Chapter 2

The High Flyers

It is safe to say that America would have been a much drier place during Prohibition if Canadians had not rushed to the aid of their neighbours. And it’s just as safe to say that this could not have happened to the extent it did without the support of the Canadian government and two families, the Bronfmans and the Hatches.

During Prohibition in the U.S., the Canadian government permitted export of liquor, even from provinces where liquor could not be purchased over the counter. In earlier years, the Canadian government had also permitted the interprovincial export of liquor, usually for personal or medicinal consumption. This was not a case of leaving the barn door open and letting the horses out. This proved to be a case of taking the barn door right off its hinges.

Waiting patiently inside the barn, untethered and ready to enjoy free rein, were the Bronfmans and the Hatches. Through their distilleries, affiliates, and respective delivery systems, these two families would provide almost all of the liquor that flowed to the United States from Canada and Europe during Prohibition years. All of it, under American law, illegal.

The Brothers Bronfman

Ironically, some American politicians may have toasted the successful passage of the Volstead Act with Canadian whisky distilled by the Bronfmans. Certainly Bronfman whisky toasted the Act’s repeal in 1933. Before the end of Prohibition, the Bronfmans were regarded as the First Family of the Canadian liquor industry.

In 1890, the Bronfmans emigrated from Bessarabia, in the southwest Ukraine. Their father, Eliel, established the family in Brandon, Manitoba, where he first tried his hand at farming. Failing that, he became a merchant, dealing in frozen fish, firewood, and horses. Hard work and faith held the family together during those early, difficult years. Eliel’s inflexible work ethic, dedication to family unity, and his commitment to the Jewish faith were stronger influences on his four sons than the bottom line of his business activities.

By 1903, the family had pooled its savings to purchase a small-town hotel near Brandon. Later, they were able to purchase the Balmoral Hotel in Yorkton, Saskatchewan, their first major acquisition. Neither establishment was fancy, and both survived mostly on bar sales. Abe, the eldest of the brothers, managed the Balmoral. Here he trained his brothers, who would later go on to run hotels of their own. By 1912, Sam “The Whisky Man” Bronfman owned a hotel in Winnipeg, financed by profits made on the others. Indeed, re-investing profits would become a Bronfman business trait.

According to Sam, the brothers realized after a while that the life of hoteliers was not for them. They saw little future in serving drinks one at a time when they could be serving other hotels by the case, keg, and barrel.

Wholesaling was the course they chose, and three of the four brothers — Abe, Harry, and Sam — got involved in the business. As time passed, it was established that Abe was in charge of Quebec and Maritimes distribution; Sam tended Ontario, Manitoba, and British Columbia; and Harry looked after Saskatchewan and Alberta, the former for many years considered to be the Bronfman home base. Alan, the youngest of the brothers, became a lawyer.

The Bronfmans had a knack for manoeuvring through and around legalese and untidy legislation. In effect, they often showed more due diligence in their dealings than the government. They were quick to begin advertising interprovincial direct mail services, and just as quick to form a drug company to serve pharmacies in provinces where the only available liquor required doctors’ prescriptions.

The Bronfmans were ahead of the competition in many regards, including that of acquiring sources of guaranteed supply. As Prohibition in Canada began relaxing, the family began buying distilleries that held substantial inventories of aged liquor, not difficult because many distilleries had been almost mothballed by Prohibition laws.

For the Bronfmans, the shift to supplying the American demand in the first two years of U.S. Prohibition was an easy transition. They already had bonded export warehouses established across Canada. As quickly as the federal government moved to close the mail order and drug loopholes in Canadian law, the second option, that of allowing export outside the country, became more valuable.

The Bronfmans moved rapidly to establish a string of export houses closer to the American border. Even remote Kenora, Ontario, had a Bronfman export house. Originally, it was established to serve the Winnipeg area, but there were also navigable waterways ideal for rumrunners that extended far south of the American border, for the most part through unsettled, rugged country.

By 1922, the Bronfmans were establishing themselves in Montreal. Sam recognized that the American demand was going to be unabated for some time. He wanted to assure his supply. In 1923, he journeyed to Louisville, Kentucky, to purchase the Greenbriar distillery. He then had it moved and reassembled in Montreal. The Bronfmans had set their course to an international empire.

