Cyclopædia of Political Science, Political Economy, and the Political History of the United States

Edited by: Lalor, John J.
(?-1899)
BIO
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Editor/Trans.
First Pub. Date
1881
Publisher/Edition
New York: Maynard, Merrill, and Co.
Pub. Date
1899
Comments
Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
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WHISKY RING

III.314.1

WHISKY RING, the popular name for an association of revenue officers and distillers to defraud the government of the internal revenue tax on distilled spirits. The nature and natural effect of this tax are so fully described elsewhere that it is needless to do more than refer to them. (See DISTILLED SPIRITS.) It is only intended to enter a little more minutely into the formation and operation of the ring.

III.314.2

—The ring had its origin in St. Louis, when the "liberal republican" movement had achieved its first success. (See MISSOURI, LIBERAL REPUBLICAN PARTY.) The distillers were assessed by the revenue officials for money with which to secure the support of an influential St. Louis newspaper. The ring soon widened, and in 1874 it had spread into national proportions. Distillers who refused to enter it were watched, and entrapped into technical violations of law. Then, having become liable to seizure, they had to choose between ruin and surrender to the ring. There were branches at Milwaukee, Chicago, Peoria, Cincinnati and New Orleans, and an agent, who has not been legally identified, at Washington; but the headquarters of the ring were still at St. Louis. It had acquired so large an influence in the national republican party, that, when the new secretary of the treasury, Bristow (see ADMINISTRATIONS), issued an order to transfer supervisors, which would have thrown the ring into confusion, the politicians obtained a direct countermand of the order from the president. The special treasury agents were corrupted, and the ring maintained its ground.

III.314.3

—When the statistics of the St. Louis merchants' exchange for 1874 were published, a comparison of the shipments with the revenue returns showed that about $1,200,000 of taxes had not been paid. Nevertheless, the secretary of the treasury was unable to reach the individuals at fault, for the ring had prompt information from the department itself of any step toward investigation. Early in February, 1875, the editor of the "St. Louis Democrat," Mr. George Fishback, sent a message to Mr. Bristow, offering to furnish him with a trustworthy agent, who would unearth the frauds. The secretary accepted the offer, and Mr. Fishback named Mr. Myron Colony, secretary of the cotton exchange. Mr. Bristow appointed the solicitor of the treasury, Mr. Bluford Wilson, to co-operate with him, and the work was begun.

III.314.4

—At first the attempt was made to watch the operations of suspected distilleries, the amount of grain carried in and of liquor carried out; but the officials and distillers discovered the attempt, and suspended the frauds until they had organized gangs of ruffians and driven away the detectives. Then Mr. Colony, under pretense of collecting statistics of the city's receipts and shipments, placed a man at each landing and freight depot, to copy bills of lading. The copyists were ignorant of the purpose of their employer, and were directed to copy the records of all staple articles, including whisky. Finally, by assorting the bills, Mr. Colony had a description of all shipments of liquors by each distillery for three months, with the serial numbers of the stamps. Comparison with the official returns of course laid the whole fraud bare; and, within a month after Mr. Colony's appointment, he had made all the leading houses of St. Louis liable to seizure. The work was then transferred to special agents of the internal revenue bureau most of whom were kept in ignorance of the real object of their investigations; and a new commissioner of internal revenue, ex-senator Pratt, of Indiana, was appointed. Under his direction, experts compared the returns of other distilleries with the records already obtained, and thus the secretary was enabled, through his agents, to work up similar frauds at Milwaukee and Chicago, and to discover the manner in which the distillers. by connivance of the officials, accomplished the frauds, by shipping secretly barrels whose contents they had reported as "dumped" into the common cistern of the distillery for storage. Finally, May 10, 1875, the blow fell simultaneously at St. Louis, Milwaukee and Chicago, by the seizure of all the implicated distilleries, sixteen in number, and as many rectifying houses. The records seized enabled the government to make further seizures in almost every important city in the United States, for the seizure of May 10 had been entirely unexpected and unprepared for. One telegram had gone from Washington to St. Louis. "Lightning will strike on Monday. Inform our friends in the country." But it was found that the sender and receiver of the message were both opponents of the ring; and, with this exception, no intimation of the secretary's purposes seems to have passed outside of his own little circle. As a result of this secrecy of operation, the government was able to bring into court a total amount of about $3,500,000 of property seized, with suits on gaugers' bonds, and indictments against 238 persons, including distillers, rectifiers, wholesale liquor dealers, collectors, deputy collectors, supervisors, gaugers, storekeepers, and other persons. It was shown that the government had been defrauded of about $1,650,000 of taxes during the ten months from July 1, 1874, to May 1, 1875.

