Part 17

The inspector grinned. “Just another one of those routine checks, Captain. I’ll admit it’s getting monotonous.”

But it was more than merely another routine check. Several weeks earlier Tom Duncan, chief of the Customs Service’s Racket Squad, had received a tip from an informer in Antwerp that diamonds were being smuggled into the United States by crew members of a trans-Atlantic airline. The informer didn’t know which airline was involved. All he knew was that the carriers were airline employees. The chances were, however, that the carriers were employees of the Belgian airline, Sabena.

Duncan called in several agents and told them the story. “Let’s start shaking down the crew members on those Sabena planes,” he said. “We can’t search them on every flight. But we can make it so rough maybe somebody will crack.”

The searches had been underway for more than a month when Duncan received a telephone call from a Sabena representative.

“What can I do for you?” Duncan asked.

“We’re pretty upset about these searches,” the caller said. “One of our crew members is in my office now. He wants to talk to you. He believes he has some information that may be helpful. Will you see him?”

“Of course I’ll see him,” Duncan said.

“He’ll be at the Henry Hudson Hotel in one hour,” the Sabena representative said. “Room 301. He’s one of our radio operators.”

Duncan went to the hotel with Agent Harold Smith, another veteran investigator with whom he had worked on scores of cases. The Sabena radio operator was waiting for them in his room.

“You have some information for us?” Duncan asked.

“I think so,” the operator said. “I want you to understand why I’m giving you this information. I’m damned tired of being under suspicion every time I come into New York. I’m fed up with being searched and questioned and delayed. I want to see this thing cleared up.”

“We don’t like it any more than you do,” Duncan said. “We’ll let up on the pressure as soon as we can.”

The operator said that earlier in the year he had been approached in Belgium by a pilot with whom he had flown as a member of the Belgian air force. This man had told him he could earn a large sum of money if he would merely wear a pair of specially made shoes into the United States and then turn the shoes over to a man who would call for them. It was obvious to the operator that he was being asked to smuggle diamonds into the United States.

“I turned them down,” he said to Duncan. “I didn’t want to get mixed up in anything like that.”

“Do you know anyone who is carrying diamonds?” Duncan asked.

“No,” the operator said, “I don’t. But I presume the same offer was made to someone else. Probably another Sabena crew member with whom this man had flown in the past.” He gave them the pilot’s name.

The conversation tended to support Duncan’s suspicion that the smuggling was being done by a person connected with Sabena. He sent a cable to the Treasury representative in Antwerp, Bill Beers, a gregarious, bilingual agent with a remarkable talent for cultivating sources of information in Europe. He asked Beers to furnish a list of the names of Sabena employees who once had been fliers in the Belgian air force. He got the list, but at the time it wasn’t much help, even though one of the names was Robert Edmund Deppe.

When the search of Deppe’s luggage was completed at the airport, an agent said, “That’s all. You may go now.”

Deppe collected his luggage and walked outside to hail a cab. He was driven to the Henry Hudson Hotel on 57th Street between Eighth and Ninth Avenues, where Sabena Airlines personnel were quartered on their stopovers in New York.

When he reached his room, he tried to make a phone call, but no one answered. For the next few hours, he tried again and again to get an answer from the number. At last he took a shower, changed into light sports clothes and left the hotel to get a late dinner.

The telephone which Deppe heard ringing was in the apartment of Julius Falkenstein at 58 West 72nd St. The reason Falkenstein didn’t answer at the time was that he and his wife were being detained and searched by Customs agents at the Canadian border.

As far as Falkenstein’s friends knew, he was merely a hard-working employee of a New York furrier whose place of business was in the Manhattan garment district. He was a quiet chap who minded his own business. Customs agents had never heard his name until Friday, July 10--two days before Deppe’s plane landed at Idlewild--when Duncan received an urgent trans-Atlantic call from Beers in Antwerp.

“Tom,” Beers said, “I’ve got a good line on a smuggling ring. My informant here tells me that their New York contact is Julius Falkenstein. He has a brother in the business in Antwerp.”

