Part 13

Trusted workers had placed armfuls of the dry weed on fine-mesh screens and rubbed it by hand. The fragments of leaves filtered through the screens onto sheets, leaving on the screens only the rough stems which later were burned. The fragmented leaves, as fine as cigarette tobacco, were carefully weighed into one-pound lots. Each lot was placed in a paper bag, which in turn was placed inside a plastic container and sealed with strips of adhesive tape. Then the plastic bags, in lots of thirty, were placed in cotton sugar sacks and stacked in a shed to await shipment. Now Pena was working on a deal to ship the entire lot to a distributor somewhere in the vicinity of Chicago. He had decided not to parcel out the processed marihuana in small amounts to buyers from the United States. Instead, he was going to bypass the middlemen and take the lion’s share of the profits himself.

Ellis knew that a ton of “wheat” (the underworld term for marihuana) would produce about 1,000 pounds of the narcotic weed suitable for rolling into cigarettes. A pound of marihuana would make approximately 1,000 cigarettes. This meant that the retail value of Pena’s shipment would run somewhere in the neighborhood of a million dollars. Never before had so bold a scheme been attempted in marihuana smuggling.

The important element missing in the informant’s information was how and when Pena planned to move the marihuana. Ellis had sent his man back to Nuevo Laredo to get this information if possible. Without these facts, Pena held the upper hand. Ellis had only fifteen agents to cover the 400 miles of border in his district--and there were thousands of places where marihuana might be smuggled across the river.

This time the tipster ran into a blank wall. He learned that the sacks of marihuana were still stacked in the shed on Pena’s ranch. But that was all he could learn, except that in the past Pena had smuggled shipments of marihuana across the Rio Grande at a bend in the river about five miles upstream from the little West Texas town of San Ygnacio. When the water was low, the carriers were able to walk across the stream. If the river rose from sudden rainfalls, the marihuana was floated across the river on inflated inner tubes or on inflated rubber boats. In each case, an automobile was waiting at a designated spot to receive the contraband.

Ellis ordered a continuous surveillance of the river bend. For more than three months agents kept watch in relays, hiding in the mesquite near a small roadside park on top of a hill overlooking the sweep of the river. But the watches were fruitless. Each time Ellis inquired about the sacks of marihuana at Pena’s ranch, he was told they were still there.

In December, Ellis was reading the routine reports from New York of marihuana seizures that had been made in the city. These reports were circulated periodically to all agents-in-charge throughout the United States. There seemed to be nothing unusual in this particular batch of reports until Ellis came across an account of the arrest of one Wilfredo Fernandez, who had been caught with 16 pounds of marihuana in his possession. The line which drew his attention said that the marihuana was packed in one-pound lots in paper sacks which had been enclosed in plastic and sealed with adhesive tape. Ellis sensed that, somehow, Muno Pena had outwitted him, and the very thought enraged him. He sent a message to New York for more information on the arrest of Fernandez and where he had obtained the marihuana.

Fernandez, it developed, had been arrested in November for possession of cocaine. When his apartment was searched, agents came across the packaged marihuana. Fernandez sullenly admitted that he had bought it in Chicago from a dealer he knew only as “The Lawyer.” The Lawyer had taken him out on Lawrence Avenue, where they had met a man who appeared to be a Mexican, driving a stake truck with a green body. The Mexican had taken the marihuana from a large cotton sack--and then driven away. He had never seen the Mexican before and didn’t know where he lived.

“He was a skinny fellow about five feet eight tall, and he had black hair and a pale complexion,” Fernandez said. “That’s all I know.”

Ellis knew in his heart that this marihuana had come from Pena. And later he was to learn how cleverly Pena had outwitted him. Pena had stacked the sacks of processed marihuana in the shed on his ranch where any of the workers could see them as they passed by. But what the workers didn’t know was that one night Pena had removed the marihuana to a hiding place known only to himself and substituted other sugar sacks which looked identical.

