Dutch Schultz and His Lost Catskills' Treasure by John Conway

From IV. The Treasure:

It was during the time that Federal Prosecutor Thomas E. Dewey was pursuing him on income tax evasion charges that Dutch Schultz decided to take an unusual precaution. He had seen many of his contemporaries put away for various terms in prison, only to come out without a dime and with their former territories taken over by rival thugs, and he was determined to avoid a similar fate. So it was that he ordered his henchmen to gather up the millions he had hoarded over the years and stash it away for the proverbial rainy day. Just what form this cache of wealth took is not clear, nor is the actual amount Schultz was able to scrape together. Some accounts of the story say his nest egg was all in currency, other accounts have it as double-eagle gold pieces, while still others describe it as a combination of cash, gold, and jewels. Likewise, some versions of the story put the value of the stash at $5 million, while other versions claim it was $7 or even $9 million. Whatever the amount, this hoarded loot was supposedly gathered into tobacco sacks and stuffed in either an iron box or steel suitcases and hidden away—buried, if you will—to be claimed at a later date.

It was only upon Schultz's death that the existence of this treasure was made known, and then only under the most incredible of circumstances.

Even after he had been acquitted on the federal tax charges in the Malone trial, Schultz found himself doggedly pursued by Dewey for other crimes. Finally, in 1935, he decided that only Dewey's death would put an end to the pursuit, and he devised a plan to knock the prosecutor off. Before carrying out this daring deed, however, Schultz met with the other top level gangsters on the board of directors of the Syndicate to apprise them of his plan. Luciano and Lansky were astute enough to realize that murdering a man of Dewey's stature would bring down considerable heat on their lucrative operations and cost them millions of dollars, so they persuaded the others to vote against Schultz's proposition. This infuriated the Dutchman, who vowed to carry out the assassination on his own. "I don't need your permission," he angrily announced, and stormed out of the meeting.14 That fit of temper was enough to convince Luciano and Lansky that Schultz was even more unstable than they had initially believed, and coupled with their own desire to take over the Dutchman's profitable rackets, sealed Schultz's fate. The Syndicate would eliminate Schultz and his gang before they could eliminate Dewey.

Because of the relentless heat Dewey had succeeded in bringing to bear on him in the city, Schultz had fled across the river to Newark, New Jersey, where he had set up shop in the Palace Chop House, a working-class tavern and restaurant with a low profile. A team of killers led by Charles "Bug" Workman was dispatched to that location, and on October 23, 1935, a hail of bullets rid the world of Dutch Schultz, Otto Berman, and bodyguards Lulu Rosenkranz and Abe Landau.

Schultz had excused himself from the business meeting in his office just moments before Workman entered the Chop House and was washing his hands when the assassin routinely checked the room for witnesses. Not recognizing Schultz, the Bug let out a burst of machine gun fire at the man at the sink just as a precaution, and proceeded to the office where he quickly and coldly dispatched the others.

Schultz had been hit in the spleen, stomach, colon and liver. He was mortally wounded, but he didn't die right away. Rushed to Newark City Hospital following the massacre, he lingered for nearly 24 hours, and drifted in and out of consciousness. His insides had been destroyed, and the ensuing infection ran his fever up to 106 degrees. The resulting delirium caused a steady stream of chatter, and police stenographer John Long was assigned to write down every word. It wasn't long before the dying words of Dutch Schultz made their way into the newspapers, and everyone in the world soon knew about the existence of the Dutchman's stashed millions.

Although there are a number of slightly different versions of Schultz's dying words, none contain much more than disjointed, incoherent ramblings. One version that is often reproduced begins Oh, mama, mama, mama . . .I am a pretty good pretzler. . .How many shots were fired at me?. . . John, please, did you buy me the hotel for a million?. . .I'll get you the cash out of the box. . .there's enough in it to buy four-five more. . .You can play jacks and girls do that with a soft ball and do tricks with. . .Lulu, drive me back to Phoenicia. . .Don't be a dope Lulu, we better get those Liberty bonds out of the box and cash `em. . .sure it was Danny's mistake to buy `em and I think they can be traced. . .Danny please get me in the car. . .Kindly take my shoes off, they're not off. . .there's handcuffs on `em . . . Wonder who owns these woods?. . .he'll never know what's hidden in `em. . .My gilt-edge stuff and those rats have tuned in. . .What did that guy shoot me for?

Other versions contain additional references such as Please crack down on the Chinaman's friends and Hitler's commander. . .All right, I am sore and I am going up and I am going to give you honey if I can. . .Look out. . .We broke that up. . .Mother is the best bet and don't let Satan draw you too fast . . .

Soon, there were as many versions of the legend of the buried treasure as there were stories of the Dutchman himself. Most of them involved Phoenicia, and many referenced a map, supposedly sketched by Lulu Rosenkranz lest the location of the burial site be forgotten by the city slickers still strangers to the trees and rocks and streams of the upstate country.

