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Reporter's Statement of the Case It was also stated at this conference by the representatives of the Government that there were alleged violations of the war-time prohibition act; that these violations could not be compromised, but that a compromise of the violations of Regulations 28, supplement 2, article 19, could be made pursuant to section 3229, Revised Statutes.

No compromise was effected as the result of this conference, but later, and in the afternoon of the same day, plaintiff's representatives were informed by the representatives of the Prohibition Unit that the minimum amount which the Government would accept in compromise was the sum of $50,000.

VIII. Under date of June 19, 1920, plaintiff corporation wrote to the Collector of Internal Revenue for the Second District of New York offering the sum of $50,000 in compromise of the charges growing out of the alleged violations of the internal-revenue laws, which letter read as follows:

JUNE 19, 1920. Hon. WM. H. EDWARDS, Collector Internal Revenue,

Second District, New York. DEAR SIR: We enclose certified check to your order for $45,000.

This check together with certified check for $5,000 received from us May 5th, 1920, and still held by you, makes a total of $50,000, which has been agreed upon with our attorneys by the representative of the Hon. Internal Revenue Commissioner at Washington, D. C., to settle amount of alleged violations referred to in a letter from the Hon. John F. Kramer, dated Washington, D. C., May 25th, 1920, ProLegal-31171-P K-E EP. Respectfully,

CALIFORNIA WINE ASSOCIATION OF NEW YORK,

B. KAHNWEILER, President, Under date of September 10, 1920, the Commissioner of Internal Revenue accepted the offer of $50,000, submitted by plaintiff on June 19, 1920, in compromise of liability for alleged violations of section 402 of the act of September 8, 1916, by letter which read as follows:

Reporter's Statement of the Case

WASHINGTON, September 10, 192—. CALIFORNIA WINE ASSOCIATION,

Washington & 11th Streets, New York, N. Y. GENTLEMEN: The Commissioner of Internal Revenue has considered the offer of $50,000, submitted by you on June 21, 1920, through the collector of internal revenue at New York, New York, in compromise of liability for alleged violation of section 402 of the act of September 8, 1916, and has decided, with the advice and consent of the Secretary of the Treasury, to close the case by the acceptance of your offer, as follows: $50,000 in compromise of liability under the internal-revenue laws; costs, if any, to be paid by you. Respectfully,

John F. KRAMER,

Prohibition Commissioner. IX. The $50,000 offered in compromise was forwarded to the Collector of Internal Revenue for the Second District of New York and later covered into the Treasury of the United States. Immediately following the payment of said $50,000 a permit was issued to plaintiff corporation authorizing plaintiff to do business under the national prohibition act. On the same date the Commissioner of Internal Revenue wrote a letter to the United States attorney in New York recommending that no criminal prosecution be instituted against the plaintiff.

X. On or about June 16, 1921, plaintiff corporation filed with the Commissioner of Internal Revenue a claim for refund of the sum of $50,000 paid by plaintiff to the Government in compromise of alleged violations of Regulations 28, supplement 2, article 19, of the internal-revenue regulations, issued pursuant to authority granted the Commissioner of Internal Revenue by the internal-revenue act of September 8, 1916, on the ground that at the time the compromise was effected and the money paid the revenue act of September 8, 1916, had been repealed. Plaintiff's claim for a refund was rejected by the Commissioner of Internal Revenue by letter dated May 8, 1923, as follows:

MAY 8, 1923. THOMAS & FRIEDMAN, Attorneys & Counsellors at Law,

2 Rector Street, New York, N. Y. GENTLEMEN : The petition of the California Wine Association of New York, Inc., for the refund of its offer of

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Opinion of the Court $50,000 in compromise of violations of the internal-revenue laws of the United States and your brief in support thereof have been given careful consideration.

The decision of this office is that your client is not entitled to the relief requested for the following reasons:

1. The original offer of $5,000 was submitted to compromise a violation of the internal-revenue laws of the United States and the subsequent offer of $45,000 was submitted as an additional or supplemental offer to such original offer of $5,000.

2. Reference in certain correspondence to article 19, Regulations 28, supplement 2, issued under the revenue act of 1916, was clearly due to inadvertence. This regulation and law at no time embodied the requirement that resulted in the alleged false returns in question, and could not have been in contemplation of the parties. Such requirement was contained in Treasury Decisions 2788 and 2940, issued under the revenue act of 1918; and in making such false returns under this requirement, the California Wine Association of New York, Inc., violated section 3451, R. S., an internalrevenue law.