One night Pena had taken the sacks to the river, where he met a confederate. They had carried the sacks across the river to the highway where the confederate had hidden his automobile, to which was attached a U-Drive-It trailer. The marihuana was stacked in the trailer and then covered with a mattress, a set of bed springs and a few household articles. These were lashed down with a tarpaulin over them--and then the driver headed north. To all outward appearances, he was a worker moving with his household goods from one job to another.

Ellis asked Chicago Customs agents to check on long distance telephone calls made in November by The Lawyer. And within a few days he received a list of names ranging from barkeeps to uncles, aunts, and cousins, horse track bookies, and pool parlor operators.

Meanwhile, agents in Laredo had been checking on Pena’s associates and on his family. They made a list of everyone known to have any connection, even casually, with Muno Pena.

It was when Ellis checked these two lists of names that he found there was one name which appeared on both lists. The name was Isuaro Garza. The agents’ information was that Garza was married to Muno Pena’s sister. Mrs. Garza and her three children lived in Laredo and maintained a home there. But Garza, for some months, had been living on the outskirts of Kenosha, Wisconsin. Occasionally Mrs. Garza and the children would drive north to spend a few days with Garza. They never stayed for long and always returned to their Laredo home. No one seemed to know what Garza was doing in Kenosha.

Ellis thought he knew what Garza was doing there. He was certain that Garza was the man from whom The Lawyer had obtained the marihuana--and that Garza was Pena’s man, making deliveries in Chicago from the 1,000 pounds of marihuana smuggled across the Rio Grande.

Ellis was so positive of this connection that he appealed to Washington for permission to take six agents from the Laredo office--men long accustomed to working on this type of case--for an investigation of Garza. But headquarters was in the midst of an economy wave. Ellis was told that funds were tight and that it would be impossible for him to take six men from Laredo on an uncertain mission. However, he was given authority to go to Kenosha himself and to take along one aide. If he could make a case against Garza within ten days, well and good. But at the end of ten days he must return at once to his post in Laredo.

Ellis chose Agent G. L. Latimer to accompany him. The two set out for Kenosha, driving day and night, through a snow storm which was sweeping the Middle West. They located Garza’s home. He was living in a small white frame house just outside the northern edge of the town.

“There were two or three feet of snow on the ground,” Ellis recalls, “and it looked like we were going to have to stake out the place by living in sleeping bags. But there was a motel nearby which was closed for the winter. We got permission from the owner to slip into the court from which we could see Garza’s house. We were sure he was our man--but we wanted to know who was calling for the marihuana and where it was hidden. We wanted to catch the whole apparatus if possible. So day and night we watched Garza’s house.”

Occasionally Garza would leave the house for a trip to the grocery store, to go to a movie, or to visit in the city. The agents were unable to detect him making any deliveries. But on the tenth day--the last day of grace for Ellis and Latimer to be away from their Laredo posts--a car drove up to the white frame house. A man entered and shortly came out carrying a package which he stowed in his automobile. When he had driven a short distance from Garza’s home, he was halted. Ellis found the package filled with marihuana. It was in a paper sack enclosed in plastic and taped with adhesive.

With this evidence, a search warrant was obtained and the agents advanced on Garza’s house. It was nearing midnight when Ellis knocked at the door. A light came on and then the door was opened and a voice said, “Who is it? What do you want?”

Ellis shoved the door open, revealing a skinny Mexican standing in his long-handled underwear, shivering from the cold.

“We are U.S. Customs agents,” Ellis said. “We have a warrant to search this place.”

Isauro Garza submitted meekly. A loaded pistol lay on a table near his bed, but he gave no resistance. The agents found 720 one-pound sacks of marihuana hidden in closets and in the attic--the largest haul of marihuana ever to be made in the United States. Its retail value was $720,000.

Garza feigned surprise over the discovery of the marihuana. He told officers he “had no idea what was in the sacks.” He said a man named Tony called at his home one day and left a truckload of sacks. Tony asked him to keep them for him. Another fellow named Pepe came from Chicago three or four times. “He picked up some of the stuff and gave me $600 for rent and expenses--but I didn’t know what it was all about,” Garza said.

