So, frustrated in his attempts to resume his life, Eddie turns to lucrative bootlegging, first delivering the contraband in his own taxicab, and then becoming a better-dressed, full-time entrepreneur as he cashes in on the illegal profits and manufactures his own illegal bathtub gin with Danny:

(in voice-over) And so the Eddie of this story joins the thousands and thousands of other Eddies throughout America. He becomes a part of a criminal army - an army that was born of a marriage between an unpopular law and an unwilling public. Liquor is the password in this army. And it's a magic password that spells the dollar sign as it spreads from city to city, from state to state. The public is beginning to look upon the bootlegger as something of an adventuresome hero, a modern crusader who deals in bottles instead of battles. And so, because of a grotesque situation, this new kind of army grows and grows, always gaining new recruits who care nothing about tomorrow just so long as money is easy today...1922. By now, the Prohibition law is firmly a part of American life, but so is the evasion of that law. College students, male and female, and even high-school boys and girls who never drank before find themselves willing and able to buy hard liquor with the greatest of ease. The hip flask becomes an integral part of the national scene - at football games, in automobiles. In the meanwhile, the supply of good alcohol fails to keep up with the ever-increasing demand for liquor. But in the undercover liquor industry, crude stills make their appearance. Wood alcohol is re-cooked, and the product of this loose and ineffective process is put on the market in a constantly-swelling flood.

Eddie has retained the services of law attorney ("legal brain") Lloyd Hart, and built up his fleet of cabs and drivers (hiring ex-cons who are 'ripened up for the job' by a few years in jail) as a front - primarily to deliver the rot-gut scotch and champagne he produces: "We're gonna get more as fast as Lloyd can pick 'em up for us." [Eddie's taxicab business parallels Larry Fay's taxi-cab sideline.] The new business is overwhelmingly profitable: "They're lapping it up faster than we can deliver it." Against his better judgment, the reform-minded, respectable Lloyd believes Eddie shouldn't be on a criminal track by hiring ex-cons to work for him, but Eddie is convinced otherwise by the easy money:

Lloyd: You oughta use those cabs as cabs. You're on the wrong track.
Eddie: No, this dough says I'm not. Look kid, when the gravy's flowin', I'm gonna be right there with my kisser under the faucet.
Lloyd: This isn't my kind of law. I started out to be a corporation lawyer.
Eddie: This is a corporation. I'm making money....Don't be a sap. What do ya wanna do? Runnin' around chasin' ambulances for the next ten years? Look, take what you can get while you can get it 'cause nobody's gonna walk up to ya and drop it in your lap. Do ya hear that?...Don't think that everything's all wrong because you're not starvin' to death, ya hear?

While backstage collecting on a $700 debt from Masters (George Meeker), the promoter of a musical comedy entitled Pretty Baby, Eddie - by chance - spots a pretty young dancer - he recognizes a grown-up Jean as a chorus girl ("a cute bundle") in the show. Masters suggests: "Maybe I could wrap it up for ya." After her number, he greets her: "Hi, Mineola...A few years make a big difference." The next evening after her performance, he insists on accompanying her to her midnight train to Mineola, arguing that he's a "nice guy": "I'm really a pretty nice guy. Just give me a chance to prove it." She misses the twelve o'clock train after being taken to a speakeasy. On the Three-thirty AM train, he slowly becomes a sentimental "sucker" for her singing talent. Her aspirations are to become a musical comedy star someday. At her front door in Mineola, he learns that her mother has died, and that she has been looking for her big break as a singer.

Infatuated with and sympathetic to the virginal, demure and respectable Jean, he arranges for her to audition at the Henderson Club and slavishly promotes her: "Look, I've got a little gal here with a lot of class, just something this joint needs." After her rendition of My Melancholy Baby, he lauds her: "You really did it, baby, really did it - sounds like a trio." Although Pete Henderson (Ed Keane) doesn't have any more room for singers, Eddie advances her career by subsidizing the sweet songbird's salary. Panama predicts that his budding, flash-in-the-pan, gallant love for the young songbird may be over in a week:

Henderson: She seems like a nice kid. I hope she can outtalk him.
Panama: I hope she can outrun him.

Eddie proudly shows Jean the workings of his profitable business, full-time racketeering. It involves peddling scotch at 6 bucks a quart that only costs half a buck to produce, and selling champagne ("diluted New Jersey applejack") to the best places at 15 bucks a quart. He answers her query about cheating: "Cheating yes, cheating if you get caught. But you don't get caught if you take care of the right people, and this is big business. Very big business."

For Jean's opening night performance at the club, Eddie has the joint "jammed with professional applauders. The deal is two bucks a head and drinks." While Henderson orders the bartender to serve watered-down drinks made from ginger ale, Eddie boasts of his starlet about to appear on stage: "Is this kid a draw or isn't she? You haven't had such a crowd in this place since you opened." After the club owner calls him a "sucker" for loving a woman who doesn't return his affection, Eddie is angered:

Don't you ever say that to me again, do ya hear? Never!

