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On the evening of 10 May 1935, Lustig was arrested by federal agents on charges of counterfeiting after an anonymous phone call was made, out of jealousy, by his mistress Billy May, who became jealous when she learned of the romance between him and Shaw's young mistress Marie.
The day before his trial, he managed to escape from the Federal House of Detention in New York City, but was recaptured 27 days later in Pittsburgh.
Lustig pleaded guilty at his trial and was sentenced to 20 years in Alcatraz Island, California.
On March 9, 1947, he contracted pneumonia and died two days later at the Medical Center for Federal Prisoners in Springfield, Missouri.
On his death certificate his occupation was listed as " apprentice salesman.

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