A jury thought otherwise. Garza was sent to prison for five years. And Muno Pena? He had lost another round to Dave Ellis, but he continued his operations on a smaller scale. Customs agents are waiting for the day when he places one foot across the border--and then he’ll be out of circulation for quite a while.

11

A DIRTY BUSINESS

A cunning and ruthless hoodlum, two crooked Customs employees, two Greek narcotics peddlers in Shanghai and a supporting cast of killers, goons and dupes formed one of the greatest narcotics syndicates the United States has ever known. Over a span of less than two years in 1936–1937, this gang smuggled into the country narcotics believed by Customs agents to have had a retail value of at least $10 million. Their system was so simple that it was almost foolproof. Almost ... but not quite.

The prime mover in this profitable operation was Louis “Lepke” Buchalter--a name which perhaps doesn’t mean much to the younger generation. But in the prohibition era and the years of the depression, Lepke built a fantastic financial empire on a foundation of terror, violence and murder combined with a genius for organizing. He was, in many respects, more powerful and more successful than “Scarface” Al Capone and dozens of other hoodlums of the times who were more publicized in the nation’s press.

Louis Lepke Buchalter rose to power in the shadow of the Jazz Age, the era which evokes sentimental memories for so many Americans. But Lepke’s world was about as sentimental as a tommygun.

He was a small, slender man--5 feet 7--with a dark complexion and black hair which he parted on the side. He was soft-spoken and seemingly humble in manner. He had large brown eyes that appeared as soft and gentle as the eyes of a fawn. But his eyes only masked the evil in this man who schemed and killed until he ranked at the top of the list of U.S. criminals.

By all odds, Lepke was the most brilliant--and the most dangerous--of the criminals. It was Lepke who showed the underworld how to infiltrate and take over control of labor unions, and how to become silent partners in the management of industries. It was Lepke who put murder on a wholesale basis with an organization that became known as Murder, Inc. It was Lepke who found the chink in the U.S. Customs Bureau’s defenses against narcotics smuggling--and who made narcotics smuggling almost a pleasant pastime.

Lepke is worth at least a footnote in any history of our times because he symbolized an era of graft, corruption and violence the likes of which the nation had never known before. He was born on February 6, 1897, in Manhattan’s Lower East Side, one of a family of eleven children. The family lived in shattering confusion in a small, crowded apartment over the hardware store owned by the father, Barnet Buchalter.

Lepke’s mother called him “Lepkeleh,” the Jewish diminutive for “Little Louis,” and his friends shortened the nickname to Lepke. He was not a bad student in grade school. But he quit school after finishing the eighth grade and for a time worked as a delivery boy at $3 a week.

His father died when he was thirteen. The family broke up and scattered. The other ten children went on to become respectable, useful citizens. But not “Little Louis.” He rented a furnished room on the East Side and turned to crime. He organized raids on pushcart peddlers, stole from lofts, picked pockets, and lived by his wits. He was sent to the reformatory and to prison for short terms for larceny, but he always returned to the old life. He had ambitions to become a big shot in New York’s underworld.

In the early 1920s, Lepke joined an East Side mob headed by “Little Augie” Orgen. But while most of the underworld scrambled to satisfy the country’s unquenchable thirst for bootleg whiskey, Lepke convinced Little Augie that it was safer, smarter and more profitable to specialize in labor racketeering and in selling “protection” to businessmen.

If an employer was having trouble with strikers, Lepke would see to it that the recalcitrant workers were beaten up by his goons and that peace was restored at no increase in wages. If union leaders were having trouble with rank-and-file members, Lepke’s strong-arm squad would bring the rebels back into line with beatings and threats against the men’s families.

Other mobs sold such services on a flat-fee basis. But not Lepke. When his men were hired to put down a union revolt, they remained as members and then slowly muscled their way into the management of the union. The members’ dues were increased to pay for the services rendered.