“Maybe this is what we’ve been looking for,” Duncan said. “We’ll get right on it.”

Two agents called at the furrier’s shop where Falkenstein worked but were told that he had left for the weekend. This news was relayed to Agents Harold F. Smith and John Moseley, who had been sent by Duncan to watch the Falkenstein apartment building. The agents had obtained a description of their man from an apartment employee.

At 6 P.M. on that muggy afternoon, Falkenstein and his wife Ann came out of the building carrying suitcases. They walked around the corner and climbed into a car. Then they headed across town to the elevated West Side Highway and turned north. The agents followed them for several miles but finally lost them in the heavy weekend traffic. When the agents reported by radio to Duncan that they had lost contact, Duncan said, “Let ’em go. They are probably headed for the Catskills. We’ll pick them up again Monday.”

That night Duncan had another call from Antwerp. He was told that an informant had reported two shipments of diamonds were enroute to New York, one by way of Canada.

Duncan played a hunch. He called Agent Abe Eisenberg, the Customs’ representative in Montreal. Eisenberg was about sixty years old, a chunky man with graying hair who had been matching wits with smugglers for almost forty years. He was one of the best undercover men in the Service; he had an actor’s ability to look like a dignified banker or a bum. A man of meticulous honesty, he had one obsession: he hated crooked Jews. Being Jewish himself, he regarded every dishonest Jew as a disgrace to his race.

When Eisenberg answered the call, Duncan told him of the tip from Antwerp and the suspicion that Falkenstein was involved. He explained that the Falkensteins had left Manhattan that afternoon and had headed north.

“Keep a check on the hotels, Abe,” Duncan said. “They may be headed your way to pick up the diamonds.”

“Remember, I’m up here all alone,” Eisenberg said. “I can’t do my job and watch them too.”

Duncan laughed. “Don’t worry. You’ll get reinforcements. I’ll send Harold Smith up on the next plane. Julius Zamosky and I will come up by car. We may need the car to tail them when they start back this way.”

Duncan called Smith and told him to get to Montreal by plane as quickly as possible to give Eisenberg a helping hand. Then he called Zamosky, another of the veterans on the Racket Squad, and at dawn they were headed out of Manhattan for the Canadian border.

All day Saturday and Saturday night the agents, working with Canadian police, kept Falkenstein and his wife under surveillance. Falkenstein made several telephone calls to friends and visited them in their offices. Then at 9 A.M. on Sunday, he and his wife checked out of the hotel. They stowed their luggage in the car trunk and headed south.

Duncan, Smith and Zamosky followed the Falkenstein car out of Montreal. When it was evident the couple intended to cross the border at Champlain, New York, Duncan radioed a request to the Champlain Customs station asking that the Falkensteins be detained.

Julius and Ann Falkenstein were seated in an inspector’s office when Duncan and his aides walked in and closed the door.

Falkenstein came out of his chair with a display of outraged innocence. “What is the meaning of this?” he shouted. “Why are we being held here?”

Duncan said, “We happen to think you went to Montreal to pick up a shipment of diamonds.”

“We have no diamonds,” Falkenstein said. “Go ahead and search us.”

“That’s what we intend to do, Mr. Falkenstein,” Duncan said.

A search of their persons revealed nothing. Duncan ordered their automobile and luggage searched. Nothing was found.

Duncan felt certain that Falkenstein had gone to Montreal to pick up the diamonds. There must have been a hitch which prevented delivery. He questioned the couple at length. And then reluctantly, late in the afternoon, he told them they could go.

It was during this questioning that Captain Deppe was sitting in his room at the Henry Hudson Hotel listening to the telephone ring in the apartment of the Falkensteins.

* * * * *

When Duncan returned to his office the next morning, he found a cable from Beers congratulating him on the “seizure” of the diamonds. A telephone call to Antwerp cleared up the mystery of the cable: rumors were afloat in the diamond market underworld that a shipment of diamonds to the United States had not been acknowledged--and the diamonds were presumed to have been seized by Customs agents. There were reports, too, that Falkenstein was “in trouble.”

