I'm not a historian, but I believe Schlozman is referrring to a fictional practice described in Victor Hugo's 1869 novel The Man Who Laughs rather than actual history (spoilers for the novel below). In this novel, Hugo coined the term "comprachico" (meaning child-buyer) and described their activities:

"The Comprachicos worked on man as the Chinese work on trees. A sort of fantastic stunted thing left their hands; it was ridiculous and wonderful. They could touch up a little being with such skill that its father could not have recognized it. Sometimes they left the spine straight and remade the face. Children destined for tumblers had their joints dislocated in a masterly manner; thus gymnasts were made. Not only did the Comprachicos take away his face from the child; they also took away his memory. At least, they took away all they could of it; the child had no consciousness of the mutilation to which he had been subjected."

In the novel, the hero, Gwynplaine, is revealed to have been a disgraced nobleman's son who was sold to the Comprachicos and had his mouth mutilated into a permanent grin (in some adaptations, this is represented as a Glasglow grin, but, in others, it is more of a permanent contortion of the muscles). He then works as a fool/actor before being restored to his noble position.

Hugo describes the Comprachicos in a very matter-of-fact way that might trick some into thinking thye were real. Schlozman is probably referring to the story of Gwynplaine or the description of the Comprachicos he read or heard about from the novel. However, I have not been able to find anything describing real Comprachicos or similar practices of mutilating children to be sold as court entertainers.

FUN FACT: The Man Who Laughs was adapted into a (very good, silent, German Expressionist) movie in the 1920s. Gwynplaine was played by Conrad Veidt, and this portrayal was one of the inspirations for the Joker, as related in Bob Kane's authbiography Batman and Me.