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Congress at last felt obliged to take some action to stay this all-abounding and ever-increasing tide of corruption, and to devise some feasible means to collect the tax on spirits. After mature deliberation, in which the Committee of Ways and Means had the advice of able men familiar with the subject, the act of July 20, 1868, was finally passed, in which, for the first time, a system of stamps for distilled spirits was devised and enacted into law. This system has continued without any material change until the present day, and has collected the tax on distilled spirits with only sporadic instances of fraud. During the fiscal years 1866, 1867, and 1868 the tax on spirits distilled from grain or molasses was $2.00 a gallon. In 1866 the tax was collected from 14,847,943 gallons, in 1867 from 14,885,740 gallons, and in 1868 the quantity had sunk to 7,224,809 gallons. The fraudulent operators in distilled spirits had become so bold that they paid the government only a very paltry percentage of the tax. In 1869, the fiscal year when the act of July 20, 1868, became operative and introduced the stamp system, the number of gallons on which tax was paid rose to the astonishing total of 62,092,417 gallons, or about nine times the quantity on which the tax was paid during the preceding year. There is no reason to believe that the amount consumed in the previous years, or either of the three preceding yearš, was any less than in 1869. If we take 1869 as a basis of the normal spirit consumption of the country at that time, we shall find that the frauds committed on the revenue from distilled spirits during these three years alone amounted to the enormous sum of three hundred million dollars, the most gigantic revenue fraud probably ever recorded in history. The political economists will and do say that a tax of $2.00 per gallon, being more than ten times the value of the product itself, was in the nature of things incapable of being collected, as it offered a bribe for its evasion so potent that neither the virtue of the distillers nor revenue officers could be expected to resist it; but still it is evident that, if the stamp system had been in force, the frauds could not have been carried on on so gigantic a scale.

THE STAMP SYSTEM FOR DISTILLED SPIRITS.

By the laws now in force, it is required that on all spirits placed in distillery warehouse a distillery warehouse stamp must be affixed to the package at the time of deposit, showing the wine and proof gallon contents; and when the spirits are withdrawn from the warehouse for consumption a tax-paid stamp must be affixed to the same package, showing, by the denominations and the coupons attached, the number of gallons on which tax has been paid. This tax-paid stamp represents the payment of tax on the number of gallons for which it is issued, and is charged to the collector at its face value, and must be accounted for with the same particularity as a bank note. When spirits are rectified and compounded, an account is kept of the number of proof gallons entered for rectification; and when the spirits are gauged out of the rectifying house the rectifier is entitled to rectifiers' stamps representing the number of gallons which the account shows have been entered for rectification. And so in wholesale liquor dealers’ establishments, when it is desired to cut up an original distillery package, or any other legally stamped package, into smaller packages, the wholesale liquor dealer is entitled to wholesale liquor dealers' stamps representing in the aggregate the number of proof gallons in the original package. The rectifiers' stamps and the wholesale liquor dealers' stamps represent no tax or value, and are strictly derivative; and if the accounts are properly kept in the collector's office, the spirits covered by rectifiers' and wholesale liquor dealers’ stamps can be infallibly traced to the original tax-paid packages from which they were derived. The law further provides that all distilled spirits found in any cask or package containing five gallons or more, without having thereon each mark and stamp required therefor by law, shall be forfeited to the United States. This law renders it practically impossible for any spirits in packages of five gallons or over to be handled or sold by liquor dealers unless they bear a revenue stamp. Of course there is considerable evasion of tax by the reuse of stamps and stamped packages, but in the nature of things this fraud cannot be

very extensive.

THE ST. LOUIS WHISKEY FRAUDS. The most serious attempt to defeat the revenue stamp system, and the greatest fraud in spirits attempted since the passage of the act of July 20, 1868, had its headquarters in St. Louis, and was. perpetrated by means of an unlawful use of rectifiers' stamps. The modus operandi was this: all the distillers in the ring operated rectifying houses at the legal distance from their distilleries. Having bought all the revenue officers charged with the supervision of their business, it was easy to remove the spirits without stamps from the distillery to the rectifying house. But all this was of no avail unless some method could be devised to procure legal stamps for the packages, so that the illicit product could have currency upon the market without being subject to seizure. This end was obtained by pretending to enter large quantities of spirits for rectification which had no existence except on the paper describing them.

