Official and Confidential (40 page)

Also in the sixties a wiretap picked up a conversation between two mobsters in which, curiously, Lansky was referred to as ‘a stool pigeon for the FBI.' The Royal
Canadian Mounted Police, taping a conversation between a criminal in Canada and Lansky in the United States, were amazed to hear the mob chieftain reading from an FBI report that had been written the previous day.
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There was no serious federal effort to indict Lansky until 1970, just two years before Edgar died. Then, it was the IRS rather than the FBI that spearheaded the investigation. Even the tax evasion charges collapsed, and Lansky lived on at liberty until his own death in 1983.

New information indicates that Lansky was not the only person in possession of compromising photographs of Edgar. John Weitz, a former officer in the OSS, the predecessor of the Central Intelligence Agency, recalled a curious episode at a dinner party in the fifties. ‘After a conversation about Hoover,' he said, ‘our host went to another room and came back with a photograph. It was not a good picture and was clearly taken from some distance away, but it showed two men apparently engaged in homosexual activity. The host said the men were Hoover and Tolson …'

Since first publication of this book, Weitz has revealed that his host was James Angleton, a fellow OSS veteran and – in the fifties – top CIA officer. A source who has been linked to the CIA, electronics expert Gordon Novel, he said Angleton also showed him compromising pictures of Edgar.

‘What I saw was a picture of him giving Clyde Tolson a blowjob,' said Novel. ‘There was more than one shot, but the startling one was a close shot of Hoover's head. He was totally recognizable. You could not see the face of the man he was with, but Angleton said it was Tolson. I asked him if they were fakes, but he said they were real, that they'd been taken with a special lens. They looked authentic to me …'

Novel said Angleton showed him the pictures in 1967, when Angleton was CIA Counter-Intelligence Chief and when Novel was involved in the furor swirling around the probe into the investigation of the assassination of President
Kennedy by New Orleans District Attorney Jim Garrison. ‘I was pursuing a lawsuit against Garrison, which Hoover wanted me to drop but which my contacts in the Johnson administration and at CIA wanted me to pursue. I'd been told I would incur Hoover's wrath if I went ahead, but Angleton was demonstrating that Hoover was not invulnerable, that the Agency had enough power to make him come to heel. I had the impression that this was not the first time the sex pictures had been used. Angleton told me to go see Hoover and tell him I'd seen the sex photographs. Later, I went to the Mayflower Hotel and spoke to Hoover. He was with Tolson, sitting in the Rib Room. When I mentioned that I had seen the sex photographs, and that Angleton had sent me, Tolson nearly choked on his food. Hoover told me something like, “Get the hell out of here!” And I did …'

With Angleton dead, there is no way to follow up this bizarre allegation. While Novel has been a highly controversial figure, his account of seeing compromising pictures must be considered in light of other such references – not least that of former OSS officer John Weitz. For Novel added one other significant detail, that ‘Angleton told me the photographs had been taken around 1946, at the time they were fighting over foreign intelligence, which Hoover wanted but never got.'

During his feud with OSS chief William Donovan, dating back to 1941, Edgar had searched for compromising information, sexual lapses included, that could be used against his rival. His effort was in vain, but Donovan – who thought Edgar a ‘moralistic bastard' – reportedly retaliated in kind by ordering a secret investigation of Edgar's relationship with Clyde. Could the sex photograph in OSS hands have been one of the results?

It may be significant, too, that compromising pictures are reported as having been in the hands of both the OSS and Meyer Lansky. The OSS and Naval Intelligence had extensive contacts with the Mafia during World War II, enlisting the help of criminals in projects including the hiring of burglars
and assassins, experimentation with drugs, the protection of American ports from Nazi agents and the invasion of Sicily.
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Lansky helped personally with the latter two operations, meeting with Murray Gurfein, a New York Assistant District Attorney who later became one of Donovan's most trusted OSS officers.
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At least once, Lansky worked alongside U.S. intelligence officers on exactly the sort of operation likely to turn up smear material on prominent public men. In 1942, he arranged for the surveillance of a homosexual brothel in Brooklyn suspected of being the target of German agents. ‘Clients came from all over New York and Washington,' Lansky recalled, ‘and there were some important government people among them … If you got hold of the names of the patrons you could blackmail them to death … take some pictures through a hole in the wall or a trick mirror and then squeeze the victim for money or information.'
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There is no knowing, today, whether the OSS obtained sex photographs of Edgar from Lansky, or vice versa, or whether the mobster obtained them on his own initiative. A scenario in which Lansky obtained pictures thanks to the OSS connection would suggest an irony: that Edgar had tried and failed to find smear material on General Donovan, that Donovan in turn found smear material on him and that the material found its way to a top mobster, to be used against Edgar for the rest of his life.