He snatches Henderson's cigar from his mouth and stuffs it back into his face. Panama sees Eddie's nervous jitters: "You act like a kid who's just gonna try on his first pair of long pants." His anxiety stems from the fact that he's planning to propose to Jean with a large diamond ring ("What a load of ice!") after the show. In love with Eddie herself (and carrying a torch for him), Panama cautions that Jean is inappropriately too young for him and that he's out of his league:

Panama: What's this kid got on you?
Eddie: Oh, I don't know. Whatever it takes to get a guy like me, she's got.
Panama: Does she know about this?
Eddie: No, I'm gonna tell her after the show.
Panama: You might be movin' too fast, Eddie. Sometimes you get over these things and you're sorry.
Eddie: I don't think I'll ever get over this one.
Panama: You're battin' out of your league, buster. You're used to traveling around with - dames like me. You sure got it bad. Suppose she turns you down.
Eddie: Turn me down? Why should she turn me down?
Panama: Suppose you tell me about that later.

Tough-talking flapper Panama introduces young Jean before she sings I'm Just Wild About Harry. During the number (as he did during Jean's audition), Eddie holds onto Panama's hand. Backstage after her number, Eddie - now obsessively smitten and in love with Jean - generously offers her an engagement ring. She loves him - out of gratitude, but is not romantically interested in him as a marital partner. She stalls on giving him a committed answer:

Jean: They seemed to like me, didn't they?
Eddie: You're stallin' me, Jean.
Jean: You've been awfully good to me.
Eddie: I improve with age. You want the Brooklyn Bridge, all you gotta do is ask for it. If I can't buy it, I'll steal it. Well?
Jean: Eddie, I don't know.
Eddie: Whaddya mean, you don't know?
Jean: I haven't had time to think about it.
Eddie: You've had plenty of time. I didn't have to tell you the way I felt about you. You must have seen it in a million ways.
Jean: I have.
Eddie: Well?
Jean: I don't know, Eddie, I just don't know.
Eddie: But don't you know the way you feel about me, whether you like me or whether you don't?
Jean: Oh, I do like you, but...I just can't tell you.
Eddie: I know what's botherin' you. Maybe Panama was right. Maybe you and me don't play in the same league. Yeah, that's it. You don't like the racket I'm in. You don't like the people I know or the things I do. It's not me, it's what I stand for, am I right?
Jean: Why I...
Eddie: Yeah, I am right. Well, I'm not gonna let this stand between you and me, not the way I feel about you. I'll get out. A few more years in this business, I'll have enough dough...so we can settle down and forget all this. How does that sound to ya?
Jean: Why, it sounds all right.

Eddie's business is threatened by the activities of rival gangster Nick Brown (Paul Kelly), who owns an Italian Spaghetti and Ravioli Restaurant as a front and is the "head of a syndicate that's running all the high-class merchandise that's being sold in this country." During a meal in the restaurant, the kingpin Nick refuses to deal with "penny-ante" Eddie:

Nick: I don't sell to penny-ante guys. I got distribution of my own.
Eddie: Well, don't forget. This penny-ante guy asked you in a nice way.
Nick: I'll try and remember.

On a foggy night more than twelve miles out from the shore, Eddie and his gang (impersonating a Coast Guard crew) audaciously hijack and come aboard one of Brown's rum-running boats with a shipment of booze worth $100,000 that is captained by gangster George Hally. After they come face to face with each other, they renew their acquaintance over a drink, but Eddie refrains from alcohol: "I don't like it...A dress salesman doesn't have to wear dresses, does he?" After a short discussion, the scheming George is easily persuaded to become a partner with Eddie and double-cross Brown:

Between the two of us, we ought to do all right together...It ain't gonna be so easy the next time. Brown ain't gonna stand for you hijackin' his boats like this. The next time he'll be ready for ya. One fine night, a 5-inch shell is gonna blow the top of your head right off. You can't spend your profits at the bottom of the ocean....I got the organization to bring this stuff in and I know where to get it. You got the organization to peddle.

They both agree that each have similar traits - untrustworthyness - the basis for a partnership: "That sounds like a pretty good basis for a partnership."

By the mid 1920s, gang rivalries and violence are intensified over the increasing profits available in the bootleg liquor business, and the introduction of a machine gun known as a 'tommy-gun':

(in voice-over) 1924. By now, America is well-launched into an era of amazing madness. Bootlegging has grown from small, individual effort to big business embodying huge coalitions and combines. The chase after huge profits is followed closely by their inevitable partners: corruption, violence, and murder. A new and horrible tool appears - the tommy - a light, deadly wasp-like machine gun, and murder henceforth is parceled out in wholesale lots.

