LITTLE GREEN HOUSE ON K STREET Chapter Three

I do not find it surprising that at midnight on 17 January, 1920 -  less than an hour after prohibition became the law of the land - 6 armed men stole $100,000 worth of “medicinal whiskey” out of two box cars parked unguarded on a Chicago railroad siding. Even at that early moment America's dream of becoming a more moral nation, drunkenly stumbled over the sobering reality that alcohol has never been a mere beverage.

In 1920, the first year of national prohibition,  35,000 doctors were granted permits to prescribe various potable forms of alcohol for their patients. That same year the company which distilled “Old Grand Dad” reorganized itself as The American Medicinal Spirits Company and kept right on distilling  “Old Grand Dad Whiskey” . In fact the distilling business was suddenly booming. In the first five years of prohibition, the distillation of hard liquors in America more than doubled.  And an Republican members of an administration elected on the promise of prohibition and a moral America, were, from day one, doing everything they could to profit from that graft.

As an article for “The Nation” magazine lamented in 1921, “In the U. S. are 27 warehouses in which 15,000,000 gallons (at a time) of liquor are stored. The liquor is private property held for legal sale as medicine..A system of permit withdrawals was devised by the enforcement officials..for each case (3 gallons) of liquor. It very soon became apparent that a vast amount of fraud was being perpetrated.” It was this fraud that filled the backyard bank of the Little Green House on K street. The author of that article was Roy Haynes.

Roy Asa Haynes (above) was the Prohibition Commissioner for the United States government, appointed by the brand new President, Warren Harding. And each  “Withdraw Permit” to release distilled liquor had to be signed by the Commissioner, Roy seemed the perfect choice for the newly created job, and was well known  in anti-saloon league politics. Except he was also a crook. And the process to corrupt prohibition began even before Harding left Ohio for Washington, D,.C.

"The Ohio Gang" set the price for each Withdrawal Permit at $15.00, per case. And the very first permit, for the withdrawal of some 2,000 cases of alcohol, was issued to the General Drug Company of Chicago, for which J.B. Kraffmiller, a railroad tank car builder,  was paid $20,000, cash.  He kept $6,500 for himself and passed on the rest to Howard Mannington, Harding's secretary,  at 1625 K Street. Mannington then divided it amongst the rest of the Ohio Gang, each member getting $2 per case. Even the General Drug Company got a dollar kickback, for the use of their good name. Because they took delivery on a mere fraction of what they signed for. 

Most of the booze supposed to to to General Drug was unloaded from government warehouses by the "bootleggers" who had actually bought the liquor and paid the bribes. They passed along this overhead to their customers,  who happily paid a dollar for a drink which the year before had cost them a quarter. And as Agent Means, in the basement of 1625 K street sang, my God, how the money rolled in. The very first year of prohibition, it is estimated, bootleggers made about $100 million dollars in profits. K street was not guilty of bootlegging. They were merely the facilitators.

The bag man in this facilitation was Jess Smith (above, right),  Attorney General Daugherty's (above, left)  “jovial, rotund, combination confidant and valet.” Agent Means described him this way; “Poor Jess, he was a typical city department-store floor walker, transplanted into alien aisles....at a complete loss. And how he loved clothes. He worshiped Daugherty with a dog-like devotion.” 

This seedy looking man in expensive suits was the go-between, shuffling between his boss and idol, Attorney General Harry Daugherty and the triumvirate at the little Green house.  Two or three times each week Jess would arrive at the Little Green House to deliver instructions and collect payoffs. He would then deliver the cash to an Ohio bank  owned by AG Daugherty's brother Milo. There the money would be laundered, Jess Smith kept everything straight in meticulous notebooks he carried on him, the “who”, the “how much”, the “for what”, and the “for whom.”

It was the sweetest deal in the history of K Street, and you just knew some schmuck was going to screw it up. The schmuck turned out to be the keeper of the backyard bank, Federal Agent Gaston Means (above). For him bountiful was never enough. In the winter of 1922 Means got his hands on several blank Withdrawal Permits. He forged Haynes' signature, and started selling them on his own.  It took very little time for word to get back to Daugherty. In February Daugherty suspended Means from the Bureau. .But Daugherty dare not fire Means or remove him from the Little Green House, because Means had all those file cabinets in the basement, stacked with names, dates and amounts.  

In the mid-term elections of November, 1922 the Republicans lost five seats in the House. The following January of 1923, the Democrats began to percolate over Republican scandals as a 1924 campaign issue. So in the spring of 1923 Daugherty was forced to go to President Harding and tell him of the trouble Means was causing. It was decided a sacrificial lamb would have to be offered up to the Democrats, and since it could not be Means, the clothes horse “poor Jess”, was tailor made for the role. "Poor Jess", with his notebooks might have also been a threat, but because of his devotion, Daugherty  was certain he would remain loyal.

On Tuesday morning, 29  May, 1923 Jess Smith played golf with Attorney General Daugherty, and while walking the course was informed that he had to leave Washington the next day, permanently. Jess did not take it well. Daugherty then proceeded to the White House, where he phoned another associate, Warren Martin, and ordered him to go the Wardman Hotel and stay with Jess until the poor man was out of town. At six the next morning, Martin was suddenly awakened in his room by a gunshot. He found the 61 year old Jess Smith, in his pajamas and a dressing gown, lying on the floor of Daugherty's bedroom. Smith's head was inside a wastepaper basket, a bullet through his brain. The weapon lay on the floor, inches from his fingers. There was no autopsy. His death was ruled a suicide by a friendly doctor. His meticulous notebooks and personal correspondence mysteriously disappeared.

Sixty four days later, on the second of August, President Warren G. Harding died of a heart attack in a San Francisco hotel. For a time the fact that "Silent Cal" Coolidge was now President made little difference to the business of K Street. But inevitably, when dealing with crooks, somebody eventually screwed things up, again.

This time it was Jess Smith's ex-wife, Roxy Stinson (above).  Cheated out of what she thought was her share of Jess' share of the ill gotten boot,  Roxy spilled her guts to a Senate committee investigating the Attorney General. On 28 March, 1924  - a presidential election year -  President Coolidge demanded Daugherty's resignation. Daugherty said, “ "I wouldn't have given 30 cents for the office of Attorney General, but I won't surrender it for a million dollars." Then he added, “I have no personal feeling against the President. I am yet his dependable friend and supporter." And then he resigned.

In June of 1924, Gaston Means (above) was sentenced to four years for perjury. Once out of prison he wrote a book, “The Strange Death of President Harding”. It was an instant best seller, a well written inventive concoction of half truths and fantasy. Still desperate for money, in 1932 Means claimed to have been contacted by the kidnappers of the Lindbergh baby.  He was arrested after stealing the supposed $100,000 ransom he handled, and sentenced (above) to fifteen years.  He died of a heart attack in Leavenworth Prison, in 1938.

Howard Mannington died in 1932, at the age of 64, of a "lingering illness". Henry Daugherty (above) was indicted in 1926 for accepting bribes. The jury deadlocked, 7-5 in favor of conviction. His second trial ended in another hung jury, this time 11 – 1 for conviction. But then the government gave up. In 1932 Daugherty published his own book, “The Inside Story of the Harding Tragedy.” It did not sell well. In October of 1940 Henry suffered two heart attacks which left him bedridden. He died in his own bed on 12 October, 1941, a very rich man. And that was the point..

Now, the Little Green House on K Street was vacant again. The graft it had contained certainly did not end. It just moved to a better neighborhood.

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