1935: While facing tax evasion charges, NYC beer baron and mobster Dutch Schultz enjoyed his time in Syracuse

The story of the riches that New York gangster Dutch Schultz allegedly buried somewhere in Upstate New York has fascinated writers, filmmakers and treasure hunters for decades.

Schultz, whose real name was Arthur Flegenheimer, is said to have hidden money, jewelry, gold and bonds in a steel box or safe in the Catskills region sometime in the 1930s, which today could be worth up to 50 million dollars.

The infamous smuggler and beer baron, once named Enemy No. 1 by FBI Director J. Edgar Hoover, has another connection with Upstate.

Six months before his death on October 23, 1935, Schultz was in Syracuse, accused in one of the largest trials in the city’s history.

An aerial view of Syracuse dated March 1935, including the Clinton Exchange building in the lower left corner. It was the city’s former federal building and was the scene of the Dutch tax evasion case Schultz in April.

A newspaper reporter argued that it was the “most brilliant trial” in Syracuse since the defamation case of former President Theodore Roosevelt 20 years ago.

“The federal government mobilized one of the most expensive and brilliant armies of prosecutors and witnesses ever assembled,” the Syracuse Herald announced on the 7th at the trial of the former Bronx beer baron in the US District Court here. “

Schultz was charged with failing to file tax returns on illegally earned income in 1929, 1930 and 1931, its heyday before prohibition was lifted in 1933.

Newspaper accounts said he “evaded paying $ 92,000 in taxes on his $ 2,000,000 income. He faced four charges, including a maximum of 16 years in prison and a $ 200,000 fine if convicted.

The tax evasion charges were similar to those brought in conviction of another notorious gangster, Al Capone. In fact, a prominent member of the team that convicted “Scarface”, John H. McEvers, was charged with prosecuting Schultz.

Schultz arrived in Syracuse on Saturday evening, April 13, 1935 and was quickly taken to his suite on the ninth floor of the Syracuse Hotel, where he huddled with lawyers.

“All I want is fair treatment and a fair trial,” he said.

He was an instant media star and was photographed on the go for the coming weeks while visiting attractions in Syracuse. He was interviewed by reporters and met with city officials, including Mayor Rolland Marvin and all his town hall staff, Judge William Barnum and District Attorney William Martin.

Schultz donated money to local charities and was a favorite among Syracuse taxi drivers, often paying two or three dollars for a 35-cent fare.

The original main entrance to the Syracuse Hotel, on the East Onondaga Street side of the building, circa 1930. During his tax evasion investigation in April 1935, Dutch Schultz walked from the hotel and met many of the city’s leaders. Onondaga Historical AssociationOnondaga Historical Association

The city made an impression on him, possibly as a retreat.

“Syracuse had a hit with the former beer baron who was quoted as saying he would like to be at home in Syracuse,” the Herald reported. “Friends say he says this sincerely, and they wouldn’t be surprised if he made that statement – if the court doesn’t look after his future in a less pleasant place.”

(Schultz may have had a bad night in Syracuse during the trial. In the early hours of April 27th, a Syracuse University initiate called an “obscene challenge” to Schultz’s bodyguard you so and so – if you are no more than seven, ” the Warren Street youth yelled at the hotel window, shaking his fist. Many guests hurried to look outside, but Schultz’s men did not take up the challenge.)

The trial began on April 15, 1935 in the old federal building overlooking Clinton Square.

Security was extremely tight as a dozen deputy marshals and three plainclothes officers from the Syracuse Police Department patrolled the building’s second floor.

The public was not allowed to enter the courtroom or its hallways when the jury selection began. The inmates were forbidden to light cigarettes, take photos or even put their hands in their pockets.

Dutch Schultz was perhaps the least nervous person in the courtroom, “properly dressed” in a black suit, gray oxford tie, well-starched white shirt, and highly polished black shoes.

“I’m fine,” he said when the testimony began. “I am confident that I will get a fair trial.”

But his fear must have increased when the federal government started its presentation.

