Nashville union and American. [volume] (Nashville, Tenn.) 1868-1875, 1874-04-08
FRAUDS In DISTILLING.
How the Government is Cheated
Out of Millions of Revenue.
Discovery Of q stuPendOus System
for Defrauding the ReyenueADane
ger that Honest Dealers VIII be
Driven Ont OF the Business.

Driven Out OF the Business.
From the New York Journal of Commerce.
WASHINGTON, March 26.-There an
pears, from discoveries just made, to be in
operation a stupendouS system of defraud-
ing the revenues, whereby the government
IS losing at the rate Of several million dol
lars a year, and honest distillers and deal
ers in spirits are ia danger of being driven
out of business. It appears that the chief
points at which the frauds are committed
are: St. Louis, Mo-, Evansville, Ind,
Milwaukee, Chicago, LIST district of Ken
lucky, and Peoria, Ill. The charges are
that there are only one or two illicit places
at each of these points, and the distillers
who pay tax regularly and honestly are
anxious to assist the government in roofing
them out, because their interests and the
government are the same. Many of the
distillers say that unless the government
takes prompt measures, honest distillers
viii soon be forced out of business, and on
all hands it is recognized that the frauds
now being perpetrated are ~stupendous.
From certain collection districts there have
recently been shipped large quantities of
spirits upon which it is evident that a por-
ton Of the taxes have been evaded. These
goods are always marked with a rectifier's
oeAnAHf dAA4 NOuoAcI L1Llllll VI tWO EldSScSs
These are, as alleged,
RAW mGHwINEs, REDUCED TO PROOF, :
and generally branded sBourbon, ?, with rec
tifier's brand and stamps, although not rec
tilted goods in fact. They are sometimes
slightly eolored, although frequently even
this pr~ecaution is not taken; and the pack
ages are not charged, as would be the case
with unretned spirits, put up for holding
and Improvement as Bourbon. These Spir-
its are transported long distances and sold
at the market price Of highwines, frequent
ly below the price, and are sold uniformly
to r~ectifierS for use as raw spirits. The
goods being the same, the price no greater,
and the destination and use the same as
the highwines originally produced at the
distillery, there would be nothing to
gain by the change of package and subSti-
tuition of the rectiied for the tax paid
stamp. II would not be done for ecOnO-
my in transportation, for while highwines
average about 60 proof gallons to the bar
rel, these goods average about 40: and the
change eOmpels the shipper of asiven num-
Der OF proof gallons to invest over 40 per
cent more in barrels and pay 10 per cent
more for freight (he reduction of proof
compelling him to pay freight on 50 much
water instead of spirits), besides the ex-
| penses Of the operation, and to get the
same amount of money for the lot in the
end as if the tax had been regularly paid
upon the usual package
For example: Say freight from the point
of manufacture to market is 80 cents per
cwt.; the freight ON a ba rel weighing $50
lbs. would be S1.75. If high wines, 90
proof gallons, the freight would be, say,
$3.50 per gallon; if low proof, S4.4 per gal
Iona loss on freight by the change of over
II cents per proof gallon, or about 81 on a
barrel Of ~highwines, the difference itself a
fair profit.
In packages there is a similar loss, call
ing cost of a barrel s.. 10; for 60 gallons this
is $3.50 per gallon; for 40 gallons, $5.22 per
gallon-a difference Of IL cents per gallon
in cost Every proof gallon of these sham
rectified low proof crude goods costs, there
| fore, laid down at an Eastern market, 81
cents per proof gallon more than they would
have cost in original packages, without
counting cost Of reducing, rectiTier's license,
stamps, regnaging, etc, which cannot be
reekoned at less than II tents per proof gal
lon. Change must be made at dead loss Of
A cents per gallon. This is manifestly for
the one purpose of coneealing fraud in the
original manufacture, or withdrawal, and
concealing under the cloak of a rectiier's
stamp the difference between the number of
proof gallons in the package and the num-
Der tax had been paid on, which difference
could not be concealed under a tax paid
stamp.
Examination will probably make it evil
dent that many of the sham r~ectifying
houses lack the proper appliances and bust
ness Of Q legitimate rectifying house;
/ while their s~pringiIg up in the vicinity of
distilleries to serve merely as stations for
changing the brands of goods, renders the
purpose of their creation obvious.
The great danger of this fraud is mani
| fest when it is remembered that by precise
" the same modus operandi were the great
! frauds carried on under the two dollar tax.
Now the scene is changed from large cities
in the East TO the West, in some cases to
more secluded localities. But the method
and object are the same. Although of com
paratively recent origin, the present fraud
is believed to be rapidly attaining large
proportions.
Special inducements are offered to those
who will buy these "One-stamped goods"
and frequently a round lot is offered under
market price, provided part are taken one
stamp, or rectifier's, and part with two
stamps, or tax paid. II is believed that in
C6TIdlu mdIhclS uOt less iu1I lHlCCn pei
cent. Of the goods arriving one-stamped
should be twO-stamped.
The fraud is rs vet confined to q few
known districts, and may nov be easily
stopped in those districts, for a proper ex-
pert examination of both distillery and
rectifying house, must by comparison of
receipts, Shipments and stock on hand dis
close a discrepancy. OF course, false ac-
counts and various devices to conceal the
fraud will be met with. When a distillery
and rectifying house are operated in the
same interest and locality, and raw or IN
refined spirits are shipped from the rectify-
ing house at highwine prices, the inference
in the trade is that there must be cheating,
and an honest expert will discover the
fraud, whether carried on by ruse of stamps,
under guaging, or other e~xpedient in the
distillery.
oNE-sTAMPED ALCOHOL.
The second class of fraudulent goods
coming on the Eastern market is 'One-
stamped alcohol" In this the fraud, if
somewhat less glaring, is equally apparent
on examination, being even more dangerous
because more specious, and requires careful
and prompt action.
As the present law, by amendment to
the law of 1868, permits the manufacture
of alcohol in distillerieS, by continuous
distilatiOn, until recently nearly ali
alcohol made in the distilling dis
tricts Of the West, was made in dis
t~ileries, and came on the market with two
stamps as tax paid. But recently a large
portion of that marketed from distilling
districts has been marketed with one stamp
only. In the manufacture of alcohol there
is a wastage of say 2 per cent of the spirit
used. The tax being 20 cents per proof
gallon, the wastage on tax is l 40-1O0 cents
per proof gallon, about "a cents per aleO-
hol gallon, which is saved by the manufac-
ture in a distillery as against manufacture
in a r~ectifying house, because a recti6er re-
distills tax paid spirits to make alcohol,
and a d~istilleT passes his highwines to the
second distillation, and pays tax OF the
final product. Therefore, in localities
where there are alcohol distilleries, where
alcohol is now sent from rectifying houses
with one stamp at a comparative loss of
over p cents per gallon, fraud may reason
ably be suspected. 1t is stated that in
many cases the alcohol is actually made in
the distillery, the rectifying house being
without Redistribution apparatus in use, and
being used merely as a cover for change Of