Several versions of the treasure tale place the location of the burial ground somewhere along Route 28 between the roadway and the Esopus Creek. Some place it along the railroad tracks leading into Phoenicia. One of the most popular stories is that Schultz and Lulu Rosenkranz carried a steel safe containing the loot to Phoenicia on an April night in 1933 and buried it in a grove of pine trees near the Esopus, with the obligatory "X" marking the specific tree under which the digging was done.

A more elaborate version of the events surrounding the hiding of the loot was revealed nearly 50 years ago by an old-timer-—he was over 80 years old at the time—-who claimed to have first-hand knowledge of the day Schultz and his men found a home for their millions.

This account has the treasure being buried the very afternoon Schultz and his gang were ambushed at the Palace Chop House. According to this tale, Dutch and one of his men, probably Rosenkranz, stopped for lunch at the Phoenicia Hotel, in the center of town. They left around one o'clock, got in a car, and drove a half a block, where they made a right hand turn onto Route 214. They proceeded north along the Stony Clove Creek for about eight miles, and stashed the money beneath the skull-shaped rock formation known as the Devil's Face. The two men were back in Phoenicia by three o'clock that afternoon, and returned to Newark for their fateful rendezvous with Bug Workman that evening.

Schultz's deathbed ramblings did make a reference or two to Satan, so the connection to the Devil's Face formation is a logical one, though it would seem more likely that the landmark Schultz would have used is the large rock known as the Devil's Tombstone, which is closer to town, and considerably more accessible than the 150-foot high rock skull. These were city boys, after all.

The late Mickey Simpson, a Phoenicia old-timer who remembered Schultz as well as anyone, had his own theory about the treasure. Sure, he said in 1991, Schultz might have buried his loot by the Esopus Creek, but if he did it was long gone. The Phoenicia area had suffered a number of serious floods over the years, he said, and surely even an iron box couldn't have survived them all. "Personally, I wouldn't step off this porch for it," Simpson said. "It's probably somewhere at the bottom of the Ashokan Reservoir."

Locals also like to tell stories of the elderly man who used to walk from place to place along the railroad tracks digging holes. When asked what he was digging for, he would say simply, "Dutch Schultz's buried treasure." The railroad finally made him stop; he was destroying their ballast.

A Phoenicia motel operator used to allow treasure hunters to dig on his property, but first asked them to sign a legal document promising him a split of whatever they found there. He abruptly stopped the practice when a particularly resourceful treasure hunter showed up with a backhoe, dug dozens of holes, and disappeared without filling them back in.

Early in summer 2000, Fox Cable came to Phoenicia to film a segment for its new series "Million-Dollar Mysteries" on the lost treasure of Prohibition gangster Dutch Schultz. It is one of the region's and America's most enduring treasure tales, and for more than 60 years people have searched for the millions Schultz was said to have hoarded and buried in or near this central Catskills' hamlet.

This time Fox invited Sullivan County Historian and Catskills' gangster expert John Conway to narrate the story of how Schultz, shortly after he returned from a trip to Phoenicia in 1935, was gunned down in the Palace Chop House in Newark. Schultz lingered for nearly 24 hours in the hospital, a police stenographer always by his side. There the dying and delirious Schultz, who was once considered to be the most powerful gangster in America, made cryptic references to Phoenicia and his loot: "Wonder who owns these woods?. . .He'll never know what's buried in ‘em."

The Fox Cable filming came at an opportune moment for Conway. His new treatment of Dutch Schultz and his lost treasure was just published by Purple Mountain Press.

The plain-speaking Schultz was closed-mouthed about two things: his early years and his wealth. He was born Arthur Flegenheimer in Manhattan in 1902 and moved to the Bronx with his parents at an early age. He dropped out of school by sixth grade to devote himself to gang activities. Sometime during his youth he adopted the name Dutch Schultz. "If I had kept the name Flegenheimer, nobody would have heard of me," he was once quoted as saying. He was sentenced to the only prison term he would ever serve in 1919: 15 months.

Prohibition was tailor-made for gangsters like Schultz, but he was very different from his contemporaries in the illicit booze business. He wasn't less ruthless, but he was much more frugal. His arch-rival Jack "Legs" Diamond dressed flashy and tipped lavishly, as did many of the other gangsters. Not Schultz. He was tight with every dollar except where bribery was concerned. So what happened to all of his money? It was not found following his death.

John Conway lays out the known facts about Dutch Schultz. He examines Schultz's connection with Phoenicia and how the story of the buried loot has brought many treasure seekers over the years, including a unique map-making psychic from Virginia. In an appendix he provides a brief account of the other Prohibition-era gangsters who played a role in the Catskills.

John Conway serves as Sullivan County County Historian. His columns on local history were published by the Times Herald-Record for many years. Purple Mountain Press has published his Retrospect: An Anecdotal History of Sullivan County and LOOMIS: The Man, The Sanitarium, and The Search for the Cure.