3. On June 26, 1920, the Solicitor of Internal Revenue, pursuant to section 3229, R. S., advised the acceptance of such offer of $50,000 in compromise of liability under the internal-revenue laws.

4. On September 7, 1920, also pursuant to section 3229, R. S., the Commissioner of Internal Revenue, with the advice and consent of the Secretary of the Treasury, accepted the offer of $50,000, “ as advised by the Solicitor of Internal Revenue.” If

you desire further hearing, your request therefor should be submitted within a reasonable time; otherwise this decision will stand as the final determination of the matter by this office. Respectfully,

D. H. BLAIR, Commissioner.

The court decided that plaintiff was not entitled to recover.

Moss, Judge, delivered the opinion of the court:

This is an action by the California Wine Association of New York, Inc., to recover $50,000 paid to the Government on June 19, 1920, in compromise of penalties for violations of the internal-revenue laws on the ground that the specific statute and the regulations with which plaintiff was charged

Opinion of the Court with violating were not in force at the time the offenses were committed, but had been repealed several months. prior thereto. Plaintiff was charged with forty-one separate and distinct acts, each of which constituted a violation of law under the revenue act of 1916 and Regulations 28, supplement 2, promulgated thereunder.

Proprietors of all “ bonded premises” were required under said regulations to forward to the Bureau of Internal Revenue at the close of each month a sworn statement, on a certain prescribed form, known as Form 702, containing daily entries of business transacted during the month. Plaintiff conducted and maintained a bonded wine room which comes within the meaning of the term “bonded premises.” During the months of October, November, and December, 1919, as the result of an investigation by the Commissioner of Internal Revenue, it was shown that forty-one sales of wines had not been delivered to the parties named in the monthly reports, but had been diverted to an illegal use. The punishment for such violation under the act of 1916 was a fine of not exceeding $5,000, or imprisonment for not more than five years, or both. Prior to the date of the compromise the Commissioner of Internal Revenue had refused to issue to plaintiff a permit required by section 6, Title II, of the national prohibition act, 41 Stat. 305, which provides as follows:

“No permit shall be issued to any person who, within one year prior to the application therefor or issuance thereof, shall have violated

any law of the United States regulating traffic in liquor." This was the situation when the compromise in question was effected. The revenue act of 1916, 39 Stat. 756, was repealed by the act of 1918, 40 Stat. 1057. It is true that the offenses charged against plaintiff were committed after the repeal of the act of 1916; and it is plaintiff's contention that inasmuch as the acts of which complaints were made were committed after the repeal of the act of 1916 there was no basis for a compromise, and no consideration for the payment of the $50,000. It appears, however, that the act of 1918 provides the same penalty for the offenses with which

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Opinion of the Court plaintiff was charged as that provided in the act of 1916. Subdivision (f) of section 402 of the act of 1916 reads as follows:

“That any person who shall evade or attempt to evade the tax imposed by this section, or any requirement of this section or regulation issued pursuant thereof, * * * shall, on conviction, be punished for each such offense by a fine of not exceeding $5,000, or imprisonment for not more than five years or both,

Section 620 of the revenue act of 1918 providesthat whoever evades or attempts to evade any tax imposed by sections 611 to 615, both inclusive, or any requirement of sections 610 to 621, both inclusive, or regulation issued pursuant thereto,

shall, on conviction, be punished for each such offense by a fine of not exceeding $5,000, or imprisonment for not more than 5 years, or both,

The provisions contained in Regulations 28, supplement 2, promulgated under the act of 1916, were continued in effect under the act of 1918, by Treasury Decisions, 2788 and 2940, dated February 6, 1919, and October 29, 1919, respectively. Proprietors of bonded warehouses under the 1918 act, and the regulations thereunder, as under the act of 1916, and the regulations under same, were required to make a monthly report to the Internal Revenue Bureau showing the daily record of the business transacted. It was necessary to show the date of each shipment of wine, the name and address of each consignee, the number and date of his permit, the quantity and alcoholic content of the wines, and the serial number of the packages contained in the shipment. Charges of making false entries in its records, carried into its sworn monthly statements, constituted the foundation of the compromise. It should be noted that plaintiff energetically urged the settlement of its difficulties by a compromise of the penalties. Its permit to conduct its business had been denied, and while these charges existed a permit could not issue under the law. It was liable, under the law, for a total fine of $205,000, or imprisonment of not exceeding five years, or both, in each case. Its very existence was at stake. There was no denial of the charges. With

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