24

‘For like Caesar's wife, the FBI Director must not only be above suspicion but be seen to be so.'

Smith Hempstone, journalist, 1971

I
n November 1957, the zeal of a rural policeman established what competent law enforcers had long accepted, that there was indeed a Mafia, a vast national organization directed by known godfathers of crime.

On a routine inquiry about a bad check, Police Sergeant Edgar Croswell of Apalachin, New York, stumbled on an extraordinary gathering. Sixty-three top mobsters, from fifteen states, were assembled at the palatial home of a Sicilian killer, Joe Barbara, for what could only be described as a Mafia convention.

For all Edgar's denials, events of recent months had made anyone who read the newspapers aware of organized crime. Gang warfare in New York had been making headlines for months: Frank Costello shot and wounded in the lobby of his Central Park apartment building; Frank Scalise, a henchman of Albert Anastasia, killed in the Bronx, his brother Joseph missing, reported shot, the body apparently dismembered and dumped; then one of the great Mafia sensations of the century, Anastasia, Costello's key protector, the man reputed to have been chief executioner of Murder Inc., riddled with bullets in the barbershop of the Park Sheraton Hotel.

The Eisenhower government realized something had to be done. According to former Attorney General William Rogers,
however, Edgar had to be dragged ‘kicking and screaming' into action. He obstructed, especially, the task force known as the Special Group on Organized Crime, set up by Rogers in response to Apalachin.

The Group's Chicago office was headed by Richard Ogilvie, a future Republican Governor of Illinois, a man revered by those in the FBI who did try to work against organized crime. Edgar, Ogilvie recalled, ‘ordered that the FBI files, containing the very information we needed on organized crime, were to be closed to us. Furthermore, he forbade any agents even to talk to members of the Special Group …'

Edgar refused to see the Group's chief, Milton Wessel, dismissing him as a ‘Pied Piper' and, in writing, as ‘a real rat.' FBI agents investigated Wessel and may have tapped his home telephone. When the Group concluded that nationwide organized crime existed ‘without any doubt,' Edgar derided its members as people who ‘look at “Mr District Attorney” on TV too frequently.'

In order to appear to be taking an interest in organized crime, however, Edgar suddenly discovered an old statute – the Hobbs Act – under which the FBI could investigate racketeers. Two weeks after the Apalachin gathering, startled Agents in Charge received instructions to embark on a new project, the Top Hoodlum Program.

The agents called the project THP, and it called for each field office to produce a list of exactly ten suspect members of the underworld. That was, of course, ridiculous. While one town might have trouble identifying more than a couple of gangsters, another, like Chicago, could point to dozens. For all that, the agents went to work with a will. In Washington, Edgar agreed that William Sullivan – then Chief of Research and Analysis – should report on the nature of organized crime. At last, it seemed, Edgar was interested in reality.

In the two years that followed, the FBI gathered intelligence on organized crime as never before. Then, just as his agents were starting to make real progress, Edgar quietly let
things slide. The campaign against the mobsters first slowed, and then ground to a virtual halt for no apparent reason. A possible explanation is that Edgar had become the target of fresh blackmail – through one of Frank Costello's allies, Lewis Solon Rosenstiel.

Rosenstiel, sixty-six in 1957, was a hulking figure who favored amber-tinted glasses, which he rarely removed, and large cigars to go with his status as one of the wealthiest men alive. As a young man, he had entered the liquor trade thanks to an uncle who owned a distillery. Then, during Prohibition, he had built up massive whiskey stocks for the day America could drink legally again. By the end of World War II his company, Schenley, had become the leading U.S. distiller, with profits of $49 million a year. By the late fifties he owned a luxury house on East Eightieth Street in Manhattan, a 2,000-acre estate in Connecticut, a mansion and yacht in Florida and a large private airplane.

