed across America, but the nation remains thirsty for alcohol. Disorganized gangs of Italian and Jewish American thugs are quick to move in and sell diluted booze to the poor, but the brain thinks big. If he can organize the thugs and sell alcohol on a national scale, he can make serious money. He was the first to recognize the money that could be made through bootlegging. He organized the first idea of how you would run bootlegging as a business venture. Rothstein is not interested in selling cheap hooch on street corners. He has class. He knows the real money lies in selling expensive Scottish whiskey to the rich. You bring the good stuff over from Scotland, you do not adulterate it, you sell it to the best people, you establish a reputation as the go-to guys for good stuff. First he makes contact with Scottish distillers overseas. Then he arranges shipment of the goods. He pays off officials to get the booze into the country. All he needs now are men to distribute it. He hand picks the cream of the underworld. His team will change American crime forever. Arnold Rothstein is the mentor of an entire wave of the gangsters of the future. The guys we know as the classic gangsters of all time. Meyer Lansky, Fugsy Siegel, Lucky Luciano, Dutch Schultz, Frank Costello. You name them, Arnold Rothstein had something to do with them in the 1920s. Rothstein takes these smart young heavies and shows them that if they want to be successful, crime has to run like a business. One protégé is Charles Luciano, who will go on to lead the five families of New York. Another is Meyer Lansky, the future mob accountant. And he takes a gamble on a violent young thug called Dutch Schultz. He let all these little mice run where they wanted to run and do his bidding and that's where these guys got their start. It's a match made in heaven. Rothstein lays out the cash and never gets his hands dirty. Meanwhile the young Turks learn to transform small-time violence into big business. For this gang of thugs it's the chance of a lifetime. Whatever you say about a lot of those gangsters, they realized that Rothstein was something special, far above them. If they want to make money and have a connection to stay out of trouble with the law, Rothstein was the guy. So begins the biggest bootlegging operation in American history and speakeasies across the country flow with Rothstein's high-class booze. The brain takes more than a healthy cut and in today's money is soon worth an estimated 125 million dollars. Rothstein has gone from high-stakes gambler to the richest crook in the country. With refined tastes, he's the only hood who can pass for a gentleman. The way he speaks, the way he dresses, it's very middle-class, very businesslike and also in his personal habits. He's not a drinker, he's not a smoker, he does have one weakness though. He loves milk and he loves cake and that is as wild a living guy as he is. The sane center of an otherwise electrified existence combining violence and greed and corruption. Rothstein wants to build his team in his own image. He teaches Luciano good taste, how to use cutlery, how to help a lady sit down for dinner by holding out her chair. Arnold Rothstein was not only the mentor to lucky Luciano in the gangster business, but in the fashion business and turning a cheap Lower East Side hoodlum into a gangland fashion plate. He also gives these guys a sense of self-betterment. You should have better vocabulary and that was a very important touchstone. This is the future of organized crime. Acting like businessmen, not just as muscle. Rothstein can also give an invaluable lesson in PR. While Luciano is moonlighting as a hitman and drug dealer for the Sicilian mob bosses, in June 1923 he's caught in a police sting selling drugs on Manhattan's 14th Street. Unlike Rothstein, Luciano can't pay off the law. Instead he saves his own skin and He makes a deal with the police. He rats out some of his associates and walks away. At which point Luciano has two problems. One, his upper-class clients don't want to be associated with a low-level 14th Street drug dealer and his gangster associates don't want to be associated with a snitch, a rat. So he has to rehabilitate himself. Luciano escapes jail but the incident destroys his reputation. In his hour of need he turns to Rothstein for help. And he says Arnold how can I do this? How can I get back in good graces? Arnold is in a sense a master of public relations and repairing reputations. What reputation a lucky Luciano may have. And he says here's how you do it. He tells Luciano to buy 200 of the best ringside tickets to the Jack Dempsey vs. Louis Firpo fight. You're watching one of the most savage fights ever staged in a professional prize ring. 85,000 screaming fans are on hand to witness Jack Dempsey and Louis Firpo swap leather in one of the most frantic matches of the century. Despite the tickets huge cost, Rothstein tells Luciano to give them away to the most influential people in America. Dempsey tangled with Firpo and in two rounds almost everything happened. Firpo knocked Dempsey out of the ring. Luciano distributes them to rich businessmen, important congressmen, to gangsters like Al Capone and Johnny Torrio. And then to top it off Luciano appears at the match dressed to the nines. Luciano's reputation is restored and he's someone everyone wants to know. It's all down to his PR man Arnold Rothstein. So he taught Luciano and some other future Hall of Famers in organized crimes Hall of Fame how to function, how to operate, how to be slick and not violent. Rothstein knew you could not succeed in American crime by being violent alone. He considered those people misfits and sooner or later they would be undone and that the way to succeed and die in your own bed if you could was by being organized and