Nelson Johnson - Boardwalk Empire - The Birth, High Times, and Corruption of Atlantic City

Corio’s greed foiled Miller’s scheme. Instead of reporting the full $60,000 fee on his income tax return, Corio took a chance by omitting it and pocketed the $13,200, which Miller had given him to pay the taxes. Corio claimed he did this because Miller had welched on their side agreement. When he learned prior to filing time in 1936 that Miller was holding out on him, Corio decided to keep the $13,200 instead of applying it toward the taxes. He sabotaged the agreed-upon plan without informing Miller or Nucky. The agents made a thorough investigation of Corio’s statement and concluded it was reliable. However, they couldn’t trace any other payments to Nucky. Although the agreement negotiated by Corio and Jeffers provided that Nucky was to receive one-third of the entire railroad station profit, which totaled more than $240,000, the $28,000 payment was all they could prove.

Despite this major break in their investigation, William Frank wasn’t satisfied with the case against Nucky. The $28,000 payment by itself didn’t establish a case for tax evasion as Nucky had reported a new loss of $56,000 on his 1935 income tax return. As a result, Frank was forced to recommend a single charge of conspiracy to evade the corporate income taxes of A. P. Miller, Inc.

The federal grand jury returned an indictment against Nucky and Miller on May 10, 1939. But William Frank was far from pleased; after 2½ years of work, Corio’s statement was all he had. Frank knew the power Nucky wielded and feared he might find a way to escape prosecution. All he had to do was to silence Corio—that alone would destroy the government’s case. Neither Frank nor the U.S. Attorney’s office was confident the conspiracy charge would stand up, especially when one of the co-conspirators was the main witness. If they were to be sure of a conviction, they needed more.

Along with the probe into graft, Frank’s agents pursued tax evasion cases against the principals of Atlantic City’s rackets. Their strategy was to apply pressure on as many racketeers as possible in an attempt to find someone to admit to paying protection money to Nucky. The two main attractions of Atlantic City’s vice industry were prostitution and gambling. During the preliminary phase of their investigation, the FBI found eight large houses of prostitution (there were scores of smaller ones, all of which were doing a flourishing business); 25 horse betting rooms and gambling casinos; nine numbers banks; and more than 800 businesses where one could play the numbers. Atlantic City was fertile soil for prosecution of tax evasion. Finding prospective defendants wasn’t the problem; the evidence uncovered revealed violations of the law by so many people that hundreds of indictments could have been filed. The agents’ task was one of going after the right defendants who might talk under pressure. They began with the madams.

In the summer of 1937, the federal government launched a two-pronged attack on the resort’s prostitution business. At about the same time Frank’s men began their probe of the madams, a new team of federal investigators appeared in town in response to complaints that large numbers of women were being transported from out-of-state to the resort for purposes of prostitution. On August 30, 1937, the FBI raided all of the brothels, arresting the proprietors, “inmates,” and customers. The arrests totaled more than 200, of whom 140 were prostitutes.

The prostitutes were held as material witnesses at various county jails throughout the state. As a result of the testimony, all of the madams and about 30 pimps were indicted for violation of the Mann Act, commonly known as the White Slavery Law. Also indicted were Ray Born, undersheriff of Atlantic County; Leo Levy, special assistant to the Mayor of Atlantic City; and Louie Kessel, Nucky’s bodyguard and valet. Born was the bagman to whom the madams paid protection money each week. Levy and Kessel were involved in the initial arrangements for establishing several brothels. Nearly 40 ranking members of Atlantic City’s prostitution business were convicted for Mann Act violations, but none of them would cooperate with Frank and his agents. The investigators then proceeded with tax evasion charges for a second series of indictments.

The madams ran their houses on the same exclusively cash basis as everyone else in Atlantic City’s vice industry. Because of this the agents were forced to be creative. From interviews with the individual prostitutes who had been held as material witnesses, the agents secured affidavits as to their earnings, which, according to established practice in Atlantic City, represented one-half of the 50–50 split between madams and prostitutes. This estimate of earnings was further refined by a review of the records of local doctors who routinely examined the girls and laundry records, which were a rough reflection of each house’s volume of business. By piecing together these bits of evidence, the FBI established fairly accurate figures for the gross income of each brothel. The madams were indicted and convicted a second time for income tax evasion, but they all remained silent. “The whores hung in there—they were tough old girls.”

While prostitution turned a profit, it was only entertainment. Gambling was Atlantic City’s serious business. Gambling of every type, and at stakes to suit every class of player, had been part of the resort’s economy for several generations. The people who profited from gambling were firmly entrenched in the community and were a force to be reckoned with by anyone who sought political power. While Nucky was a cunning politician, it required more to remain boss for 30 years. “Nucky was Boss because he delivered. He made it possible for everybody to make a buck without a hassle. That’s why he was Boss so long.” If he hadn’t protected the racketeers they would have replaced him long before William Frank and the FBI came to town.

What the agents found were gambling rooms operated out of storefronts and as part of restaurants and nightclubs. They were run as if gambling was legal and open to anyone who walked in off the street. The furnishings of the rooms varied from those rooms that were quite austere, with rows of crude benches, to others that were elegantly furnished salons. Some of these casinos operated on two floors; the street floor being cheaply furnished for the $.50 and $1 players, while the upstairs was luxuriously equipped for $5 and $10 players. Complimentary food and beverages were served, and the management of the casinos paid round-trip railroad fare to any player producing a ticket showing they had come to town that day to gamble.

Indicative of the volume of gamblers was that Atlantic City’s horse rooms paid “track prices.” This meant they paid the same odds as those paid at the racetracks. Without a routinely heavy volume of bets there wouldn’t have been enough of a “spread” to justify paying the prevailing odds. Nucky had total control over the horse rooms. He had gone to Chicago in 1935 and made arrangements with the underworld Nationwide News Service for the exclusive agency in Atlantic City for racing results. Each room paid $200 per week for this service. The price charged by Nationwide News was $40 per week with the difference going to Nucky.

Most of the gambling rooms were involved with everything from horse races and numbers to casino games such as blackjack, poker, craps, and roulette. The rooms that emphasized horse races usually provided craps tables or a game of poker so there would be a second chance to grab the money lost on the horses. The higher priced casinos were usually connected with nightclubs, and the accommodations—food, booze, or broads—were equal to any casino in the world. The smaller rooms had average daily winnings of $500 to $1,000 per day, while the larger rooms grossed $5,000 to $6,000 per day.