III.314.5

—When the papers in the case were first laid before President Grant, he indorsed one of them with directions to "let no guilty man escape," and had supported Bristow heartily. But the first effort of the ring was to persuade the president that Bristow's zeal was inspired by a desire to obtain the presidency. The investigators had come to believe that the president's private secretary, Babcock, was one of the ring, and they directed his movements to be watched. The letter, which ordered the fraud to be exposed "from bottom to top," was stolen from the office of the government counsel: and, when it reached Babcock, the letters "W. H." had been added at the end of a line after the word "top," so as to make it appear to be the intention to investigate the White House from bottom to top. A press copy of the letter exposed the interpolation, and prevented the removal of Wilson, for which the president had hastily given orders on first reading the letter. This, however, was but one of the efforts which were made from every side to break up all confidence and co-operation between the president and the secretary: others seem to have been more successful.

III.314.6

—Indictments for conspiracy to defraud, and for destruction of public records, began in June, 1875, and continued throughout the year. The most important were those against John A. Joyce, revenue special agent, John McDonald, supervisor, Wm. O. Avery, chief clerk in the treasury department, and General O. E. Babcock. The trials began in the autumn at Jefferson City, Mo. Joyce was convicted, Oct. 23, McDonald Nov. 22, and Avery Dec. 3. One of the leading counsel for the government in these prosecutions was John B. Henderson, of Missouri. In the Avery trial he had occasion to introduce certain suspicious telegrams from Babcock, and he commented on them and on the president's general action in the case in terms which, to say the least, were indiscreet. "What right," said he, "had Babcock to go to Douglas [the former internal revenue commissioner] to induce him to withdraw his agents? What right had the president to interfere with Douglas in the proper discharge of his duties, or with the secretary of the treasury? Why did Douglas bend the supple hinges of his knee, and permit any interference by the president?" Henderson claimed that this language was meant only to justify the president in not interfering; but it must be evident that the president could not have been fairly expected to endure this mode of attacking the whisky ring. Henderson was removed; but his place was given to Jas. O. Broadhead, a leading democratic lawyer of St. Louis, Dec. 9 the federal grand jury indicted Babcock. Babcock had already asked for a military court of inquiry, to investigate the charges against him in the Avery trial, and the president was strongly disposed to direct the attorney general to suspend all civil proceedings in the Babcock case, and turn the matter over to the military court. This was successfully resisted by Bristow; but the court was granted, and met at Chicago, Dec. 9. The attorney general directed the district attorney to send to the military court his evidence against Babcock, and the names of his witnesses; but the district attorney (Dyer) refused to obey an order which would have made him punishable for contempt of court. The military court met, suspended its proceedings, and soon afterward dissolved.

III.314.7

—The Babcock trial began Feb. 8, 1876. One of the most important witnesses, a gauger named Everest, who was alleged to have personal knowledge of payments to Babcock by the ring, had been induced to go to Europe. District attorney Dyer had induced him to return by a promise of exemption from prosecution, met him in Philadelphia, and obtained an outline of his testimony. As soon as this became known, the attorney general issued an order to the district attorneys at St. Louis, Chicago and Milwaukee, dated Jan. 26. 1876, ordering them to give no promises of exemption, but to punish every guilty person, who should be convicted or should confess his guilt. It is hardly necessary to say that this letter excited a general indignation, and was looked upon as an official effort to screen Babcock.

III.314.8

—It must be confessed, that, in spite of the fact that there was not a breath of suspicion upon the president personally, there was a very general feeling that he was to some extent on trial with his private secretary; and there was an equally general feeling of relief when the jury. Feb. 24, brought in a verdict of not guilty. Immediately afterward the president took another private secretary in Babcock's place.

III.314.9

—Most of the remaining defendants either plead guilty or were convicted; and a few, in whose cases there were extenuating circumstances, were non-prossed. Of the leading defendants, Avery, McKee and Maguire were pardoned in about six months.

III.314.10

—In March, 1876, a select committee was appointed by the house of representatives to ascertain whether any federal official had aided or given information to the defendants. It sat for six months, examined a great number of witnesses, and gave their testimony in House Misc. Doc., No. 186, 1st session, 44th congress, 1875-6. The whole makes up a startling revelation of the political methods of the time and of the disgraceful and dangerous condition of the civil service.

III.314.11

—Every effort had been made to blacken the private and public character of Secretary Bristow, but without the slightest success. In the spring of 1876 he opened an attack upon a whisky ring on the California coast. Here, at last, he was beaten. As soon as his investigations became dangerous, a California senator demanded the removal of several of the more active special agents of the treasury at San Francisco. The secretary refused, but was not supported by the president; and in June, 1876, he resigned. His retirement relieved the ring from further prosecution: but its active energies were broken and were never revived.

C. & J.

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