Growing up I always heard it was in Southern Illinois (where I grew up), as documented here:
http://www.aerospaceweb.org/question/history/q0118.shtml
> A far better documented incident occurred in southern Illinois in Williamson County in November 1926. "Bloody Williamson" had already garnered national notoriety during the 1920s as the site of labor unrest among coal mine unions, one of the bloodiest Ku Klux Klan wars in history, and gang warfare between two rival groups of liquor bootleggers. The Birger Gang, led by Russian immigrant Charlie Birger, and the Shelton Gang, led by brothers Carl, Earl and Bernie, had been involved in a bloody turf battle for domination of the southern Illinois liquor racket for several months. Their ever-escalating arms race had evolved from shotguns to tommy guns and even homemade trucks covered with armored plate used to shoot up each other's roadhouses.
> The warfare turned particularly violent in November 1926 as a series of shootings, bombings, and destruction of property caused terror throughout the county. Upping the ante once again, the Sheltons embarked on a bold plan to destroy the Birger Gang hideout, a place known as Shady Rest. They approached a pilot on a barnstorming tour and coerced him into taking a member of the gang on an overflight of the Birger roadhouse. On 12 November 1926, gang member Blackie Armes climbed aboard the old Curtiss JN-4 "Jenny" biplane carrying several bombs, each made out of dynamite sticks bound around a bottle of nitroglycerine. While passing over Shady Rest, Armes lighted and dropped three of the devices. Only one exploded, missing its intended target and instead killing Birger's favorite bulldog and pet bird. Though initially stunned, members of the Birger gang fired back but did no damage. The shocked pilot flew back to the airfield, let the gangster off, and then immediately took off again, probably fearing for his life!