smart Rothstein helps gangsters in other ways. He acts like an illegal bank and offers crooks credit to start up their own illicit businesses, earning himself another nickname, the big bankroll. In New York he is numero uno, number one, the big man, the big bankroll, the guy who puts everything together. If you want to make a deal work you see him, if you need the money you see him. But once again the gambler who never gambles shortens the odds. His loans come with strict conditions. Gangsters must take out life insurance policies, naming Rothstein as the beneficiary. They were in dangerous businesses these guys and in case something happened to them, they couldn't pay their debt, you would collect on their insurance. Shrewd business deal. Isn't that what the successful manager does? A win-win strategy. His generosity comes at a high price, a 20% interest rate. And if they don't pay him back he feels that he owns them and they can do certain favors for him. That's how he ends up using his muscle. He wasn't entirely upset when he didn't get money back because then he could get people to do the dirty work that he personally didn't want to do. Bid by bid, Rothstein is taking control of New York's criminal underworld and could call in favors whenever he wants. But bankrolling the mob puts a dent in his finances and the brain soon needs another source of income. He moves into what will become a cash cow for the future mafia, labor racketeering. In 1926 labor unrest is rife and bosses will pay good money to put pressure on their workers not to strike. Rothstein connects with Louis Lepke Boccolta, a violent gangster breaking heads for the factory bosses. One of the most talented people that Arnold Rothstein turned to in labor racketeering was Louis Lepke Boccolta. A truly vicious Lower East Side kind of guy and he is a total animal, a thug of thugs. But even tough guys like Lepke are slaves to big business, only getting paid when there's a strike. The brain, as always, teaches him how to shorten the Rothstein was sort of a mentor to Lepke on that. Don't just work for management, you know, work both sides. Under Rothstein's wing, Lepke takes control of an entire union. When he isn't making money from breaking strikes, he threatens them and turns the workers union into a protection racket. Sometimes there's a downside to having protégés, and one of the protégés who is particularly troublesome to Arnold Rothstein is a guy named Arthur Flegenheimer, better known as Dutch Schultz. Rothstein gave Dutch Schultz his break as a bootlegging driver, but now he wants to strike out alone. Schultz is one of those guys who is not going to be boxed in, who will use the muscle, who is an out-and-out killer. Rothstein lets Schultz distribute illegal beer in the Bronx, but it's not enough. Eventually he will just resist Arnold Rothstein's attempt to divvy up the bootlegging areas of Manhattan into convenient, safe areas. Schultz wants a bigger piece of the bootlegging empire, and he's not afraid to bite the hand that feeds him. One of the problems with hiring murderous psychopaths is you can't control them. They're wonderful if they're doing your bidding, but they're also doing their own bidding. With a gang of thugs at his beck and call, Schultz starts to hijack Rothstein's booze deliveries. When Rothstein gets the news, he dismisses the rebellion. After all, Schultz is a psychopath. But more importantly, the brain can see the writing is on the wall for prohibition. One of his other protégés has opened the door on a business that will make the liquor racket look small beer. Back in the day, Charles Lucky Luciano cut his teeth as a drug pusher, and now he tells Rothstein about the unprecedented demand Rothstein, again, being the brain, saw a market that he could capitalize on. Some mobsters might say, no drugs for me. I don't want us involved in drugs. Rothstein had no qualms about things like that. If they could line his pocket, he was interested, and that's how narcotics comes about for him. Just a simple matter of profit. Heroin is still legally produced in Europe and China. When it comes to importing illegal goods, the brain's expertise is second to none. He soon turns his booze network into a drug network. Prior to Arnold Rothstein, the drug trade was extremely disoriented. It was not organized at all. But when you have his amount of brains and cash and connections behind any enterprise, it's going to go up exponentially. So because of that, it really is accurate to speak of Arnold Rothstein as the father of the modern American drug trade. Rothstein supplies cities across the country, providing to both the rich and the poor. He knew how to keep his hands clean. Arranging it for it to be distributed by somebody else, he's put a layer between him and the drug, a wall almost, that makes it very hard for authorities to penetrate. Yet it's not enough. Rothstein wants to push his criminal empire beyond America. He wants to go global. But for that, he needs a backer even richer than himself. In 1928, Rothstein meets with the third richest man in the world, European financier, Captain Lowenstein. He is so wealthy that when Germany invades Belgium in 1914, he says, oh, let's just buy it back from him. He's got the dough to do it, and he's got the dough to put together an incredible cartel of drug dealers. Together, they mastermind a plan for an international drug ring. Captain Alfred Lowenstein can provide the connections in Europe. Arnold Rothstein can provide the connections in America. And they get together in a series of secretive meetings in New York City in the late 1920s. Everything is going well. The flow of illegal drugs is about to increase tenfold, and Rothstein is set to become richer than his wildest dreams. Then, on July 4th, his new business partner, Captain