“Quickly but meticulously, the government covered the accused with masses of evidence to show that Schultz had amassed a small fortune in the last few years of the prohibition era,” the Herald reported after a week-long testimony. “Then prosecutors wrapped that blanket in reels of telephone wire that they said had had thousands of conversations with beer orders and deliveries in his vast Bronx speakeasy empire.”

On April 18, the government’s lead witness, Marguerite Scholl, a Bronx stenographer who personally delivered Schultz’s ledgers to the Feds, testified about what was “on the Dutchman’s payroll” and how many men were working for him.

His lawyers attacked her story for over an hour, but she “stuck with it”.

Other witnesses were less compliant.

Some developed amnesia or went into hiding.

Another disappeared completely after a walk.

When “Deafy” Dan McCarthy, Schultz’s “buddy and speakeasy partner”, was told by McEvers that his testimony would not be made until the afternoon of the 18th? “

McEvers agreed, and McCarthy left and never returned. Searches of hotels and bar rooms in Syracuse and the Big Apple could not find “Deafy”.

– The normally calm beer baron Dutch Schultz was noticeably nervous during the deliberations of the jury during his tax evasion case in Syracuse in April 1935. Courtesy of World ArchivesCourtesy of World Archives

Schultz’s defense lasted only three hours. It just boiled down to bad legal and financial advice for the beer baron.

On April 25, Edward Reynolds, a former US assistant prosecutor, testified that he had told Schultz as early as 1926 that he was not required to file an “income statement from the illegal sale of beer.”

His attorneys also claimed he offered the government $ 100,000 to offset his undisclosed income, but they refused.

On the day the jury received the case, Schultz pleaded to reporters outside the courtroom:

“I offered $ 100,000 when the government was broke and people were talking about revolution and they coldly turned me down. You can see how that at least I was willing to pay. Everyone knows that in this case I will be persecuted. I want to pay. They took it from everyone else, but they didn’t want it from me. I tried to do my duty as a citizen. “

The jury began its deliberations on Friday, April 28, just before noon. It quickly became clear that they were hopelessly stuck.

The whole city waited expectantly. While waiting for a verdict, those present in the courtroom were betting on what the verdict would be.

In the jury room, the 12 male jurors voted on Schultz’s guilt and then eased tension by smoking and playing bridge and pinochle.

The stress was too much for 68-year-old Skaneateles farmer Giles Hilbourne, who suffered a heart attack while walking down a flight of stairs during a break.

“He was carried upstairs by bailiffs,” reported the Herald. “He recovered within minutes and joined the other 11 jurors in the deliberations.”

At 3 p.m., a Fabius shopkeeper, Michael Shea, told the judge that after 27 hours the jury could not pass judgment.

Notes found in the consultation room indicated that the jury was 9: 3 in favor of the conviction.

Schultz is said to have been in a “gay mood” when it was over.

He checked out of the Syracuse Hotel, wearing brand new fishing gear that he had bought to end the process. Maybe he’d gone to Oneida Lake for a fishing vacation.

“He went to the hotel checkout window and tossed a $ 500 bill through the grill to pay his hotel bill,” remarked the Herald. “‘Take it out of there,’ he said.”

He gave the bellboy a $ 5 bill.

In this building, the Franklin County Courthouse in Malone, the retrial against Dutch Schultz took place in July 1935.

The prosecutors swore they would not be finished with him.

“We’ll give the Dutchman both barrels next time,” said a prosecutor. “At least we’re trying to show the next jury that we’re not playing with him.”

A second trial was ordered for July 1935, this time in Malone, NY

This time Dutch Schultz was acquitted.

Justifiably he returned to the Bronx and sought revenge on the man who had charged him twice, Thomas Dewey, the special attorney for New York City.

Schultz hoped to enlist the help of several other important criminals in Dewey’s murder.

However, they did not want any further attention from Dewey, the future governor of New York and presidential candidate, and decided to assassinate Schultz instead.

On October 23, 1935, Schultz was shot while washing his hands in a toilet at the Palace Chophouse in Newark, New Jersey. He died a day later. He was 33 years old.

He went to the grave and took the place of his buried treasure with him.

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This feature is part of CNY Nostalgia, a section on syracuse.com. Send your ideas and curiosities to Johnathan Croyle at jcroyle@syracuse.com or call 315-427-3958.