Prohibition: Thirteen Years That Changed America (22 page)

By 1924, Olmstead was a millionaire, dealing exclusively with wholesalers. With net profits of at least $200,000 a month, he acquired a palatial home in Mount Baker, Seattle’s choicest suburb, as well as the American Radio Telephone Company, Seattle’s first radio station (KFOX), which his wife Elsie ran from their home. Like Remus, Olmstead entertained on a lavish scale, and, like Remus, acquired a new glamorous companion. The elite of Seattle, including the mayor, were proud to be his friends. As a Seattle newspaper commented in 1924, “It made a man feel important to casually remark: ‘as Roy Olmstead was telling me today. . . ‘ “

His police connections were invaluable, as the following wiretap extract proves:

Roy phoned the police station. M — came to the phone and said: “Hello, Roy, what’s on your mind?” Roy said: “One of your fellows picked up one of my boys.” M — replied: “Who is it?” Roy replied that it was B — “I don’t give a damn what they do but I want to know before he is booked.” M — replied, “I’ll take care of it for you, Roy.”

In another wiretapping extract, a policeman was heard telling Olmstead that he had arrested one of his men. “He was loaded clear to
the axle. I could not do anything else.” Olmstead quickly got to know that his phones were tapped, and exploited this to his advantage. He started giving fake orders on the phone, using an untapped telephone booth to give his staff genuine instructions.

But eventually the law caught up with him. Mabel Willebrandt, the deputy attorney general who pursued Olmstead as diligently as she did Remus, was convinced that his radio station was used to transmit coded instructions to his reception committees and wholesalers, and that key words were broadcast in specially written children’s bedtime stories read on the air by Olmstead’s wife. It was during one such transmission, made from Olmstead’s mansion (which had its own transmitting studio) that Prohibition agents finally made their raid, and arrested him. In 1926, he stood trial for “conspiracy to possess, transport and import intoxicating liquors,” and was sentenced to four years in jail.

His trial made legal history because the judge authorized hitherto illegal use of wiretaps. Olmstead’s career did not end there. After his release from McNeil Island federal prison, he became a born-again Christian Scientist and devoted the rest of his life, and the remains of his considerable fortune, to charitable work with convicted prisoners. McCoy, released at the same time, retired to Florida, also with substantial funds. After the territorial waters limit was reduced to three miles, it became essential for valuable ships such as McCoy’s
Arethusa
to remain at a safe distance from the coast, and a new category of player emerged — the fishermen who ferried customers to the floating liquor supermarket ships and back (also hiring themselves out to bring the liquor ashore, braving Coast Guard interception). Their exploits were celebrated in sea shanties, including these famous lines:

Oh we don’t give a damn
For our old Uncle Sam
Way, oh, whiskey and gin!
Lend us a hand
When we stand in to land,
Just give us time
To run the rum in!

Everett Allen, author of
The Black Ships
, grew up during Prohibition in New Bedford and remembered not only the friendly bantering
between fishermen and Coast Guards but that “on most days there would be twelve to fifteen rum boats testing their engines and roaring around New Bedford harbor while a patrol boat kept an eye on them. Then, as it got later, one by one they would disappear.”

Local New Bedford fishermen found rum-running far more lucrative than catching and selling fish, and many became minor dealers themselves. “You knew right away when a man stopped fishing and started running rum,” a local New Bedford resident told Allen. “In the first place, his family began to eat proper and you could tell by what they bought at the grocery store, when they had had to run up a grub bill all winter.” A fisherman called Manuel stored liquor in his cottage water tank, selling it to private customers by the bottle straight out of a water spigot. In wintertime, peddlers sold rubber hot water bottles containing whiskey from pushcarts in the New Bedford streets.

Freelance fishermen’s “shuttle services” often operated without prior knowledge of any “floating supermarket” arrivals, for there was a constant flow back and forth. A former Coast Guard officer turned rumrunner told Everett Allen: “At night on ‘rum row’ [the stretch of the Atlantic nearest New Bedford] you’d think there was a city out there.” Isabelle Mairs, an East Hampton teenage flapper in the 1920s, remembers watching Coast Guard vessels pursue fishing boats in spectacular chases clearly visible from East Hampton’s exclusive Maidstone Club — which, though serving every conceivable type of liquor, was not raided once during the Prohibition years. Its members were far too influential, and East Hampton’s police chief, a frequent guest at the club, would get so drunk that his car ended up in the lake several times.