In one of the film's most tense scenes, Eddie's gangsters rob a liquor shipment that has been confiscated by the government and stored in a guarded warehouse ("The government takes it from Nick Brown and we take it from the government. Pretty neat, huh?") They incapacitate the guards, enter the storage area, and load up the illicit cargo into trucks. When the arrival of a relief watchman aborts the robbery, Hally recognizes a relief guard as Pete Jones (Joseph Sawyer) - his "old sergeant" - and brutally murders him in cold-blood, fulfilling his threat from years earlier: "I told you that we'd meet up sometime when you didn't have no stripes on your sleeve and here we are." Eddie expresses exasperation for the unnecessary killing, but Hally defends himself: "He had it coming to him."

At the nightclub during another performance, Jean sings It Had To Be You. While holding a torch for Eddie, Panama encourages Eddie's own legal-affairs man Lloyd to pursue his love affair with Jean:

Why shouldn't you see her? She's your kind of kid. You both like the same things, talk the same language, just like me and Eddie.

Later that night after the robbery, Eddie and George return to Panama's speakeasy. George warns Eddie that Lloyd is ready to "move in" on his girlfriend, but Eddie is so preoccupied that he fails to notice Jean's attachment for his own young lawyer:

George: I'll lay ya eight to five right now - that's kid's gonna move in on your gal.
Eddie: I hope you know what you're talkin' about.
George: Sure I do. Listen Eddie, I'm tryin' to steer you right. Listen, gals like her go for guys like that, you know, with all that Joe College stuff. He's gonna take her to football games, fraternity dances, all that rah-rah stuff. A kid like him can't miss. (Eddie clenches his fist.)
Panama: Calm down, Eddie. Maybe George is right. If he is, there's nothing you can do about it.
Eddie: Shudd-up. I trust my friends. (Eddie leaves the table)
George: You know, he's a sucker. I don't trust mine.
Panama: It's mutual, chump. They don't trust you either.

Jean listens to a primitive "new crystal set" (radio) in her dressing room - another gift that Eddie has lavished on her ("that's science"). He has also invested in singing lessons for her. Pitifully in love and aspiring to be a clean-cut "Joe College" kind of guy, Eddie invites Jean to a Saturday football game in New Haven (Connecticut). Lloyd enters the dressing room, and both he and Eddie listen to the radio's broadcast of a "late news dispatch" that reports the hijacking of a US government warehouse in New York City where "a quarter of a million dollars worth of liquor was removed after two watchmen were shot down in the performance of their duty. One of the watchmen, Pete Jones, 42, was already dead of bullet wounds when found. Jones was a World War veteran."

After hearing about the robbery and the killing of their "loud-mouthed sergeant," Lloyd becomes suspicious and expresses his misgivings about Eddie's gangland activities. Following Eddie's departure (he is tipped off that Nick Brown is arriving at the club), Lloyd dares Jean to confront her corrupt benefactor with the truth of her love - for him:

Lloyd: You're afraid of the truth?
Jean: I've told you time and time again, I can't hurt him. He's been so good to me.
Lloyd: You're gonna get yourself in so deep you'll never be able to get out.
Jean: Well, what do you want me to do?
Lloyd: Tell him the truth. Tell him that you don't love him. That you...
Jean: That I what, Lloyd?
Lloyd: Just tell him that you don't love him, that's all.

During Jean's next song, My Melancholy Baby, Nick Brown and his strong-armed goons burst into the nightclub and accuse Eddie of informing federal agents about his running of a liquor shipment, and then stealing it himself - plus murdering one of the night watchmen:

You tipped off the feds I was running in a load last night and they took it away from me...and you lifted it from them...The watchman you knocked off didn't die right away. He talked.

Gunfire and a brawl between the rival gangs clears the nightclub of customers and causes $5,000 worth of damage. Eddie brashly proposes to buy the entire club from Henderson: "A big boy like me ought to have his own playground anyway." When Lloyd is asked to draw up a contract for the sale, the young attorney quits the gang: "I'm not drawing up any more contracts for you...Eddie, you stuck up that warehouse tonight, didn't you?...You killed the watchman...You were responsible for it...No Eddie, it won't work. This is where I draw the line. I said I'm through and I mean it." Ready to kill Lloyd with his gun drawn, Hally believes that their racket's partner knows too much about the organization and might squeal and betray them, but Eddie intervenes on his behalf:

George: This guy's got enough on us to...
Eddie: He won't talk.
George: He better not. Now listen, Harvard. You came into this racket with your eyes open. You learned alot and you know alot. If any of it gets out, you go out with your eyes open, only this time, they'll have pennies on them. All right, now scram, get out of here, go on home and chase ambulances.