The following day, Beers advised New York that Falkenstein was supposed to have received one shipment of diamonds in Montreal on July 11 and another shipment in New York on July 12. The shipment to Montreal had been delayed--but the shipment had arrived in New York and presumably was “safe.”

Duncan could not know that the New York shipment at that moment was lying in a shoe box on a shelf at the Sabena Airlines baggage room. On the day of Captain Deppe’s arrival, the room had been turned upside down in a search for contraband, with no one noticing the box. Duncan later said ruefully, “The box was in plain view, just sitting there. I suppose that’s why it was never opened. It was too obvious.”

A few days later another Sabena pilot would casually enter the baggage room, pick up the box, and deliver it to Mr. X--completing the job which Deppe had started.

At this point Duncan decided to drop the searches at the airport and to take another tack. A good starting point seemed to be the Henry Hudson Hotel. Agents Smith and Moseley were ordered to obtain from the hotel all records of outgoing telephone calls made by Sabena personnel over a period of several months. Hotels normally keep such records for as long as four or five years--or until there is no further need for them in verifying accounts.

The checking of the telephone calls was slow, tedious work. At last one of the agents came up with the record of two interesting calls--both made to Trafalgar 3-8682, the telephone of Julius Falkenstein. The calls had been placed from the room occupied at the time by Capt. Robert Edmund Deppe. “I think we had better keep a check on this gentleman,” Duncan said.

From that day forward, each time Captain Deppe arrived in New York he was under surveillance by Customs agents. They checked him in and out of the hotel, in and out of restaurants, and in and out of movies, cabs and subways. Wherever he went, he had an agent as a shadow.

It was a boring surveillance. Captain Deppe was a methodical and unimaginative man who stayed pretty much to himself. He made few outside calls, and the incoming calls usually were those from the airline’s flight operations office relaying routine instructions.

At last Deppe strayed from his normal routine. After bringing his plane into Idlewild International Airport on September 27 he left the airport and headed for the Henry Hudson Hotel, followed as usual by the Customs agents. When he arrived at the hotel he did not go directly to his room as he customarily did. He slipped into a lobby telephone booth and made a brief call. Then he went to his room to change into civilian dress.

A short time later, Deppe left the hotel. He walked to the subway and took a train to Columbus Circle. He changed trains and rode into the Bronx, where he left the subway and strolled to an apartment building on Bennett Avenue. He was reaching for the pushbutton at the door of Apartment 1A when the agents closed in on him.

“We are U.S. Treasury agents,” Smith said. “We want to talk to you.” He asked Deppe why he had come to this particular apartment.

Deppe made no pretense of innocence or outrage. He said calmly, “I came here to deliver a package.” He reached into his pockets and pulled out two envelopes. Inside each of them was a package containing dozens of diamonds whose value was later appraised at $233,230.

“Go ahead and ring the bell,” Smith said. “Give this package to the person who opens the door and don’t try any tricks.”

The agents stepped to one side and Deppe rang the doorbell. The door was opened by Mrs. Julia Michelson, a dark-haired, plump woman whose husband operated two neighborhood grocery stores.

“Here is the package I was to deliver to you,” Deppe said.

Mrs. Michelson accepted the package with a nod of thanks and started to close the door. At this moment the agents moved quickly to block the closing of the door.

“We’re Treasury agents, ma’am,” Smith said. “We would like to talk to you about this package.”

While Deppe was being taken to headquarters for questioning, Mrs. Michelson explained that her brother-in-law in Paris had written to her asking that she accept a package from a friend who would deliver it to her apartment. She was to hold it until someone else called for it.

“What is this all about?” she asked. “What is in the package?”

“Diamonds,” Smith said. “Smuggled diamonds. I’m afraid you are in trouble.”

Mrs. Michelson was permitted to call her husband, and when he arrived, the agents explained the situation. The couple readily agreed to cooperate in helping trap the receiver who would call for the gems.

For two days, Agents Abe Eisenberg and Harold Smith remained at the Michelson apartment, waiting for the telephone call from the receiver. But no call came and no one knocked at the door asking for the package.