Businessmen who hired Lepke’s strike-breaking services were ordered to buy the protection on a continuing basis. If they refused, a bomb would be hurled through a window to wreck a plant or a shop. Acid would be thrown onto merchandise, or someone’s face would be splashed with acid as he walked from his place of business to his home.

Those who capitulated--and most of them did--soon found Lepke’s men demanding a voice in management, even to the dictation of contracts (from which they received a kickback) and the placement of a man in the business office to keep a check on the money.

Little Augie was pleased with Lepke’s organizing brilliance and the profits that were rolling in. But the word got around that he didn’t like Lepke’s growing strength in the organization, where he was known as “The Judge” and “Judge Louis.”

Little Augie’s irritation was short-lived. On October 16, 1927, as he stood in a doorway at 103 Norfolk Street talking with his young bodyguard, a sedan suddenly swerved to the curb. A voice called, “Hey, Little Augie!” As the gang chief turned, a burst of machinegun fire cut him down. His wounded bodyguard was identified by police as John Diamond--later to become better known as Jack “Legs” Diamond.

The underworld hummed with the story that Little Augie had fallen victim to Lepke’s ambition. On the basis of an informer’s tip, police picked up Lepke, “Gurrah Jake” Shapiro and “Little Hymie” Holtz and charged them with murder. But no one could prove anything and the case soon was dropped.

With Little Augie out of the way, Lepke set to work to consolidate his empire. He moved more solidly into the leather, baking, garment, fur and transportation industries. At the peak of his power, Lepke personally directed some 250 criminal operations. He rode about New York in a limousine with a liveried chauffeur. He had a staff of 300 men looking after his affairs, plus an assortment of accountants, bookkeepers, gunmen, strong-arm men, and experts in such matters as acid-throwing.

He also put murder on a cash-and-carry basis. If a member of the mob became careless or talked too much, he was executed summarily. Dangerous witnesses were ordered to leave the state under the threat of death--and if they refused to obey, they were killed.

Oddly enough, even at the height of his power, Lepke was virtually an unknown in New York and throughout the country. While other hoodlums gained the headlines, Lepke remained in the shadows with few people realizing the extent of his empire, whose earnings have been estimated at more than $50 million a year. Nor was it known for twelve years--1927 until 1939--that Lepke alone had ordered the deaths of from sixty to eighty men whom he considered a threat to his own safety and prosperity.

By 1933, however, the operations of Lepke and other racketeers had aroused such popular indignation that the U.S. government moved against them. In November of that year a Federal grand jury indicted Lepke on two counts of violating the antitrust laws through his domination of the rabbit-fur-dressing industry. He was arrested and released on bail. He returned home to his wife and adopted son to continue operations as usual while the wheels of justice turned slowly.

It was during this period that another opportunity came to Lepke quite unexpectedly. Three hoodlums--Jack Katzenberg, Jake Lvovsky, and Sam Gross--were allied with other gangsters in the operation of an illicit chemical plant in Newark, New Jersey. The gang was smuggling opium into the country, taking it to the plant and extracting morphine from the opium, to be sold at wholesale across the country. This business was wiped out on February 25, 1935, when an explosion destroyed the chemical plant.

Katzenberg, Lvovsky, and Gross had found the narcotics business too profitable to give up. They began looking around for other ways to get back into the business, and they decided to talk the problem over with Lepke. A mutual friend brought them together in his apartment, where they discussed setting up an international organization which would obtain narcotics in Shanghai and smuggle them into the United States. The sale of narcotics was to be put on the same efficient basis as the sale of murder.

The major stumbling block to the plan was the U.S. Customs. It would be relatively simple to obtain heroin in Shanghai and to bring it as far as the port of New York. The problem was how to smuggle it past the Customs inspectors on a continuing basis that would guarantee a steady supply with a minimum risk.

Lepke was a firm believer in the adage that every man has his price--and he was certain he would have no difficulty in finding someone whose price was reasonable and who would cooperate with the syndicate. This direct approach had always worked in the past and Lepke had no reason to change tactics now.