At first, the fishermen-bootleggers used their own boats to take the liquor ashore, but as Coast Guard patrols became more experienced, and their engines faster, fishermen’s boats became increasingly vulnerable. Jimmy McGhee, a motor mechanic in Manorville, near Southampton, helped save the situation for the bootleggers. His brilliant, never-patented creation was a speedboat of his own devising. It was a pared-down floating platform powered by twin water-cooled airplane engines (bought cheaply from stocks of First World War surplus) and capable of speeds of up to 65 miles an hour — far faster than the fastest Coast Guard boats. McGhee’s powerboats ran on aviation fuel and required skilled, cold-blooded crews, for there
was a constant risk of engines overheating and blowing up at high speeds.

McGhee became a well-known figure in the Hamptons, and was in great demand not only as a mechanic but as a boat designer. Like McCoy, he was more interested in boats than in money. Although he was, in a sense, the Coast Guard’s worst scourge, he never did anything illegal, consistently refused to take a cut on the liquor cargo his boats transported, and was never arrested. Long after Prohibition, this entirely self-taught mechanical genius became a well-known figure in racing car circles, and during the Second World War was hired as an adviser by Grumman, the maker of fighter aircraft.

Boats such as McGhee’s, built in discreet workshops in New York and all along the East Coast, were also acquired by notorious underworld bosses whose men ran the Coast Guard gauntlet themselves. Their one-man torpedo boats were armor-plated, with bullet-proof windshields, and carried up to 400 cases and moved at 35 knots. Some of these craft have survived, including one once owned by Dutch Schultz, the notorious gangster, and are now valuable collectors’ items.

The war at sea was continuous. Fishermen used their nets to foul the engines of pursuing Coast Guard boats. Regardless of the weather, veteran residents recall, there were noisy water ballets off the Hamptons coast involving fishermen’s boats and their Coast Guard pursuers. In 1925, Coast Guard boats were ordered to mark suspected rum-running vessels at all times. Many of the speedboats were equipped with radios, and used codes to communicate with their land bases, even though the penalty for using an unauthorized radio on a rum-running speedboat was a $7,000 fine. The FBI knew that rumrunners ferrying liquor from parent ships to shore used accomplices, sometimes fronting as local radio station employees, to broadcast cryptic messages in Morse that only the initiated could understand.

The bootleggers’ codes got increasingly sophisticated as time went on, and were not confined to radio, for they knew their mail was routinely opened, and were careful to conceal details of their shipments as best they could. As the Coast Guard’s cryptanalysis improved, so did the exporters’ methods. One of the biggest bootlegging conglomerates, the Consolidated Exporters’ Company, hired a retired Royal Navy expert to devise and modify their codes every few weeks, paying him a $10,000 retainer.

David Kahn, in
The Code Breakers,
⁹
quotes Elizabeth Smith Friedman, a senior cryptanalyst for the Coast Guard, as saying that “at no time during the [First] World War, when secret methods of communication reached their highest development, were there used such involved ramifications as are to be found in some of the correspondence of the West Coast rum-running vessels.” Testifying in a New Orleans court against the Consolidated Exporters’ Company, she gave this example of encoded instructions: “Anchored in harbor. Where and when are you sending fuel?” became

“MJFAK ZYWKH QATYT JSL QATS QSYGX OGTB.”

Largely at her insistence, the Coast Guard eventually launched the CG-210, a patrol boat packed with high-frequency receivers and direction finders, and staffed with trained cryptanalysts that could listen in on a large number of coded messages simultaneously. It was, in a way, a high-tech breakthrough comparable to today’s AWACS plane, and Kahn makes the point that without prior work on bootleggers’ code-breaking, progress in World War II cryptanalysis against Germany and Japan would have been far less successful.

