described as the most vicious group in 1930s New York. In 1932, a year before the repeal of Prohibition, they began to diversify and extend their tentacles to other rackets, realising that the lucrative days of bootlegging would soon be over. In anticipation of that day, they moved their activities to the garment district in midtown Manhattan, where they branched out into extortion rackets, demanding protection payments from trucking firms, also muscling in on the booming narcotics trade. As is traditionally the case with the Mafia the world over, what gave this gang much of its power was kinship, whether through blood or marriage. With three powerful relatives, his cousins Vincenzo and Vincent and his brother in law Joe Stretch, Joe Rao carried clout among several gangs. In fact, one of the dangerous aspects of his criminal activities was that he had few lasting loyalties, tending instead to form alliances with several different groups and mob bosses depending on how much enrichment was in it for him.
What ultimately led Rao to be feared and respected by the mob in equal measure was his eventual long term association with Jewish-born Mafioso “Dutch” Schultz, aka Arthur Flegenheimer. Born in the Bronx in 1902, Schultz had risen to fame in the 1920s as the Bronx Beer Baron, who controlled the manufacture, importation and distribution of illegal brew throughout New York City. Pre-empting the repeal of prohibition, he went into the restaurant racket and then became king of the so-called “numbers game” or policy racket, an illegal version of the lottery in which the odds were a thousand to one and winning numbers were always “fixed” by Schultz’s men to ensure players never won much from their bets. From earlier criminal investigations, David Marcus knew it was the Schultz connection which ultimately conferred on Rao the power to run Welfare Island as his personal fiefdom. Marcus had heard that when Rao was convicted in 1932 and given a prison sentence, he asked to be sent to Welfare Island knowing he could organise a drugs racket - a rumour Marcus had no reason to disbelieve. Given his close relations with New York’s most powerful millionaire mobster, Rao would have had ample support and few obstacles in his drug trafficking operation and any other racket he decided to run on the island.
Today, Dutch Schultz may not be remembered as a gangland celebrity such as Bugsy Siegel or Charles “Lucky” Luciano, immortalised on film and TV, but there was a time when Schultz’s power in New York’s underworld was virtually second to none. In contrast to the alliances between members of the various Italian clans, Dutch Schultz was the last independent mobster who refused to become a part of the new style syndicate. Never a team player, Schultz knew he had too much to lose by forging partnerships. By 1930, Schultz held New York in the same way Al Capone ruled Chicago and could afford to operate solo. In 1934 he had been running the hugely profitable numbers game for several years, aided by a loyal handpicked team of lieutenants and foot soldiers, enforcers, lawyers, accountants and bankers. The average daily take in bets was reported to be around $35,000; estimates of Schultz’s annual income from the policy rackets was put at $12-$14 million. He kept a low profile, bore a perpetually sullen expression and lacked the sinister glamour of many Jazz Age gangsters. With a miserly nature verging on the pathological, he lived frugally, wore cheap suits and shirts, abhorred ostentatious behaviour and flashy clothes and cars. Journalist Meyer Berger, who interviewed Schultz for the New York Times , described him as having the appearance of “an ill-dressed vagrant …. or at best a guy with a special talent for looking like a perfect example of the unsuccessful man.” Schultz told Meyer that he never spent more than $35 for a suit or $2 for a shirt, claiming: “Only queers wear silk shirts. I never bought one in my life.