One of Lepke’s first moves was to investigate the Customs procedures at the New York pier. He found that when vessels arrived at the Port of New York, the passengers’ baggage and trunks were brought to the pier for examination. And when they had been examined, a Customs inspector affixed a colored stamp on each piece of luggage. Once the stamps were affixed, the luggage could be removed from the pier and placed in a taxi or in a truck to be carted away.

Lepke saw that the stamps were the key to his problem. If he could find a Customs employee who would furnish him with the colored stickers, then a sticker could be affixed to a trunk or a suitcase containing narcotics and it would pass through Customs without an actual inspection.

Carefully, Lepke’s lieutenants made inquiries along the waterfront. At last they found their men, two guards who were willing--for a price of $1,000 a trip--to furnish Lepke and his men with the necessary stickers on the day that the narcotics carriers arrived. The price was cheaper than Lepke had expected.

With easy entry for the narcotics assured, Lepke arranged to obtain heroin from two Greek dealers in Shanghai.

This was the state of affairs when Jack Katzenberg made a trip to Brooklyn for a visit with his brother-in-law, Ben Schisoff, a balding, sad-eyed man with the face of a ferret. Ben and his wife Bella operated a Coney Island hot dog concession. They cleared about $1,500 to $2,000 in profit each season, enough to live on through the winter and to take care of the concession rental for the next season.

Katzenberg generously offered to send Ben on an all-expenses-paid trip around the world by luxury liner. All he asked in return was that Schisoff bring back two trunks from Shanghai. “You won’t even have to bother about looking after the trunks,” Katzenberg said, “because there’ll be somebody to do that for you. And when you get back I’ll have some money for you.”

Schisoff was confused. (At least that was the story he would tell Customs agents later.) Why would his brother-in-law suddenly wish to send him around the world with all expenses paid--and then give him money at the end of the trip? He knew his brother-in-law was in the rackets. He knew his reputation as a hoodlum. He also had heard all the rumors that Katzenberg was connected with the narcotics traffic even though he had managed to elude Federal officers. Schisoff told Katzenberg to give him a few days to think it over.

Schisoff finally sat down with his wife and said, “Listen, Bella, I want to go on a trip by myself. You go to Miami. You’ve worked hard and now you are entitled to share the money we have. I want to go alone. You know I am a nervous type of man and I want to go for a couple of months to recuperate. You can stay home or you can go to Miami or do whatever you please. How about it?”

But Bella was having none of this business of her husband taking a vacation alone. She loudly insisted that if he were going on a trip, then she was going with him. She wasn’t going to let him go gallivanting off by himself to get into God knows what sort of trouble. Her answer was “no!”

Schisoff reluctantly told Katzenberg that his sister insisted on going along. He expected his brother-in-law to call off the deal. But instead Katzenberg amiably agreed that both of them could go and that he would pay their expenses. And so on November 15, 1935, the couple boarded the SS _President Lincoln_ in San Francisco and set sail that day on their voyage around the world by way of Shanghai.

When the _President Lincoln_ arrived in Shanghai, Sam Gross was waiting at the pier to meet them. He introduced them to his two Greek companions and then took them to the Metropole Hotel, where he had made reservations for them. Sam said, “Now you two get a good rest. Everything is going all right.”

As Schisoff told the story later: “A few days later, Sam Gross tells me that he is going away for a week. He said to us, ‘Don’t walk too often in the street because it is not so good.’ I said, ‘All right. But what will I do if anything happens? Maybe I’ll get sick. I don’t know anybody around here.’ So he gave me an address. In case anything went wrong I should call that telephone number. I don’t remember the address and the number. It was a Greek fellow, named Jay, and his wife. Finally Sammy Gross puts a scare into me and tells me not to go into the streets.

“And so we stayed in the hotel until we got blue in the face. And so my wife finally says, ‘We have money. Why sit in the hotel? I want to do some shopping. Everything is so cheap here.’