Boardwalk Empire: The Birth, High Times And Corruption of Atlantic City (22 page)

The money in John Tomlin’s account was easily traced from his son’s business account. When first summoned to a meeting with the FBI agents to explain their unreported income, the Tomlins came dressed in rags and stated they were prepared to take a pauper’s oath. One of the agents confronted John Tomlin with a photograph from a recent newspaper where he was shown in attendance at one of Nucky’s gala political dinners dressed in formal evening clothes. When the agents made it clear they intended to prosecute them, the Tomlins hired lawyers and spent whatever was needed on their defense. Both father and son were indicted and eventually convicted. Despite offers of immunity for their testimony, neither Tomlin would admit that Nucky had shared with them in the profits.

Another public contract scrutinized by Agent Frank’s team of investigators was the city garbage contract for the years 1933 through 1935. The individuals involved were Charles Bader, brother of Mayor Edward Bader; James Donahue, a Republican ward leader from Philadelphia; and Edward Graham. The three of them traded under the name Charles L. Bader and Company. This was the simplest case the agents handled. Bader’s records proved an obvious case of tax evasion—it was there among the firm’s books, banking statements, and canceled checks. The records also showed bribes to Nucky. Bader’s daughter, who was the bookkeeper, had carefully made notations of Nucky’s initials, “E. L. J.,” on the check stubs for the withdrawals of cash made by Bader and Donahue who passed cash totaling $10,000 on to Nucky.

The payments to Nucky were confirmed by the court records of a lawsuit. Bader, Donahue, and Graham had quarreled over the division of the profits from the garbage contract. Their dispute wound up in the Atlantic County Chancery Court. The court ordered an accounting, which, among other things, disclosed the $10,000 bribe paid to Nucky as part of the firm’s expenses. The judge hearing the case, as well as the lawyers trying it, all knew a bribe had been paid to secure a municipal contract, yet none of them did anything about it. Nucky’s influence was so dominant and Atlantic County’s judicial system so corrupt that an extortion payment was a routine business expense. Bader, Donahue, and Graham were all convicted, but a single $10,000 bribe wasn’t enough for a case of tax evasion against Nucky.

Special Agent William Frank was obsessed with obtaining more evidence against Johnson. The investigation had taken on a personal flavor, with Frank openly contemptuous of Nucky. He ordered his men to continue looking into public contracts. One project that couldn’t be overlooked was the construction of the new railway station for Atlantic City. In 1933 the two railroads that had been servicing Atlantic City were ordered by the New Jersey Public Utilities Commission (PUC) to consolidate into the Pennsylvania Reading Seashore Line. As part of the state’s ruling, a new railroad station was to be constructed.

At a time during the Depression when there was little work available for contractors, Johnson secured a $2.4 million contract for A. P. Miller, Inc., the construction company of an ally, Tony Miller. Nucky had control over the key figures who made decisions and was able to handpick the contractor for this project. Under state law the railroad was mandated to pay one-half the construction costs and the PUC the remainder. Mayor Harry Bacharach sat on the PUC as the city’s representative, and he followed Nucky’s orders to the letter. There was also the need for special legislation from Trenton and approval of the location by city commission. Nucky took care of all the details. As for the railroad, members of the commission were practical people and agreed to go along with Nucky’s choice, provided a competent firm did the work. Nucky put together all the pieces and the contract was awarded to A. P. Miller, Inc.

In examining the books of the Miller company, the agents discovered that in 1935, the final year of the contract, the company paid a $60,000 legal fee to a local attorney, Joseph A. Corio. The stated profit on the entire contract amounted to approximately $240,000. The corporation’s tax return showed another figure for legal fees for that year, in the amount of $1,150. The $60,000 item was buried among the construction costs of the station. Several checks totaling $60,000 were paid to Corio but weren’t deposited in his bank account. He cashed them personally.