The Brothers Hatch

The Hatches were to Great Lakes rumrunning what the Bronfmans were to the Atlantic and Pacific.

Like the Bronfmans, the Hatch brothers, Harry and Herb, were no strangers to the liquor business by the time the Volstead Act was passed. Their father was a hotel and saloonkeeper in eastern Ontario throughout the brothers’ early years, then continued in the trade at Indian Head, Saskatchewan. In 1908, the family returned to Ontario, this time settling in Oshawa. During their early adulthood, the brothers worked behind the bar with their father.

In 1911, Harry opened a retail package liquor store in Whitby, on the outskirts of Toronto. Two years later, a prospering Harry partnered with Herb to open another store on Toronto’s Yonge Street, in the heart of the city.

It was around this time that Harry found his true calling. A born salesman, he discovered he was very good at peddling liquor to bars in the small towns along Lake Ontario. With Herb in the trenches, so to speak, and Harry glad-handing his way along the road, their business was a success until late 1916, when the Ontario government shut down the retail sales outlets and the bars. With a stroke of the pen, the Hatches were out of business.

Or were they? As with the Bronfmans, the government provided the Hatches with their big opportunity. Soon they were cheek-to-jowl with the Bronfmans in Montreal, importing liquor to Quebec and reselling it back to Ontario residents by mail order.

When the short-lived Ontario mail order business was closed down — again, by provincial law — Prohibition came along in the U.S. In 1921, Harry took a job as sales manager for the Canadian Industrial Alcohol Company, distillers of Corby’s and Wiser’s whisky. The company had fallen on hard times, which only got worse when the mail-order trade evaporated.

Harry and Herb had no ethical problem in dealing with American bootleggers and wholesalers. By 1923, sales of Corby’s from its distillery near Belleville on eastern Lake Ontario had multiplied from 500 to 50,000 gallons monthly, primarily due to the diligence of the Hatch brothers. The so-called whisky export business was booming; stock was available, and the demand was certainly there. The sole problem for the Hatches was delivery — how to get the whisky to their customers. And thus, Hatch’s Navy was born.

The “Navy” got a remarkable kick-start from another Hatch relative, Maudie, who had a successful business in Whitby. Over the years, Maudie had taken mortgages on fish boats. With commercial fishing in the doldrums, most of these (and there were dozens) were behind in payments.

Harry and Herb bought up the mortgages and persuaded the fishermen to run liquor to the U.S. In addition, they persuaded a highly respected fisherman at the eastern end of Lake Ontario to help recruit “independents” from among the 350 fishermen in the area. This was Earl McQueen, whose father, John, was already rumrunning for the Hatches in his old steamer, the City of Dresden. To organize the Navy on Lake Erie, Nick Vandeveer was recruited.

Fortunately for them, in 1923 the Hatches had a falling out with the owner of Corby’s, Sir Mortimer Davis, and began shopping for a distillery of their own. They soon found one: mouldering on the Toronto lakefront was the Gooderham & Worts distillery, shut down since the beginning of World War I. It took some doing for the Hatches to get the money together, but they pulled it off.

Now they had a distillery but no whisky. Moreover, Canadian law decreed that whisky had to be aged two years before it could be sold — two years too long if the Hatches hoped to keep the flow going to their customers.

Harry, ever the salesman, went to Ottawa to plead his case to Minister of Customs Jacques Bureau. Whether it was Harry’s silver tongue, a Gladstone bag containing a campaign contribution, or both, Harry was successful. The two-year stipulation was waived by an order-in-council, and Gooderham & Worts was back in business. By 1925, the company was floating a share issue to raise money for expansion.

The Hatches now had a guaranteed supply, the capacity to deliver the goods, and the market for the goods. They were as well positioned in the Great Lakes as the Bronfmans were in the Prairies and in the Maritimes. The only difference between the two companies up until that time was that the Bronfmans had built their distillery, whereas the Hatches had purchased theirs ready to go.

In 1927, the Bronfmans changed their approach. They purchased Seagrams Distillery in Waterloo, Ontario, acquiring, when they did, the Seagrams brand names. The real coup for the Bronfmans, however, came just before that, when they acquired exclusive rights to distribute the products of Distillers Company Limited, the producers of 50 percent of the Scotch sold in the world. The Seagrams acquisition put the Bronfmans squarely in the Great Lakes bailiwick of the Hatches, but it remained that Hatch’s Navy had most of the market sewn up.

