Hero or Public Enemy Number One? Dutch Schultz insisted right up to his violent death at the age of 33 that he never did anything to deserve the "nation's top gangster" label J. Edgar Hoover and the FBI stuck on him. All he did, he said, was "supply good beer to people who wanted it. And a lot of them did."

Unfortunately, supplying beer was illegal. The Eighteenth Amendment to the Constitution had imposed prohibition on the whole United States from January 1, 1920, and the sale of any sort of alcohol was banned. Besides, Schultz was involved in other shady areas of enterprise beyond brewing: There were the protection rackets, the illegal lotteries, the feuds with rival bootleggers and the bribing politicians and police officers. But for a gangster, Dutch Schultz was a moral man. As he told a newspaper reporter in 1929: "I may do a lot of lousy things, but I'll never make a living off women or narcotics."

This was someone, however, who had personally shot dead at least two of his own men that he suspected of taking more money than was their due. His dealings with rivals were no less drastic. Even as Prohibition was ending, in 1933, Schultz settled a dispute with another beer baron, Max Hassel, by having him gunned down in a hotel suite in New Jersey. When Schultz himself was killed by fellow gangsters, he was threatening to assassinate the New York special prosecutor, Thomas Dewey.

Dutch Shultz was not, in fact, Dutch, and nor was his name Schultz. He was born Arthur Flegenheimer in the Bronx, New York, in 1902, to German-Jewish immigrants. Arthur quit school at 12 and tried various jobs before deciding that burglary was easier – and brought in more money.

Unfortunately in January 1919, at age 16, he was arrested coming out of an apartment in the upper Bronx with items that did not belong to him. A term in jail followed, where he hit a guard and escaped for all of 15 hours. He returned to the Bronx after a total of a year and a quarter inside – the only prison sentence he ever served. His fellows in the local street gang, who had heard about the knockabout with the guard, nicknamed him Dutch Schultz after a fighter from the past.

For a while Arthur "Dutch Schultz" Flegenheimer was working in a small way for Jack "Legs" Diamond, who was running a little speakeasy in the Bronx. Then Arthur started working for a local trucking business that, since the arrival of Prohibition, specialized in the now-illegal vocation of delivering beer. It was his job to ride shotgun on the beer trucks, protecting them from hijack by rival bootleggers.

The role enabled the young man to get a picture of the economics involved in making and selling beer in legally "dry" New York. A limited number of breweries were still operating, with licences to produce "near beer," containing 0.5 percent or less of alcohol (this gave them an excuse for the smell of hops and mashing malt around their premises). Some also produced real beer on the sly, behind locked doors, to sell to the speakeasies that had burst into existence once drinking was forced underground. At others, the casks of near beer they made legally were spiked with alcohol knocked out in a backroom still (much easier to hide than a brewery) to make so-called "needle beer" (after the syringes used to inject the extra alcohol into the casks through the bungholes), strong as the pre-Prohibition stuff.

The near beer was brewed for just $3 or $4 a barrel. It cost less than 50 cents to buy enough alcohol to turn that barrel into needle beer. The distributors bought the needle beer for $8 or $9 and sold it to the speakeasies and tavern keepers for $18 or $19. They in turn sold it on to their thirsty customers for the equivalent of twice as much again. Everybody made a profit along the way. But a man did not need a degree in economics to see that someone who controlled the entire chain, from brewery to bar – what is known in business as "vertical integration" – could keep all the proceeds. And Dutch could see there were a lot of proceed to be gathered from selling beer at 15 cents a glass that had been made for only 15 cents a gallon.

Young Arthur – he was still just 26 – shifted from being a small cog in the distribution machine to a partnership with a friend called Joey Noe (pronounced “noy’) in a tenement speakeasy in the Bronx. The business was a success, and the two opened further outlets. Then they moved into the beer delivery business themselves to supply their own bars, buying their product from a brewery in Union City, N.J. The next step was to supply other speakeasies in the district with beer. The owners of rival outlets were generally easily persuaded that it would be better for their health to buy beer from the Schultz/Noe partnership, though one, an Irishman called Joe Rock, tried to resist. He was kidnapped, beaten, hung by his thumbs from a meat hook, blinded and sent home only after his family had paid a ransom of $35,000.

The pair began to expand their operation outside the Bronx into other areas of New York, such as Washington Heights and Harlem. They were selling so much beer they had to go to other producers for supplies, including the Phoenix brewery on 10th Avenue and 26th Street in New York. This was controlled by Owney Madden, an English-born gangster (either Liverpool or Leeds, depending on which source you trust) of Irish ancestry who owned the Cotton Club in Harlem, where black dancers and jazz bands entertained white customers, and whose "Madden's No 1" was Manhattan's favorite brew.