The public Rosenstiel wore the mantle of business tycoon and philanthropist. He gave $100 million over the years to Brandeis University, the University of Notre Dame and hospitals in New York and Florida. Secretly, he was in league with the nation's top mobsters and had a corrupt relationship with Edgar. According to an allegation made to this author, he also joined Edgar in bizarre sex orgies, at the very time the FBI was under pressure to pursue organized crime at last.

Rosenstiel's lifelong involvement with the Mafia came to light only in 1970, when the New York State Legislative Committee on Crime established that he and mob characters had formed a consortium to smuggle liquor during Prohibition. When Prohibition ended, committee investigators learned, Rosenstiel had appeared at a business meeting flanked by Frank Costello. ‘Costello was there,' a witness said, ‘to give them a message that Rosenstiel was one of their people. You know, if there were any problems they would see to it. Here's where you had the Jew with the brains coming in with the Italian with the muscle.'

Rosenstiel also had longstanding links to Meyer Lansky. He and the gangster ‘owned points together' in mob-operated businesses, including a Las Vegas casino. During the committee's investigations, the millionaire was observed playing host to Angelo Bruno, the Philadelphia Mafia boss.

Many of the committee's leads were supplied by Rosenstiel's fourth wife, Susan. At fifty-two, she was emerging from a decade in the divorce courts, during which Rosenstiel had spent half a million dollars attempting to concoct phony evidence. Embittered though she was, Crime Committee Chairman John Hughes had no doubts about her testimony. His Chief Counsel, Edward McLaughlin, now a New York judge, remembers her as an excellent witness. ‘I thought her absolutely truthful,' he said. ‘The woman's power of recall was phenomenal. Everything she said was checked and double-checked, and everything that was checkable turned out to be true.'
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Most of Mrs Rosenstiel's testimony to the committee was behind closed doors, in executive session, and remains sealed. Two decades later, interviewed at her home in France, she still had the keen recall that so impressed the New York investigators. By her account, to live with Rosenstiel was to live with the command structure of organized crime.

Her first date with the millionaire, in 1955, was dinner at the Waldorf accompanied by Lansky associate Joe Linsey. He was there again during the honeymoon cruise, along with Robert Gould, a Schenley distributor who had been jailed for black marketeering in World War II. Mrs Rosenstiel later met Sam Giancana, the Chicago Mafia boss, and Santos Trafficante, the Florida crime chieftain. She was also introduced to Al Hart and Art Samish, both shady operators in the liquor business who had met Edgar at the Del Charro hotel in California. At Rosenstiel's birthday parties, famous hoodlums drank elbow to elbow with judges and local government officials. Cardinal Spellman, another of Edgar's friends, was a regular guest.

During 1957, a time of crisis for the mob – the year of the Apalachin conference and feuding over who was to dominate New York – Rosenstiel stayed in constant touch with Frank Costello. He visited him during a brief spell in jail, then received him as a guest at his home on East Eightieth Street. Earlier that year, on a trip to Cuba, the millionaire had introduced his wife to Meyer Lansky – an experience she described vividly to the New York Crime Committee.

‘We arrived in Havana,' Susan testified, ‘and then we went to the National Hotel … We had a very big suite, and it was filled with flowers … I looked at the card, and it said, “Welcome, Supreme Commander, to Havana. Meyer and Jake.” So I asked my husband who Meyer and Jake were, and he said, “That is Meyer and Jake Lansky, very good friends …”'

The Rosenstiels dined with Lansky that evening. He paid all their bills in Havana and provided unlimited credit for gambling. The millionaire, for his part, regularly returned the hospitality when the mobster was in New York or Florida. Lansky found one of the grander dinner parties a positive ordeal.

‘I had two butlers,' recalled Mrs Rosenstiel, ‘double service, with Mouton-Rothschild to drink. The butlers were trained always to have white towels around the bottles so my husband couldn't see it wasn't one of his champagnes. And we had this marvelous dinner. I was using my beautiful gold dinner service that had belonged to Queen Marie of Romania. They ate the dessert and then the butlers brought the little finger bowls, with little flowers in them. And some of them thought at first it was an extra dessert. Meyer Lansky went to taste it and hurt his teeth on the bowl.