Lowenstein, mysteriously disappears while on board his private plane. He gets up to go to the bathroom, and the plane lands, and he's not in the bathroom anymore. How did he get out? No one knows. But we do know this. If he had lived, and if he had combined with Arnold Rothstein, the flow of illegal drugs coming to America would have multiplied by an amazingly exponential effect. The catastrophic news of Lowenstein's disappearance reaches Rothstein in New York. With Lowenstein bumped off, his dreams of an international drug empire turn to dust. And after investing heavily, it hits him where it hurts, his bankroll. The collapsed drug deal is just the start. Soon, more investments fall through. Rothstein's luck is changing, and as a gambler, that's the last thing you want. Rothstein's judgment appears to be deteriorated rather badly in the 1920s. He is making bad investments, hanging around with worse and worse and more dangerous people. The mobsters he schooled in organized crime are out of control. Luciano is drawn into a murderous feud between two Italian crime families, a bloody power struggle that will claim the lives of dozens of mobsters. And the sadistic Dutch Schultz is now the most feared man in New York. Within this savage world of gangsters, Arnold Rothstein operates like a lone wolf. Arnold Rothstein was really a gangster without a gang. He was someone who was like a portfolio manager, who would bring in different deals from different people at different times. And without the protection of a gang, Rothstein grows paranoid. There's a feeling in New York that perhaps the brain, the big bankroll, has had his day. He starts losing money at the track. He starts losing money in poker games. All of a sudden, the big bankroll has big problems in keeping his payments and his finances straight. In a 7th Avenue Manhattan apartment, there's a high-stakes card game at play. It's the opportunity to win half a million dollars. And for a consummate gambler like Rothstein, he thinks it's the answer to all his problems. But he just can't play his cards right. Rothstein has hands good enough to win, never quite wins, just misses enough to keep him in the game. And he should really walk away. And the other guys want to walk away because they're ahead. He's been playing for 36 hours straight and has lost over 4 million dollars in today's money. Unable to give up, he bets a final $320,000 on a single cut of the deck. His entire reputation and criminal empire is riding upon a single card. It's a deuce, a two. He believes the game is fixed because he is so used to winning. He can't conceive the fact that he could lose that much money. He lost $320,000 and he couldn't believe it. How could I lose $320,000? That game has to be fixed. There's no way that me, Arnold Rothstein, could lose that kind of money. In the gangster world, calling a man a cheat is a big deal. Rothstein's He's treated George McManus, who's a well-known gambler, well-connected, like nothing. Adding insult to injury, he refuses to pay up. And this turns out to be his most dangerous gamble of all. Two months later, in Manhattan's Park Central Hotel, Rothstein is seriously injured. He's been shot. The next day, after massive internal bleeding, the genius of organized crime dies. What's so shocking about the death of Arnold Rothstein is nobody would have thought such a thing would have been possible. But it was very possible and it happened. There's one question on everyone's lips. Who killed Arnold Rothstein? The list of suspects is long. The obvious candidate is George McManus, the man Rothstein owed thousands of dollars. Although McManus is arrested, he's later acquitted. There was an innumerable number of people who might have wanted him dead for one reason or another. There's Rothstein's protégé, Lucky Luciano. He's now a major narcotics dealer and stands to inherit the entire drug business. Or was it Dutch Schultz, who's long been chasing Rothstein's bootlegging empire? There's also Louis Lepke Boccolta, the violent labor racketeer. The list of suspects goes on, but incredibly, no one is ever convicted for the crime. Atlantic City, just months after Rothstein's death, the suspects meet. If ever there was a true conspiracy, this was it. They came together at a fancy hotel. It's the biggest mob meeting in American history and everyone Rothstein hired is there. They all want to know what happens next. The king is dead. Who's going to replace him? Who could possibly replace a man who fixed the 1919 World Series? Who bankrolled rum running? Who created the modern American drug trade? Arnold Rothstein made careers in the gangland empire of the 1920s. They didn't quite know what to do when he was gone, but they knew one thing, they'd never forget him. The men Rothstein schooled and styled in the ways of organized crime seize his empire. They're ready to move in pretty quick to take over and they divide up of some of the various rackets that he's involved with. Louis Lepke and Lucky Luciano will continue to expand the drug business across America. You always hear mobsters that are successful run their crime like a business. Rothstein is the guy that kind of sets up this model. It's really followed to this day. He revolutionizes the mafia, turning thugs into businessmen. Yet as he takes his last breath, Rothstein dies like a gangster. When Arnold Rothstein was on his deathbed, the police asked him who did it and he looked at them and he said, you're mudder. He wouldn't identify who did it, but he clearly knew because he was shot in a very small room with someone. By keeping the shooter's identity secret, Rothstein sticks to the code of the mob and completes his transformation from gambler to gangster. Arnold Rothstein goes down in history as the founding father of the American mafia.