Gloucester County Democrat. (Woodbury, N.J.) 1878-1932, 1909-07-29
New Jersey Defrauded.

The people of New Jersey will read
with interest and some surprise the
opinion rendered by the Appellate Di-
vision of the New York Supreme
Court in a civil suit, that the State of
New Jersey has been defrauded of a
considerable proportion of its right
full dues in franchise taxes by cor
porations controlled by one of the
big $S0,000,000 trusts. Not only has
the State been thus defrauded for sew
eral years, but the swindle was perpe-
trated by means of gross misrepre-
sensations, fraud and perjury.
The revelation of this state of af-
fairs was due to the fact that the
agent who conducted the negotiations
that led to this tax loss sued to recov-
err his share of the spoils. After hear
ing the evidence the New York courts
promptly threw out the claim and
gave their reasons for so doing. The
opinion of Justice Nc Laughlin, on
the final appeal, is an enlightening
document. 1t reviews all the facts in
the case. 1t seems that David Nc
CalIum, Jersey man, entered into a
contract with official of the Corn Prod
ucts Company to secure reduction in
the franchise taxes assessed against
five subsidiary corporations of the
holding company. McCallum had
friends in the State house at Trenton
and had influence with certain officials
and their friends His contract was
to the effect that he was to receive one
half of the amount of tax reduction
for the year 1903 that he secured for
his principal, and one-third of the
amount of tax he recovered for the
years 1904 and 1905. In 1903 the Corn
Products Company the holding COM
pany-had acquired nine-tenths of the
stock of the five other companies con-
cerned The other tenth of this stock
was held by Independent owners. AT
ter consulting with former member
of the State Board of Assessors, Nc
Callum went to see Secretary Ma
guire, of that body, and was advised
to retain counsel. He secured the SER
vices of "a lawyer named Berdine,
and after securing the necessary
blanks from the Office of the secre-
tary, plan was worked out whereby
it was asserted that the only out
standing stock of the five subsidiary
companies concerned was the stock
held by the independent owners,
the nine-tenths held by the holding
company being eliminated from con-
Sideration. This scheme was evolved
for the reason that the State of New
Jersey imposes franchise taxes only
on stock outstanding" AS result
of this plan the State Board of Asses
sors, behind closed doors, reduced the
taxes levied for the three years to
the extent of $S,702.49 in 1903, and
$10,157.39 each in 1904 and 1905 It
was because the Corn Products Com
pany refused to pay McCallum his
commission that he sued and the facts
were brought to the attention of the
New York Courts.
Justice Mclaughlin, in his opinion,
declares that the plaintiff was engag-
ed primarily because he was Jersey
man and knew some of the officials at
Trenton. There was little for Mccall
lum to do unless it was to make inn
proper use of his acquaintance with
public officers. ssThe conclusion is ir-
resistable," says the court, that he
contracted to and did secure reduc-
ton by illegal methods" Continuing,
Justice Mclaughlin says:
accomplished by gross misrepresen-
tations, fraud and perjury, one who
claims to have brought it about must
be presumed to have had constructed
knowledge of the means by which it
was done.
Upon the true facts being made to
appear to the proper authorities of the
State of New Jerey, it must be assum-
ed that that State has the power to
and might at any time institute pro-
ceedings to collect the taxes out of
which it has been defrauded.
This decision by the court of last re-
sort in New York State ought to stir
up some of the officials of New Jersey
to take action on this remarkable state
of affairs. 1t ought not to be neces-
sary for this State to go to the rec
ords of another commonwealth to dis
cover that it has been defrauded, but
when that is found to be the case, then
it is time to begin proceedings to re-
cover the money. Newark News.
Governor Fort has directed Attorney
General Wilson to investigate these
disclosures by the New York Courts,
but former Attorney General McCar-
ter says nothing can be done to col
lect the money because the State
Board (of Assessors) had regularly,
in the absence of proof which could
not be obtained, confirmed the reduc-
ton.