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”Can you remember,” someone was saying, ”that it was on the steps of Fritzel`s that one of Al Capone`s associates proclaimed that his boss was

`nutty as a fruitcake` and would not be coming back to town”?

”Certainly,” came the reply. ”And I had to figure that he really was nutty, or nobody would have said so in such a public place.”

Fritzel`s, in case you didn`t know, was a restaurant at the corner of State and Lake, almost straight north of the Lexington Hotel on Michigan and Cermak, which was Capone`s last Chicago home.

”But not the main one,” interjected one participant. ”He stayed much longer at the Metropole, on Wabash.”

Those were the good old days. So good, someone wistfully remembered, that ”Chicago could be bought and sold by a mere handshake. No documents were needed.”

”Ah, yes,” said one of his companions, ”before the lawyers took over.”

Actually, there were lawyers present, though they may have been loathe to admit it. There were even lawmen present, though they asked not to be identified any more precisely, as though they were at a gathering that was not entirely respectable.

But, alas, it was. Here were writers and editors, businessmen (and women), artists and academics, all of them wishing that they were just a little more disreputable than they really were.

”We do not romanticize gangsters,” insisted one of those gathered the other evening at a Bucktown restaurant.

Oh, yes, they do. Otherwise they would not call themselves the Merry Gangsters Literary Society. Nor would their ”platform for a better Chicago” call for giving Capone a posthumous pardon, bringing back Prohibition and designating red-light districts. That this ”platform” is not intended to be taken seriously (that very little, in fact, about the Merry Gangsters is to be taken seriously) does not refute the conclusion that one of the things at work here is a fascination by-if not outright approval of-what most of the world considers wicked.

It is, for instance, a probable 12 to 7 (to use an appropriate literary reference) that a dinner meeting of more conventional historians-at, say, Northwestern or the University of Chicago-would not include someone remembering how ”choked up” with emotion Paddy Bauler became when he showed writer A.J. Liebling the site of the St. Valentine`s Day massacre. Nor would it be likely to turn to the subject of ”Terrible Tommy” O`Connor`s escape from jail on the day he was scheduled to hang (the inspiration for the plot of ”Front Page”). And if it had, who in Hyde Park or Evanston would have known that Terrible Tommy`s brother was called ”Darling Dave”?

Furthermore, it is not likely that among members of the tweedy set, who possess what Gracie Allen once called ”doctorships,” anyone would have lamented the absence of the one bona fide (though allegedly retired) gangster member.

(But just to demonstrate that the deadening hand of bureaucratic and academic language extends to all precincts, one of the law-enforcement officers explained that because ethnic labels are no longer proper, he now had to divide organized crime into ”traditional” and ”emerging” categories).

Richard Lindberg, for one, doesn`t even deny that there is something seductive about crime. ”It`s the swagger, the bravado,” said Lindberg, who is an editor at Crime Books Inc. in Wilmette and the author of a forthcoming history of the Chicago Police Department. ”People on the fringes of acceptable behavior have the freedom to do things we wouldn`t do because we`re law-abiding citizens.”

Lindberg`s book, by the way, is entitled, ”To Serve and Collect.” He insists the title is more ironic in tone than the text, which he calls

”serious history.”

Which Bill Helmer has also practiced. As a graduate student at the University of Texas, he wrote his master`s thesis on the history of the tommy gun. He wasn`t interested in guns as much as in gangsters, perhaps because, he says, ”my daddy wanted to be a bootlegger when he grew up.”

Helmer acknowledged that neither he nor his father really had the right stuff for a life of crime. His father, he says, made one rum run between Iowa and Chicago before surrendering to honesty. And as for the son, ”My interest in criminals compensates for my wimpishness; I don`t have the nervous system needed to rob banks.”

Instead Helmer is working on a history of the St. Valentine`s Day massacre, that 1929 carnage in a North Clark Street garage in which some of Capone`s associates dressed as police officers eliminated seven members of a rival organization. Helmer is being assisted by Jon Arnold, another Merry Gangster, who says it is not the lawlessness but ”the drama of those times” that fascinates him.

There are, no doubt, those who would prefer to remember other aspects of Chicago`s history and forget that Capone and his ilk ever had much impact. But they did, and in the view of Nathan Kaplan, the pixieish retiree who helped form the Merry Gangsters, the city`s sordid past should be considered ”a cultural asset.”

Of course, it should, even if the Merry Gangsters make a bit too much of the humor and too little of the horror of the gangster world. It should, first, for the universal reason that somewhere deep inside everyone (well, everyone with a soupcon of spunk) lies a bit of sympathy, even envy, for the bad guy. Who goes to bank-robbery movies hoping that the robbers get caught?

But this particular part of the local past should especially be considered an asset here, and by people who write, because it recalls, however imperfectly, an important part of Chicago`s literary tradition. More than anywhere else, Chicago was where writers challenged propriety, privilege and the established virtues. And if Sherwood Anderson, Theodore Dreiser, Edgar Lee Masters and Richard Wright did not quite make the case that there is no moral difference between a bank president and a gangster, they at least raised questions about how deep that difference is.

This is, after all, the city in which Nelson Algren, seeking a definition of literature, gave as one example these words of a 20-year-old criminal: ”I repeat that I am the enemy of the `order` of today, and I repeat that I shall combat it. I despise your order, your laws, your force-propped authority. Hang me for it.”

Algren`s is a point of view that has fallen out of fashion, perhaps for good reason. But it`s kind of nice that somebody around here is still challenging the established virtues.