Dutch Schultz: The Beer Baron of the Bronx

Dutch Schultz ran the Bronx bootlegging operation and the Harlem numbers racket through a combination of personal violence, accountant-level financial manipulation, and murderous instability that ultimately got him killed by the same criminal organization he’d profited from. His real name was Arthur Flegenheimer — he chose the alias because it was easier to say and carried weight from a former Frog Hollow Gang member who’d owned it before him.^1^

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How a Bronx Dropout Built a Bootlegging Territory Worth Fighting Over

Born on August 6, 1902, in the Yorkville neighborhood of Manhattan, Flegenheimer was the son of a German-Jewish saloonkeeper who abandoned the family when Arthur was fourteen. He dropped out of school, started running with street gangs in the Bronx, and by his early twenties was selling beer out of a Bronx trucking garage. By the time Prohibition ended in 1933, he controlled the Harlem numbers racket and was laundering money through a legitimate restaurant empire.

Schultz built his bootlegging operation in the Bronx and Harlem during the 1920s by following a simple model: buy the beer from breweries, distribute it through a network of speakeasies, and eliminate anyone who challenged the territory. His willingness to use violence — and his reputation for personal involvement in beatings and killings — gave him territorial control that other bootleggers maintained through negotiation and bribery.^1^

By 1928, Schultz controlled beer distribution for much of the Bronx, including an estimated 350 retail establishments paying for his product and his protection. His partner in the early years, Joey Noe, was murdered in 1928 by gunmen affiliated with the Legs Diamond organization, touching off a gang war that Schultz ultimately won through attrition. Diamond was killed in Albany in 1931, shot three times in the head while sleeping in a rented room — a murder never officially solved but widely attributed to Schultz.

Unlike Al Capone, who cultivated publicity, Schultz was privately flamboyant but publicly reclusive. He was known for explosive, unpredictable rages that made him genuinely feared even by his own lieutenants, and for an almost paranoid frugality — accounts of him wearing cheap suits and living modestly while managing millions in criminal revenue appear throughout his biography.

The Harlem Numbers Racket Was a Hostile Takeover, Not an Invention

The transition from bootlegging to numbers gambling was Schultz’s most significant business move, and it came from muscling out the people who had built it. The Harlem numbers racket — a lottery-style game in which players bet small amounts on three-digit numbers and collected a 600-to-1 payout if they won — was an established Black-owned enterprise run primarily by figures including Stephanie St. Clair, known as “Madam Queen,” who had operated in Harlem since the early 1920s. By 1931, Schultz had taken over by threatening and bribing the existing operators.^1^

The numbers business generated between $20 million and $100 million per year across Harlem at its peak, and Schultz took the majority share. He introduced efficiency through an accountant named Otto “Abbadabba” Berman, who calculated the probability distribution of bets in real time and could adjust the winning number to minimize Schultz’s payout on any given day. Berman reportedly earned $10,000 per week for this service and the manipulation reduced Schultz’s losses on big-bet days by a significant percentage.

His Plan to Murder Thomas Dewey Was the Last Decision He Got to Make

By 1935, Schultz’s primary threat was not rival gangsters but Thomas E. Dewey, the special prosecutor appointed by New York Governor Herbert Lehman to investigate organized crime. Dewey, thirty-three years old and methodical, was building a tax evasion case similar to the one that had imprisoned Capone, based on Schultz’s restaurant and nightclub income.

Schultz proposed, at a meeting of organized crime leadership in New York, that Dewey be murdered. The logic was straightforward: kill the prosecutor and the case dies with him. The Commission — the national organized crime governing body established by Lucky Luciano in 1931 — rejected the proposal. Murdering a prominent public official would bring an unmanageable federal response. Luciano, Lansky, and other senior figures voted against it.^2^

Schultz declared that he would have Dewey killed regardless. The Commission’s response was to order Schultz’s murder before he could carry out his plan.

He Survived Twenty-Two Hours and Said Nothing That Made Sense

On October 23, 1935, Schultz was shot in the Palace Chop House and Tavern in Newark, New Jersey. Two gunmen entered the restaurant while Schultz was in the bathroom and shot three of his associates — Lulu Rosenkrantz, Abe Landauer, and Otto Berman — at the table. When Schultz emerged from the bathroom, a third gunman, Charles “the Bug” Workman, shot him once in the abdomen with a .45.

He survived for twenty-two hours. During that time, in a morphine-and-fever delirium, he delivered a stream of semicoherent monologue that the police stenographer dutifully transcribed.^3^ The transcript — later studied by the poet William S. Burroughs, who found it among the strangest documents in American literature — runs to several pages and contains fragments of business instructions, apparent prayers, and observations that make no clear sense. At 8:35 p.m. on October 24, 1935, Arthur Flegenheimer died from peritonitis. He was thirty-three years old. Workman was the primary gunman. He was convicted in 1941 and served twenty-three years in New Jersey State Prison.

What Happens When a Criminal Operator Becomes Too Unpredictable to Manage

Schultz’s career illustrates a pattern that organized crime leadership repeatedly encountered: the operator too violent to be predictable was too dangerous to leave in place. Al Capone’s violence, at least, served a strategy — it was calculated to achieve territorial ends. Schultz’s violence was as likely to serve his personal grievances as any organizational purpose, which made him a liability. His proposal to murder Thomas Dewey was the final demonstration that he couldn’t be managed, and the Commission’s decision to have him killed before he could destabilize the entire structure was, in their framework, rational governance.

The Harlem numbers racket he built survived him and remained a significant criminal enterprise under new management through the 1970s, when it was eventually supplanted by state-run lotteries — legal versions of exactly the game Schultz had organized. The state took the enterprise he had proven viable and formalized it.

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Sources:

1. Sann, Paul. Kill the Dutchman! The Story of Dutch Schultz. Arlington House, 1971.
2. Lacey, Robert. Little Man: Meyer Lansky and the Gangster Life. Little, Brown, 1991.
3. English, T.J. Paddy Whacked: The Untold Story of the Irish American Gangster. HarperCollins, 2005.
4. Pietrusza, David. Rothstein: The Life, Times, and Murder of the Criminal Genius Who Fixed the 1919 World Series. Carroll & Graf, 2003.