Booze and Dope: The Criminal Links Between Old Shanghai and America

Read Paul French's exclusive guest post about the criminal underbelly of old Shanghai, then make sure you're signed in and comment below for a chance to win a copy of City of Devils!

City of Devils is set in old Shanghai—that crazy period between the wars when the International Settlement and French Concession of Shanghai were the most wide-open places on earth. No passport required; no visas necessary. Simply arrive, walk down the gangplank, tell an uninterested Customs man any name you like, slip him a few dollars, and start your new life. No questions asked.

Shanghai was a truly cosmopolitan city, a mix of a hundred thousand “Shanghailander” foreigners from two dozen nations who called the city home and four million Chinese who came to the city seeking escape from poverty, natural disaster, and warlordism. Shanghai was the world’s fifth most populous city and by far the most modern metropolis in Asia—jazz, fast cars, machine guns, neon lights, taxi dancers, plush cinemas, massive casinos. It was also one of the most lawless cities in the world. By the late 1930s, the local law enforcement agencies were almost totally overwhelmed by a combination of Chinese gangs, foreign criminals, and the encroaching Japanese army.

Perhaps unsurprisingly, any number of criminals and fraudsters decided Shanghai was the place for them when things got tough back in America:

  • C.C. Julian, the great oil fraudster of the “Julian Pete” scandal, jumped US$25,000 bail in Oklahoma and fled to Shanghai in 1933 where he tried to restart his oil stock frauds, eventually committing suicide in the city’s Astor House Hotel.
  • Nathan Rabin, a hitman with the Chicago mob originally from Bay City, Michigan, skipped town and came to Shanghai after the Capone wars, selling his assassin services to the city’s foreign criminal gangs. When the Japanese took over Shanghai, he turned traitor and started assassinating members of the Chinese resistance.
  • Jacob “Yasha” Katzenberg, a narcotics trafficker from New York and an associate of Arnold Rothstein, came to China in 1935 and started to work for the city’s notorious Chinese Green Gang that controlled the enormous Shanghai opium trade. He taught the Green Gang how to refine opium into heroin on a massive scale. When the Shanghai police and Chinese government tried to crack down on the trade, Yasha fled into the hills of eastern China and was never seen again.

Researching City of Devils and the lives and trajectories of Shanghai’s most notorious foreign criminals, I came across links between foreign organized crime in Shanghai reaching all the way across the Pacific to America in the inter-war period.

Think Prohibition, speakeasies, and rum-running, and you probably think Canada, Scotland, and Ireland. But Shanghai was in the game too. Mexican crime bosses living in Shanghai shipped tequila from their distilleries back home to Customs-lite (make that nonexistent!) Shanghai. They then put the booze in barrels marked “pig bristles” (a major export from China to the US for use in toothbrushes) and shipped it duty-free to Los Angeles and the speakeasies of the West Coast. Even with a 15,000-mile round trip, the profits were enormous. Plenty for the Mexican crime bosses to build an enormous dog racing, boxing, and jai-alai stadium with attendant swanky nightclub for the city’s Chinese and foreign elite in Shanghai’s Frenchtown. They brought in Buck Clayton and his Harlem Gentleman as the house band, got a friendly Tulsa criminal to stack the place with rigged slot machines, bought off the local Sûreté, and made another fortune.

And then there was the dope. Shanghai was created by the unequal treaty forced on the Chinese by the British after their defeat in the First Opium War (1839-1842). The city was effectively built on the opium trade. Outlawing it and fighting to suppress it never came close to stopping the business. The Green Gang sold opium all over China and throughout South East Asia. Paul Carbone and the Corsican mafia were creating the original “French Connection” long before Popeye Doyle ever heard of it. The Union Corse shipped opium from Shanghai and French Indo-China to Marseilles via the Suez Canal and then on to Miami and Chicago. But demand in the US was gigantic…

Read Angie Barry’s review of City of Devils!

When Prohibition was repealed, the money went right out of booze and straight into dope. Louis “Lepke” Buchalter of Murder Inc. needed as much opium as he could get his hands on. He had established a large refinery at his Seymour Avenue warehouse in Brooklyn to turn raw opium into heroin. He sent emissaries to Shanghai to talk to the Green Gang; the Green Gang supplied. Lepke’s emissaries then met with local foreign gangsters from Europe and America who knew how Shanghai worked to arrange things. They set up a smuggling operation out of Shanghai to the West Coast. Six major shipments (that we know about—there were undoubtedly more) left Shanghai between December 1935 and February 1937, heading to America via various shipping routes. The Shanghai criminals were paid US$10,000,000 (in 1937 money!) in commissions by Lepke Buchalter and his associate Meyer Lansky via money launderers in Mexico City.

Louis “Lepke” Buchalter. Photo: NY Daily News Archive / Getty Images

Eventually, the US Treasury Department sent one of their best agents to Shanghai: Martin “Little Nicky” Nicholson. He tried to crack down on the foreign dope smugglers, but every time he got close, someone died. One Romanian trafficker thought to be talking to Little Nicky was bludgeoned to death and then set alight; a Maltese smuggler and pimp ready to squeal was stabbed in the back and left for dead in a Frenchtown park at midnight; a nightclub owner thought to be skimming the dope profits was shot in the back of the head at his desk. Old Shanghai was that kind of town!

And a little more old Shanghai made its way to America. Little Nicky was authorized by the Treasury Department, and J. Edgar Hoover at the FBI, to raid several Shanghai opium dens thought to have links with American citizens. Two Chinese opium pipes seized by Little Nicky in those Shanghai raids were proudly displayed on Hoover’s office wall for the rest of his tenure at the FBI.

Comment below for a chance to win a copy of City of Devils by Paul French!

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City of Devils Comment Sweepstakes: NO PURCHASE NECESSARY TO ENTER OR WIN.  A purchase does not improve your chances of winning.  Sweepstakes open to legal residents of 50 United States, D.C., and Canada (excluding Quebec), who are 18 years or older as of the date of entry.  To enter, complete the “Post a Comment” entry at beginning at 1:00 p.m. Eastern Time (ET) July 2, 2018. Sweepstakes ends at 12:59 p.m. ET July 17, 2018. Void outside the United States and Canada and where prohibited by law. Please see full details and official rules here. Sponsor: Macmillan, 175 Fifth Ave., New York, NY 10010.

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    Wow – I knew nothing about this underground world of Shanghai! So cool.

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    I have always felt I was a person who Is well read. World War Two being one of the areas I have always enjoyed reading about. But when I read the write up on this period of time in Shanghai I was surprised at how little I knew. Hope I win a copy but if not I will be buying one.

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