For instance, having made a legal entry for rectification of fifty packages described on Form 122, the distiller would fraudulently again enter the same packages for rectification, say six times afterwards. This would give him a false credit for fifteen thousand gallons which were never emptied for rectification at all, and entitle him to draw rectifiers' stamps for that number of gallons, with which he could cover and place on the market fifteen thousand gallons of illicit spirits. Sometimes an entry was made for rectification of packages which had already been sold and shipped to other cities.

It is true that gaugers were obliged to certify that they saw the packages described emptied and the stamps destroyed, but the ring never seems to have had any difficulty in finding perjured scoundrels to make these false certificates. When this fraud was discovered, and the method of its perpetration was unfolded, efficient measures were taken by the Treasury Department to prevent its repetition. This was effected by making a partially false back to the stamp, so that the central portion which contained the stamp number did not adhere to the cask, and requiring the gauger to cut out this central portion and attach it to his report on Form 122, so that it was thereafter pretty certain that the packages shown in the gauger's report had been actually emptied for rectification.

A judicial account of the St. Louis whiskey frauds, as given in a charge to the jury made by Judge Dillon in the case of United States v. McKee (3 Dillon, 551), is as follows:

According to the testimony, this conspiracy originated in September, 1871, and, with a brief interval in the fall of 1872 and the early part of 1873, continued until May, 1875, when the distilleries were seized, and afterwards many of the conspirators arrested and indicted. Some of the conspirators have been convicted, and others have pleaded guilty, and the property of some of the distillers and rectifiers has since been condemned as forfeited to the United States. A shameful feature in the conspiracy is, that it seems to have originated, not with the distillers and rectifiers, but with the revenue agents of the government. Mr. Megrue testifies that he came here in September, 1871, at the instance of John A. Joyce, a revenue agent, to take charge of the illegal organization ; that the distillers who first went into it were Bevis & Fraser, Macklot Thompson, and Peter Curran. In 1872 Ulrici, who had first refused to enter it, and who continued to refuse until he saw his business being ruined by his inability to make “straight' compete with crooked' whiskey, joined the conspiracy. Afterwards other distillers — Teuscher, Busby, and the Bingham Brothers — became members of the illegal organization.

“ The tax on proof spirits was then seventy cents per gallon, and the agreement was that this tax should, as far as possible, be systematically evaded by removing the spirits from the government warehouse without the payment of the tax, by undermarking the real proof, and by the removal and reuse of stamps once used before. One half of these illicit gains, about thirty-five cents per gallon, was to be retained by the distiller for his share, and the other thirty-five cents per gallon was to be received and retained by the revenue officers or other conspirators for their share of the unlawful profits.

“ These collections from the distillers were made with systematic and business-like regularity every Saturday, when the distilleries were in operation. The ring had its collector and its disburser. The first collector was Megrue; he had an office for the transaction of that business. He remained with the organization until the fall of 1872, collecting for himself and for his confederates from the four distilleries named, on an average, as he states, of about $2,500 per week. Some idea of the magnitude of the fraud may be formed from the fact that Megrue admits that his one fifth of less than one half amounted, in about fourteen months, to the sum of $50,000 or $60,000, showing that during that period the government was defrauded at these four distilleries of from $600,000 to $800,000. Peter Curran states that he, on his own account, paid to the different collectors of the ring, from the first to the last, about $60,000 or $70,000. From June, 1873, to August, 1874, Fitzroy was the collector for the ring; then Everest and others. There can be no doubt that from 1871 to 1875 the government was defrauded by this conspiracy, in the single city of St. Louis, of revenues to the extent.of millions of dollars. No honest distiller who paid the tax upon his productions could continue in business in competition with the dishonest who were systematically evading the tax.

" It seems astonishing that a conspiracy so enormous in its proportions, and which was depleting the revenue of such vast sums, should so long remain undiscovered by the uncorrupted officers of the government. Some explanation of this is found, however, in the testimony in this case. At different times revenue agents were sent here or visited here, and it is painful to see that the large resources of the conspirators were sufficient to corrupt many of these in their turn. In 1872 Brashear, a revenue agent, visited this place; $5,000 were raised by Megrue and paid to him, and that came all from Bevis. In 1873 $10,000 were raised from the distillers

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