The Coast Guard would doubtless have gained the upper hand had it had superior craft, but when President Calvin Coolidge, Harding’s successor, asked for appropriations to buy faster powerboats, legislation was often held up by wet Congressmen, including a hard-core minority known to be in the pay of rum-running financiers.

The Coast Guard was a tough adversary, but its rate of interception never rose above 5 percent of the total traffic — roughly the equivalent of law enforcement scores today involving drugs — and even this elite force of 11,000 men was by no means above suspicion. As a boy, Everett Allen recalled two uniformed Coast Guard personnel “coming into Vineyard Haven drunk enough so they tried to sell liquor in bottles right off the street.”
¹⁰
On Block Island, a notoriously corrupt Coast Guard captain systematically looked the other way, and Allen remembers seeing sixty cases of whiskey awaiting collection in broad daylight within a few hundred yards of a Coast Guard station.

“It became as necessary to exercise vigilance over the Coast Guard as over the smugglers,” A. Bruce Bielaski, a former federal Prohibition enforcement chief for the whole of the Atlantic seaboard, told the
Sat
urday Evening Post
.
¹¹
For letting fishing boats land liquor at Fort Point Bay, near Montauk, Coast Guard captain Frank J. Stuart got $2,000, the equivalent of a year’s pay. Bielaski told the
Post
that some Coast Guard crews actually helped in the transfer of liquor from rum runners to speedboats. “When the schooner
Dawn
, with 2,000 cases of whiskey on board, was captured and towed into New Bedford, she suddenly sank. A report was sent through that she had gone down with 200 cases on board. We knew better. Later she had to be raised, and not a bottle of whiskey was found on her.” There were also large numbers of situations in which Coast Guard crews protected the rumrunners by sending U.S. Navy destroyers trying to apprehend them off on false trails.

Because Coast Guard authorities were reluctant to admit to failings in the ranks, courts-martial were invariably held in secret, and the press was informed much later, if at all. In 1932, the Coast Guard commandant reluctantly admitted that the Coast Guard officer in charge of Georgica station, Long Island, had been sentenced to one year in the Portsmouth naval jail for “certain offenses.” That same year, three boatswain’s mates were convicted of “scandalous conduct” for conniving with bootleggers around Fire Island.

So incensed was one anonymous citizen that he wrote a letter to a senior Washington official asking for a loan to buy and equip “a good submarine chaser with gun, a load of torpedoes and a few machine guns. I will supply a crew. We will go to sea and sink without trace every rum boat we can find. ... I am sick of seeing foreigners thumbing their noses at the U.S. Am I for Prohibition? Hell, no. Just tired of fiddling, fooling and graft.” The writer’s political agenda was clear. “I’ll clean the seas of the graft as Forrest cleaned the woods of niggers.” The reference was to the infamous Major General Nathan Bedford Forrest, who massacred black Union troops at Fort Pillow in 1864 — the letter itself a reminder that Prohibition supporters included not only devout Christians and moralistic Anti-Saloon Leaguers but the equivalent of today’s extremist militias; that is, the then extremely powerful — and teetotal — Ku Klux Klan, which at its peak had over four million members.

Coast Guard morale was not high, even among impeccably honest crews, for several reasons. One was the grotesquely ham-handed public relations policy of the times. In January of 1923, Edward Clifford,
assistant secretary of the Treasury Department, which supervised all law enforcement relating to Prohibition, recommended that “Prohibition officials be requested not to talk to newspapermen, in fact to give no publicity whatever as to what they are doing. This is also to apply to the Coast Guard. This matter cannot be handled successfully by giving out information to the press.” This meant that Coast Guard exploits were seldom mentioned in the press. The consequence was that the corrupt reputation of the Prohibition Bureau spread to the far less corrupt Coast Guard.

The Coast Guard’s original mission had been to ensure the safety of ships at sea, and rescue vessels in distress. But after some rum-running vessels began using fake distress signals to draw Coast Guard ships into ambushes, few humanitarian missions were attempted. As one of its supervisors, Rear Admiral Frederick C. Billard, wrote in 1927, “marked enthusiasm for this kind of operation could not be expected on the part of the average, old-time Coast Guard sailor,” who felt that he was “fighting a war with one hand tied behind his back.”