While the Bronfmans “wheeled and dealed,” the Hatches kept busy. There was no place in the business world for the faint-hearted during the 1920s. The stock market was going through the roof. Prosperity wasn’t around the corner; it was marching down the middle of Main Street. The Bronfmans certainly thought so. And so did the Hatches.

In December 1926, the Hatches purchased the Hiram Walker Company for $14 million. To the brothers, the company had two major things going for it. First, the main distillery was located in Windsor, right on the shore of the Detroit River. Second, its warehouses contained four million gallons of aged whisky. The Hatches were fully aware that at least 65 percent of whisky entering the U.S. was crossing at Windsor-Detroit — they had to be aware; their Navy was running most of it.

The Hatches moved quickly to merge their companies into Hiram Walker-Gooderham & Worts, making it the British Empire’s largest distiller.

Enough Business for Everyone

The Hatches and Bronfmans were not the only Canadian liquor distillers selling their products to Americans. In New Brunswick, Joe Walnut, a well-known local rumrunner, took a turn at distilling. Hidden in a barn near his St. Léonard hotel was a small, ultra-modern distillery with sufficient daily production to satisfy many of his wholesale customers.

On the West Coast, the major supplier to rumrunners destined for the United States was Consolidated Exporters, which among its own fleet had a “mother ship” named Coal Harbour with a capacity to carry 10,000 cases of liquor. This schooner regularly plied the Pacific from Tahiti and Mexico, serving rumrunners dashing to it from inside the 12-mile U.S. limit.

Apart from its imports, Consolidated also made substantial purchases from two local distillers: B.C. Distillery, owned by the Reifel family, and United Distillers Limited (UDL), which was a public company. In 1933, the Reifels, UDL, and the Bronfmans formed a sales agency, registering it as a shell Tahitian corporation, to handle their trade, dividing ownership along the lines of product supply. The Bronfmans were the largest shareholder.

Canadian distillers became multi-millionaires. Their distilleries were almost licences to print money, real money backed by substantial capital holdings — quite unlike the “paper” that was fuelling the speculative stock market of the 1920s.

Of course, distillers were not the only people in the contraband liquor trade who became millionaires. Jim Cooper, the “export” sales manager for Hiram Walker (a role similar to that held by Harry Hatch when he worked for Corby’s), also became a millionaire. Cooper’s vanity was his mansion. Covering a full square block, the $400,000 house boasted 40 rooms, a spacious ballroom, and a heated indoor swimming pool. Cooper is reported to have spent $50,000 dollars on his sound system, with music piped into all 40 rooms. After his death, the mansion was eventually abandoned and razed.

Although Cooper made most of his fortune in the liquor trade, he was a remarkably successful agriculturalist as well. Almost single-handedly, he revolutionized farming in southwestern Ontario. He was the first farmer to introduce clay tiling drainage to help lengthen growing seasons. He also introduced mass-production vegetable greenhousing and tobacco farming to the region. Always on the lookout for new challenges, Cooper pioneered the transformation of the region into a major egg and poultry production centre. Unfortunately, Cooper did not live through Prohibition. In 1931, in ill health, he fell from an ocean liner bound for Europe.

Another Windsor mansion built by a successful rumrunner fared better than Jim Cooper’s. In his heyday, Harry Low ran liquor to Detroit, St. Louis, and Chicago. He also purchased a WWI minesweeper, converting it to bring liquor from Montreal to Windsor. Low’s Tudor house was not on the scale of Jim Cooper’s, but then, he had other places to spend his money.

Regrettably, apart from liquor, everything Harry Low invested in went bust. Low sank his money into the sinkholes of the stock market and his own inventions. Most noteworthy of the latter was a fuel-saving carburetor. Although his ingenious carburetor worked (some of the time), gasoline was so cheap and his carburetor so expensive that Low could not find a market for it. He died penniless. His fine house was saved, however, and was purchased many years later by Paul Martin Sr., who went on to become Minister of External Affairs in the Liberal government of Lester B. Pearson.

Most of the high flyers in the business could make their money without lifting so much as a bottle of whisky. The donkey work of manhandling bulky kegs, cases, and burlap sacks of liquor was left to the rumrunners. None of them complained, for the price was right.