Late in the third day the telephone rang and Mrs. Michelson answered. The caller asked if she were holding a package for him and she replied that she was. “I’ll be around for it tomorrow morning,” he said.

At 10 A.M. the Michelson doorbell rang. Mrs. Michelson went to the door and admitted a short, plump, well-manicured man dressed in conservative clothes. As he entered the living room he must have sensed the nervousness of Mrs. Michelson because he suddenly turned and started toward the door. But Eisenberg and Smith stepped from a bedroom doorway and halted him. He was Samuel Liberman, a Fifth Avenue dealer in diamonds.

Julius Falkenstein was arrested at his place of business and taken to headquarters on Varick Street to be questioned. He confessed his smuggling role. He admitted he had gone to Canada in July to receive a shipment of diamonds. Something had gone wrong and the diamonds were never delivered to him. He had been hurrying back to New York to meet Captain Deppe when he was halted at the border. It was this delay which had prevented him from meeting Deppe and reporting to Antwerp the safe arrival of the diamonds. After the experience at the border, he had been afraid to try to get in touch with Deppe.

Deppe also confessed. He told agents he had carried diamonds into the United States on six occasions. He told them of the diamonds hidden in the shoe box which he had left in the Sabena baggage room. He was supposed to have delivered it to Falkenstein as he had the others--but when he found the Customs agents searching crew members he made no effort to retrieve the box. Later, he said, he had asked another Sabena pilot to pick up the box and make the delivery to Mr. X.

Deppe was deported for his role in the smuggling operation and turned over to Belgian authorities who were investigating the smuggling ring. Julius Falkenstein and Samuel Liberman were fined $2,500 each and sentenced to one year in prison. The sentences were suspended because of their cooperation with Customs agents.

Before the investigation ended, others involved in the United States and Belgium included a chauffeur with the French Consulate in New York, a French Diplomatic courier, an employee in the French Foreign Office, and an officer in the Belgian air force.

As for Mr. X, Customs agents know that he was successful in smuggling three shipments of diamonds into the United States even though they have no proof other than the word of informers. Mr. X is on their list, and one day, they are certain, he will make a false move that will land him in prison.

* * * * *

Diamond smuggling is one of the most lucrative of the illicit operations because diamonds are so easy to dispose of and so easy to conceal. Diamonds are found hidden in hollowed-out heels of shoes, in the running boards of automobiles, in rubber contraceptives inserted into body cavities, in false bottoms of suitcases, in fountain pens, in hollowed-out books, in women’s corsets and brassieres, and in toy animals. They come by plane and they come by ship. Communications between the contact man in the United States and the syndicate in Europe is so swift that often the syndicate knows within minutes what has happened to a shipment.

Such was the case when the Racket Squad began a surveillance of Reginald John Morfett of Rainham, England, who was the purser and chief steward of the liner _Assyria_. Morfett was fifty-eight years old and looked more like a Bond Street merchant than an inveterate smuggler. He was a slender man with thin, black, wavy hair brushed back from a high forehead. He wore his clothes well.

Agents were watching Morfett when he left the _Assyria_ early in the evening of October 16, 1955, and stepped onto the North River pier at 95th Street. An informer in London had reported that Morfett was carrying eighteen pieces of platinum and gold jewelry, set with diamonds, rubies, sapphires and jade, in addition to 34.41 carats of cut and polished diamonds. The jewelry had a total value of $48,135. Delivery was to be made to two brothers in a hotel room in New York City.

Morfett rode buses from 95th Street to Seventh Avenue and 50th Street, where he left the bus and walked to the Taft Hotel. He went into a drug store to a public telephone booth and made a telephone call.

A short time later, Morfett was joined in the lobby of the Taft by an attractive, black-haired woman who greeted him warmly. He took her into a bar where they had a drink, and then they left the Taft and began strolling up Seventh Avenue.

Agent John Rainey, a ten-year veteran with Customs, was in charge of the surveillance. It had become apparent to him that Morfett did not intend to make delivery of the diamonds on this night. He would not be walking around the streets carrying gems worth more than $48,000. He reasoned that the jewelry was still aboard the _Assyria_.