Joe Corio was a close friend and political ally of Nucky. He was valuable in delivering the vote in the resort’s Italian-American neighborhood of “Duck Town.” Over the years, Corio performed many chores for Nucky and was always rewarded. In exchange for his loyalty and success at getting out the vote, Nucky referred clients to Corio, had him elected state assemblyman, county recorder, and finally appointed Judge of the Common Pleas Court. One of the firms that Corio represented prior to going on the bench was A. P. Miller, Inc.

A review of Corio’s income tax return for 1935 showed he had reported a gross income of $20,800. Judge Corio agreed to meet with the agents in his chambers. When confronted with the $60,000 legal fee vs. his reported gross income, Corio explained that more than $40,000 of the fee had gone to expenses; however, he had nothing to back them up. When the agents began grilling him asking for proof, Corio donned his robes and stomped around his chambers demanding what right they had to question his integrity. Corio’s pompous attitude provoked William Frank, and he instructed his agents to dig into his financial records. Fortunately for the agents, the bank Corio dealt with was one that kept a photographic record of all its customers’ checks.

Several days after reviewing Corio’s attorney account records, the agents confronted him with proof he hadn’t spent anywhere near $40,000 on legal expenses in 1935, whereupon, Corio’s judicial dignity collapsed. He admitted his tax return didn’t tell the whole story and offered to pay any additional taxes and penalties, which the agents might assess. He told the agents he wanted “to settle the case” and “get it off his mind.” But the FBI refused to make a deal. They demanded a full explanation of the $60,000 legal fee and warned Corio that if he didn’t cooperate they would seek an indictment for income tax evasion.

Corio refused to talk, and between October 1937 and April 1938 he did everything possible to settle his tax liability and to prevent prosecution. Nucky saw to it that high-powered lawyers were retained, and a personal appeal was made directly to U.S. Attorney General Robert H. Jackson. Despite these efforts, the case against Corio went forward. In May 1938, a federal grand jury indicted him on charges of tax evasion and making false statements to Treasury Agents. With that, Judge Corio reportedly had a nervous breakdown and was hospitalized in a sanitarium the remainder of the year.

Corio’s case was set down for trial in January 1939. When he finally realized he wasn’t going to escape prosecution, he decided to talk. In exchange for a grant of immunity, he gave a statement to the FBI, which disclosed that the $60,000 he received wasn’t a legal fee but rather a distribution of a portion of the profit on the railroad station contract to Miller, Corio, and Nucky. “Joe Corio surprised everybody. We all thought he’d keep his mouth shut and go to jail.”

According to Corio, Miller had agreed to give Nucky three-fifths of the net profit after taxes in exchange for receiving the contract. Corio and Miller, who were related, had a side agreement of their own, which called for an equal split of the remaining profits. Nucky didn’t trust Miller and insisted their agreement be reduced to writing. Corio represented Miller and Nucky was represented by Atlantic County Judge Lindley Jeffers in the preparation of the agreement. Corio believed the written agreement was destroyed in 1935 when the three of them changed the plan for dividing the profits in order to evade taxes; however, the agents learned that the secretary who prepared the document had kept her steno notes and was able to reproduce a true copy.

Corio gave a statement admitting that in September 1935, when Tony Miller received his first profit payment of $70,000, he suggested a scheme of paying a $60,000 legal fee to Corio. This would permit the corporation to deduct that sum as an expense and avoid taxes on that amount. As originally planned, the corporation would have paid a tax on the profits before declaring dividends to Miller. Tony Miller’s scheme called for Corio to report the $60,000 as a fee on his individual return and Miller gave him $13,200 to pay the taxes on the $60,000. This left $46,800 to be distributed among the three of them; of this amount, Miller received $9,400, Corio $9,400, and Nucky received the balance of $28,000. Corio stated that he saw the cash change hands from Miller to Nucky. The total tax saving on the corporation’s and Miller’s individual return amounted to approximately $25,000.

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.