But rival beer suppliers resented Schultz and Noe's arrival in their territory – one being "Legs" Diamond, who had already been pushed out of the Bronx beer business by the newcomers. In October 1928, Joey Noe was shot and mortally wounded outside a nightclub on West 54th Street, near Sixth Avenue by gunmen in the employ of Diamond, though not before he had fired enough bullets back to kill one of his assassins. When Legs Diamond himself was killed three years later in a boarding house in Albany it was generally agreed that Dutch Schultz had arranged the deed, in revenge for his friend and partner.

Meanwhile, the Dutchman had acquired a controlling interest in a brewery in Chicken Island, Yonkers, being run as the State Cereal Beverage Co.  Accounts differ on how Schultz obtained control, although it seems likely it involved the sort of offer that persuaded bar owners to agree to take his beer. At last he owned the whole beer chain, from manufacturing to retail sale. Even a bloody 18-month war with a rival gangster, Vincent "Mad Dog" Coll, which finally ended with Coll being Tommy-gunned in a drugstore phone booth, failed to stop the dollars flooding through from the booze business. The federal authorities were to claim that Schultz's personal income for the three years from 1929 to 1931 from his illegal bootlegging activities amounted to $481,637.35 of taxable earnings. It was a multi-million dollar business being run by a man not yet in his 30’s.

Schultz was powerful enough by the late 1920’s to be invited to join the meetings organized by his fellow New York gangster, Lucky Luciano, to set up a national crime syndicate. He had also moved in on an even more lucrative operation than bootlegging: the illegal lotteries known as the numbers game or policy racket. Most of the sums staked on the numbers game by punters were tiny. But so many people – generally poor – played that they amounted, by the time Schultz and his heavies took almost complete control of New York operations, to an income of $20 million a year. Much of this had to be paid back in bribes to New York's politicians and policemen, but Schultz was still easily a very rich man. Not that anyone could tell from looking: He was notoriously poorly dressed, believing clothes to be a waste of money.

In 1933, Franklin Roosevelt took office as president of the United States.  As a preliminary to the eventual ending of Prohibition, Roosevelt declared that 3.2 percent beer would no longer be regarded as intoxicating, and was now legal. Dutch Shultz could be a legitimate brewer. He bought Owney Madden's brewery and another in Brooklyn. He could not quite get to grips with the new business climate, however. When a rival brewer began selling barrels in the Bronx, Schultz had his opponent's delivery truck hijacked and had to be told by his political contacts that with beer now legal, this was no longer an acceptable tactic.

Schultz had bigger worries than rival brewers, though. A federal grand jury had just returned an indictment against him on 11 counts of income tax evasion totalling more than $92,000. He immediately went into hiding, while his lawyer pulled strings to get the case heard away from the city in Upstate New York, where the jury might be more friendly. It was at this point that Hoover and the FBI put Schultz's face in Post Offices around the United States in an attempt to find the fugitive, now officially "Public Enemy Number One." The Dutchman finally turned up for his trial in the autumn of 1934, only to have to face a retrial after the jury failed to agree. At the second hearing, however, the new jury returned a finding of not guilty – to the amazement and fury of the presiding judge.

Schultz was not out of trouble yet. Tom Dewey (who went on to become governor of New York and the losing Republican candidate for president in 1944 and 1948) was investigating the numbers game, and also the protection racket the Dutchman had begun operating among New York's restaurants and cafes in 1932. In October 1935, at a meeting in Manhattan, Schultz urged Luciano and the other big crime bosses to arrange for Dewey to be killed. When they demurred, Schultz announced that he would organize it himself and left the meeting.

Once he had gone, the others agreed – Schultz himself was now a dangerous menace, because of the wrath he could bring down on them all if he went after Dewey. Never kill newspapermen, politicians or prosecutors, the Mob agreed. Too much trouble would follow. The Dutchman had to die.

A few days later, two hitmen walked into the Palace Chop House in Newark, N.J., where Schultz was holding a meeting with three gang members. The bullets flew, leaving Schultz and his three henchmen mortally wounded. It was the worst gangland slaying since the St. Valentine's Day massacre in Chicago in 1929.

The Dutchman, bringer of beer to the people of New York, was struck by a single bullet that ripped through him, causing irreparable damage. He died 24 hours later in Newark City Hospital, surrounded by policemen trying unsuccessfully to get him to say who his assailants had been. The Beer Baron of the Bronx was gone, dead as the Prohibition legislation that brought him into being.

-- Martyn Cornell