“Let’s grab him,” he said, and he signalled to other agents nearby.

Morfett’s frightened companion was released when agents were satisfied that she was only his date for the night. Morfett was taken back to the _Assyria_, where the agents began a search of his quarters and the other places aboard the vessel to which he had easy access.

Throughout the night the agents searched without finding the gems. The next day a fresh squad took over the search, which was continued in relays until a short time before the _Assyria_ sailed for Baltimore in the early morning hours of October 18.

The _Assyria_ was hardly three hours out when the New York Customs office received a trans-Atlantic call from London. The Customs representative in London said his undercover source had advised him that the search of the _Assyria_ had failed--and that the gems were still aboard the vessel.

The _Assyria_ returned to New York on October 27 and docked at Pier 90 on the North River. Racket Squad Chief Tom Duncan led a squad of agents aboard to continue the search--they knew this was their last chance because the ship was due to sail at 7 o’clock that evening.

The search was continued until late in the afternoon. Duncan finally said wearily, “It’s no use. We might as well knock it off.” He asked one of the agents to call Tom Rainey and tell him to drop the surveillance of the brothers to whom Morfett was supposed to deliver the jewels.

“Tell Rainey we’ll wait for him here,” Duncan said. “Then we’ll all go to dinner together.”

It was 6:30 P.M. when Rainey walked into Morfett’s quarters. Morfett sat in a chair looking bored with the whole proceedings. Duncan said, “The ship sails in thirty minutes. Let’s go and get something to eat.”

Rainey said, “Mind if I take just one more look around?”

“No,” Duncan said. “Go ahead, if it will make you feel better.”

Rainey walked into Morfett’s office and stood studying the room. He and the others had gone over the place thoroughly. But somehow he had the feeling that this was the room that held the secret of the jewels--if there were a secret.

Almost without thinking, he began to measure with his hands a small safe that sat in a bulkhead cabinet. Then he realized there was a space of about two inches between the top of the safe and the shelf of the cabinet, concealed by a strip of molding.

He pried loose the molding and discovered a package. When he opened it, he saw the sparkle of diamonds.

Rainey walked to the door and as Duncan looked up he tossed the package to him. “Here are your diamonds,” he said.

Within the next few minutes, the agents found other gems tucked into envelopes in the hiding place. And then they confronted Morfett. He shrugged. “That’s it,” he said. “That’s what you have been looking for.” He lit a cigarette as calmly as though the agents had called on him to have tea.

As John Reginald Morfett was led from the _Assyria_, Tom Duncan looked at his watch. It was 6:56 P.M. Four minutes later the ship began to ease away from the pier.

Morfett was sentenced to three years in prison for his role in the smuggling effort.

Within a period of three days in 1951--on January 21, 22 and 23--Customs agents and inspectors seized smuggled diamonds worth more than $1 million. A traveller from Antwerp named Elijah Whiteman was discovered carrying $300,000 worth of gems in the false bottom of a suitcase. Lesser seizures totalled $200,000. And then more than $500,000 worth of diamonds were discovered in a strange scene enacted at Idlewild airport.

Over the years, many Customs inspectors develop a sixth sense for spotting travellers who are trying to conceal valuables they do not want to declare. Perhaps it is the way a man or woman walks, or the nervous manner in which a cigarette is lit. It may be slight hesitancy in answering a particular question--or nothing more than a general impression which the inspector himself cannot explain.

Inspector Joseph Koehler did not know at first what it was that drew his attention to Etta Hoffman. Koehler was a dark-haired, studious-looking, middle-aged officer who had joined the Service as a young man. He had watched travellers by the tens of thousands pass his inspection post. There was no reason why he should have paid special attention to Etta Hoffman when she approached his station along with other passengers arriving from Brussels.

Etta was a tall, neatly dressed, round-faced young woman who waited placidly in line for her baggage to be examined. A perky hat sat on her dark hair and there were touches of fur on her dark cloth coat.